GRIP seeks big role for small investors

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A Sebi-appointed expert group has recommended a slew of reforms to give a level-playing field to retail investors in the primary market. Sunny Verma analyses the report in detail

Small investors would no longer play second fiddle to big (read institutional) investors. As capital markets regulator Securities and Exchange Board of India (Sebi) gets ready to roll out its second generation reforms, the spotlight has been turned on creating a level-playing field for retail and institutional investors.

So, what's on the cards? A series of initiatives aimed at reforming the market for initial public offers (IPOs), to make the issue process more efficient and less time-consuming. And, what does it have for retail investors? The quota for the single retail investor in an IPO would be doubled to Rs 2 lakh while a host of other measures would be adopted to make the issue process less cumbersome.

Moreover, qualified institutional buyers (QIBs) would have to shell out 100% of their bid amount, at par with retail investors. These are some of the recommendations made by a Sebi panel to transform the IPO market.

The Sebi-appointed Group on Review of Issue Process (GRIP), in its report submitted to the regulator recently, has suggested a litany of measures to minimise the cost and time involved in the process.

This is not the first time a Sebi committee has suggested ways to reform the IPO market. But this time, the regulator seems determined to spearhead the reforms in the primary market.

Sebi chairman Chandrasekhar Bhaskar Bhave had made it clear last week that the regulator will review the primary market issuance process and take into account suggestions in the GRIP report. The markets regulator seems to be in sync with the GRIP suggestion of creating a level-playing field for retail and institutional investors.

This means that in the months to come, institutional investors would have to put in 100% of the margin money while subscribing to an IPO. Currently, while retail investors are required to deposit 100% of their bid amount, the same for institutional investors is 10%.

Another proposal that lies at the heart of primary market reforms is to minimise the time gap between opening and listing of an issue. This would not only reduce over-subscription but also silence critics that say institutional investors should not be asked to lock their money for so many days.