IPO regime set to undergo sea change from July

100% payment by QIBs in IPOs and shorter time between IPO closing & listing.

The Securities and Exchange Board of India (Sebi) is expected to take two decisions simultaneously in July.

The first is to introduce a shorter time-frame between the closure of an IPO for subscription and its listing.

The second is asking all classes of investors, including qualified institutional buyers (QIBs), to make full payment while applying for an IPO.

Currently, QIBs have to pay a margin (around 10 per cent of the book-building price-band) when applying for subscription. But retail investors have to pay the entire amount, which is refunded within 15 days of the closure of the IPO if shares are not allotted.

Institutional investors, including foreign institutions, are known as QIBs.

Sources familiar with the developments said Sebi wants to fast-track these two decisions but a final decision can be taken only around July as a great deal of paperwork still needs to be completed and proper market feedback taken on board before a final decision. "The decision should be taken by July," they said.

Sebi Chairman C B Bhave had recently said at a conference in Singapore that the regulator wants to change the norms for QIB investments in IPOs.

Sources said the feedback from QIBs is that most of them invest money collected from the public and full payment upfront in IPOs will be possible only if the share allotment and listing process is shortened in India. This has prompted the regulator to hasten the listing process of all Indian companies.

Sebi's primary market committee, which will address the issue of reducing the gap between the closing of an IPO and its listing, is expected to meet in early April.

The draft consultative paper will then be put up for discussion, following which a final decision will be taken by the Sebi board.

The move will effectively put QIBs and the small retail investors on a level field when it comes to IPO applications.

The sources said the 10 per cent margin payment by QIBs often results in huge over-subscriptions but presents a distorted picture of an IPO's success.