Market regulator Securities and Exchange Board of India (SEBI) said it wants to bring down the time required for IPO processing to seven days from 20 days at present over the next one year. While pointing to the fact that the primary market issuance process is not as efficient as secondary market in India, SEBI chairman CB Bhave said, “We need to do something there. Currently it takes 20 days for an IPO 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 regulator admitted that the key bottleneck in speeding up the IPO process has been the way the payment and 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 per cent of the total IPO applications. “Going forward we want to make these facility available to non retail investors as well,” he said at a conference here.
Currently ASBA facility is applicable to only retail investors and market experts argue that for reducing the timeframe for an issue process, the regulator should make ASBA process mandatory in all IPO and extend this facility to all categories of investors.
On the secondary market side, Bhave pointed to the recent initiatives taken by the regulator to increase the transparency in the market transactions. For allowing investors to verify independently of their broker the price at which the transaction is done, the regulator has asked the stock exchanges to pick up 100-200 transactions on a random basis and sent a letter to clients on the price at which they have transacted. “This will give investors the ability to cross-check their transaction,” he said.
On the fund industry, the Bhave stressed the need for bringing down the cost of MF transactions and said that the regulator will go ahead and implement whatever is necessary. Pointing to the crisis faced by the MF industry during 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 operations, 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. In this regulatory intervention is not required. But if required we will certainly go ahead and implement it,” said Bhave.
On strengthening the corporate governance practice, the regulator 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 accordingly.