All retail investors to get allotment in IPOs

Retail investors applying for shares in initial public offers (IPOs) would now be assured of getting allotment of at least a minimum lot.

The Securities and Exchange Board of India (SEBI) on Thursday approved measures that will improve retail investor participation and help enhance market integrity and investor confidence.

“The share allotment system will be modified to ensure that every retail applicant, irrespective of his application size, gets allotted a minimum bid lot, subject to availability of shares in aggregate. The system will satisfy more number of smaller applicants in the oversubscribed issues,” said SEBI.

The minimum application size for all investors has also been increased from existing Rs5,000-7,000 to Rs10,000-15,000.

Prithvi Haldea, chairman and managing director at Prime Database believes these steps will help bring more new retail investors.

“So far, first-time investors used to get only 2-4 shares after all that effort to open demat accounts, fill up forms and block large sums of money. With SEBI now assuring that investors will get at least a minimum lot in oversubscribed IPOs, it will bring a semblance of sanity. Also, raising the minimum application amount is a pragmatic move given that it has been almost 7-8 years since the minimum application size was revised,” he said.

SEBI has also taken steps to reach out to investors across the country.

The nationwide broker network of stock exchanges at more than 1,000 locations will be made available for distributing IPOs in electronic form (e-IPO), in addition to existing channels, said SEBI.

The facility of applications supported by blocked amount, or ASBA, has also been extended to investors coming through the eIPO route so that money leaves the investor’s account only on allotment of shares.

Brokers and issuers would be adequately compensated for promoting the eIPO and ASBA route.

This measure would also reduce the hassles of cheque handling and the processing time taken for manual applications. “These measures will help in bringing down the IPO timeline from 12 days currently to Sebi’s target of T+5 days”, Sebi chairman U K Sinha said. Turn to Page 14

All retail investors to get allotment in IPOs

Sebi has also taken steps to help companies meet the minimum public shareholding requirements prescribed under SCRR, by the desired timeline of June 2013.

“In addition to four existing routes, two additional routes, i.e. rights and bonus issue, will be permitted, wherein the promoters would not be allowed to participate and will only be meant for public,” said Sinha.

Sebi has also brought about reforms to instill investor confidence and ensure a level playing field for all.

“To avoid any misleading signals to retail investors about the extent of subscription in the issue, no withdrawal or lowering the size of bids shall be permitted for non-retail investors at any stage,” said SEBI.

The timeline for publishing the price band, along with relevant financial information, for IPOs has been revised from two working days currently to five days, so that investors get more time to analyse the issue.

Also, to bring more transparency in capital raising, expenditure towards ‘general corporate purposes’ as an object of the issue would not be allowed to exceed 25% of the issue size.