Online applications, wider distribution for IPOs on cards
Very soon, you will be able to invest in an initial public offer electronically. Markets regulator Securities and Exchange Board of India (SEBI) has said implementing e-IPOs is next on its agenda to revitalise the primary market.
Very soon, you will be able to invest in an initial public offer (IPO) electronically. Markets regulator Securities and Exchange Board of India (SEBI) has said implementing e-IPOs is next on its agenda to revitalise the primary market.
Meanwhile, the regulator also indicated it is considering increasing the expense ratio limit, as well as providing mutual funds greater flexibility on expenses, within the overall limit.
Entry load will stay
However, it is not in favour of revoking the three-year ban on entry load. All these issues were discussed at a meeting called by the Finance Ministry with fund houses and SEBI officials on Monday.
A highly placed source told Business Line, “The market regulator is working on an e-IPO and increasing the reach of distribution of IPOs. A formal decision on this will be taken by the SEBI board.” An e-IPO is a mechanism where investment in public offerings can be done online without signing any documents. This has the potential to reduce costs and time.
Though the e-IPO concept has been in the pipeline for some time, a formal decision could not be taken because of various regulatory issues. In fact, the SEBI board was informed on November 24 last year that implementing an e-IPO requires amendments to the Companies Act, dispensing with the requirements of an investor to “agree in writing” to the offer, as there would be no physical form submission in a demat application.
The Ministry of Corporate Affairs (MCA) has held the view that in case of subscriptions to yet-to-be-listed shares, which are in demat form, it may not be necessary that an investor needs to “agree in writing”.
SEBI has already taken four important decisions for the primary market. They include simplifying the offer form, disclosure of due diligence record by the merchant bankers, disclosure of track record and introduction of circuit filter on the listing day.
To curb volatility on the listing day, it introduced ‘trade-for-trade’ (100% margin) system for issue sizes up to Rs 250 crore. This system will be in place for the first 10 days of the listing.