The Securities and Exchange Board of India’s (Sebi) recent directive to reduce the time between the closure of an initial public offering (IPO) and its listing to 12 days from the current 22 will lead to interest savings of approximately Rs 800 crore annually for retail and high net worth individual (HNI) investors, Crisil Equities said in a note. The directive, effective May 1, 2010, is a step towards realigning the Indian market with the best practices in the developed markets, where the listing timeframe is three days from the closure of issue. Crisil Equities estimates about Rs 40,000 crore will be raised from IPOs in calendar year 2010.
Welcoming the directive, Chetan Majithia, head, Crisil Equities, said: “Sebi’s move to cut the time frame between IPO closure and listing will benefit investors participating in the primary market, since it will lower the opportunity cost for funds invested in the IPO. Further, the move will reduce the risk of market volatility in the intermediate period and help faster rotation of investors’ money, thereby enhancing subscription levels in the future IPOs.”
The time frame for listing on stock exchanges in the US, UK and Singapore is three days, while in Brazil and Hong Kong, it is three days. With the recent directive, Sebi hopes to realign the Indian market by gradually adopting practices prevailing in the developed markets. Crisil Equities expects the timeline between IPO closure and listing to reduce further to around three to five days in line with global practices.
