The Securities and Exchange Board of India plans to shorten the time-frame for listing a share after the public issue to seven days. The markets regulator also plans to carry through more reforms to make mutual funds attractive for investors, including giving a single statement for all holdings of an individual across all schemes of a fund.
CB Bhave, chairman, Sebi, said on Wednesday, ?Currently, it takes 20 days for an IPO (initial public offer) to get listed after its closure. The delay in listing is a risk that investors and issuers carry. So the regulator?s aim is to reduce the time-frame to one week within a year.?
The change will be welcomed by the rapidly expanding body of retail investors, with the number of active investors about to touch the one crore (10 million)-mark. The government is planning to bring in a large number of public sector companies to the market, either as follow-on offers or as fresh listing. So Sebi is keen to ensure that investors in these issues derive the best possible price, which sometimes get scuttled when major investors dump the issue in the time available between its book closure and eventual listing.
?Shortening the IPO time-frame is a fantastic thing in the long run. It reduces the infrastructural stress and also captures current volatility a lot better,? said S Ramesh, COO, Kotak Mahindra Investment Banking, told FE. He said widening the scope of ASBA would enable this to happen.
Bhave acknowledged that the primary market issuance process is not as efficient as secondary market in India. ?We need to do something there?.
The other planned measures are reducing the expenses and processes for mutual fund investment and also having the exchanges carry random transaction checks with clients to ensure broker integrity.
The regulator admitted that the key bottleneck in speeding up the primary market issuance has been the way the payment & settlement mechanism is done in the issue process. For addressing this issue, Sebi has already introduced the ASBA (application supported by blocked amount) that allows investors to submit an IPO application without actually transferring the money.
?This process is getting tested now,? said Bhave, adding that in the last three months, applications through the ASBA process constituted 20-25% of the total IPO applications. ?Going forward, we want to make these facility available to non-retail investors as well,? he said.
On the secondary market side, Bhave pointed to the recent Sebi initiates to increase transparency in market transactions. To help investors verify the price at which a transaction is done, Sebi has asked the stock exchanges to randomly pick up 100-200 transactions and mail the transaction price to the clients. ?This will give investors the ability to cross-check their transaction,? he said.
On the fund industry, Bhave stressed the need for bringing down the cost of mutual fund transactions and said Sebi will do the needful here. Pointing to the crisis faced by the MF industry in October 2008 in the wake of the credit market squeeze, he said, ?We looked at the entire asset-liability mismatch of the MF and also their composition. Efforts are being made to bring changes there, too?. On bringing down the cost of mutual fund operation the regulator asked why there can?t be a single statement for investors for his investment in 20 different schemes, instead of 20 different statements. ?People are working on it and it is not an easy proposition. We do not need regulatory intervention to sort this out?, said Bhave.
On strengthening the corporate governance practice, Sebi has already held discussions with the fund houses, in which the industry has agreed to form a forum where they will share their discomfort about a company and raise their concern.