Sebi has devised a plan to replace direct subscription to IPOs with a system where applications will be routed through on-line stock brokers. The plan was disclosed by senior executive director of Sebi OP Gahrotra at a meeting with the top registrars and transfer agents last week.The terms of the public offer will be made available on the terminals of brokers. Investors will now only have to visit their broker and place the order on-line for the purchase of shares. The offer will be relayed and the allotment will be made or rejected on-line.

The registrar to the issue will be updated on the subscription data at the end of the day, thus providing data on the extent of subscription when the issue is open.

The subscription amount collected by the broker will be channelled to the exchange headquarters in the same manner as the member currently routes his securities and funds at the time of a pay in. Similarly, allotments will be made through the process currently adopted to make the pay out.

As the allotments will be routed through the clearing corporation of the exchange, any risk involved will be covered by the guarantee fund of the bourse. According to registrars, once the system is in place, the entire process of issue marketing could be completed within 10 days as against two months which it currently takes. Allotment period could be reduced to just 2 or 3 days, said a registrar present in the meeting.

The direct fall out of the move would be a reduction in the cost of fund mobilisation by companies and significantly speed up the process of allotment of shares to investors. According to a registrar, the only losers and likely opponents to the move are banks, who otherwise have a major role to play in primary issue marketing and the brokers who are not yet on-line or do not have a trade guarantee fund. The bankers to the issue enjoy short term money in their system due to the delay in reconciliating of accounts.

The registrars say there is no loop hole in the newly mooted system and in fact plugs a number of loop holes in the current system like deliberate delay in allotment, loss in transit, etc. There would also be no default in payment when an issue devolves as the entire applications routed through the stock exchanges will be guaranteed by the clearing corporations.

The NS has worked out a detailed blue print for on-line marketing and initiated talks with the country's leading merchant bankers, seeking their participation in the concept.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.