Finmin, SEBI push for e-IPO facility for cutting cost of funds and reduce listing time to 3-4 days
Investors will soon be able to avail of an e-IPO facility, with the finance ministry and market regulator Sebi pushing for a complete paperless system to raise capital.
"We are actively looking at this...," a senior finance ministry told ET.
The finance ministry has begun discussions with the corporate affairs ministry on the issue. "This would require amendment in the law. We are discussing it with the ministry of corporate affairs," the official said.
Experts say that this long-awaited primary market reform has the potential to reduce the cost of issue and cut down the listing time to 3-4 days from 12 at present due to faster allotment. Naresh Maheshwari, president, Association of National Exchanges Members of India or ANMI, says that the new process may also help in marketing good quality IPOs.
"Funds are blocked unnecessarily for a long period of time since forms have to be submitted, funds transferred by cheque or draft, and allotment takes weeks, leading to a delay in listing, during which period the market may change character," he said.
"The e-IPOs are expected to considerably reduce the cost of issue and simplify the process for IPO investors, thereby attracting more issuers to the market," said an exchange official.
Ramesh Vaidyanathan, partner, Advaya Legal, says, "There is a need to amend Section 73 (3), if the application is to be routed through brokers like in secondary market operations."
Section 73 of the Companies Act deals with collection, retention and refund of the application money. The application money for IPOs should go directly to the escrow account of the public issue and not routed through the broker, which is the case in the secondary market.
Vaidyanthan adds that though Sebi DIP guidelines provided for e-IPOs, the provision was omitted when Issue of Capital and Disclosure Requirements (ICDR) Regulations came into force.
Maheshwari adds that the move will also help in marketing good quality IPOs. "The distribution for IPOs is done through unregistered and unregulated intermediaries. While registered brokers are used for the book-building process, unregistered and unregulated intermediaries are used for collection of IPO forms, directly by the issuer or issuer's underwriter."
Experts say that the move will remove the difference between buying a share in the secondary market and buying a share in the primary market. It will help in real-time information on the progress of the issue. Brokers say that to start with both regular and e-IPO could be offered on a trial basis.
Vineet Arora, head-products & distribution, ICICI Securities, says, "The e-IPO process, if passed, would make it convenient for many investors, who currently apply for IPOs offline. It will save time and reduce the paper work."
In case of ICICI Secs, investors can still apply for IPOs via the online route as customers sign 3-in-1 account, which includes the bank account with ICICI Bank. (Economic Times)
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