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SEBI monitoring market situation closely

: The latest move by capital markets regulator Securities & Exchange Board of India (Sebi) in favour of a supplementary mechanism to initial public offerings (IPOs) will address the long-standing demand of retail investors whose application money is often blocked for months even when they are not allotted shares. The process called application supported by blocked amount, which is likely to begin from the end of this month, will be applicable to all book-built public issues which provide for not more than one payment option to retail individual investors. It will do away with the refund process, as the amount will be retained in self-certified syndicate banks (SCSBs) accounts until the allotment is completed. This mode of payment will apply only to public issues offered under the book-building route and only to those retail investors who bid at the cutoff price as the single option and agree not to revise their bids. The new mechanism will shorten the time between a public issue and its listing, since the latter happens only after refunds are made. At present, retail investors pay upfront the full amount for the shares they have bid for, and based on the number of shares allotted, the excess money is returned. But institutional investors put up only 10% of the money and the regulator’s move is aimed at ensuring parity between retail and institutional investors. The process must make sure that in case a company withdraws the issue, lead managers of banks must inform the SCSBs of the development and provide investor-wise details on allotment and non-allotment to each bank.