The Hindu Business Line : Amount can be in investors’ account till IPO allotment: SEBI

Reform meet: (from left) Mr. R Ravimohan, MD & Regional Head-South Asia, Standard & Poor’s, Mr C.B. Bhave, Chairman, SEBI, and Mr Ashvin Parekh, Parter, Ernst & Young, at a Seminar on IPO Transformation Conclave 2008, held in Mumbai on Tuesday. –

Our Bureau

Mumbai, April 8 The Securities and Exchange Board of India is looking at making changes in IPO regulations, so that investors need not have to wait for refund of application money, if they are not allotted shares.

Currently, retail investors have to make the full payment on application for shares, which are later refunded to the extent the shares are not allotted, which would normally take three weeks to a month.

Mr C.B. Bhave, Chairman, SEBI, today said that the regulator is looking at this issue, and with the present banking technology, it is possible to keep the IPO amounts in the investors’ account itself till the shares are actually allotted.

Application money

According to news reports, the Primary Markets Advisory Committee of SEBI is planning to introduce a value-paid instrument, which would help banks to freeze the application money till the allotment is made.

Speaking about the subscription process for investors at a conference on IPO, organised by Ernst & Young, Mr Bhave said that SEBI will make changes in the regulation only after discussing the issues involved with those involved in the IPO process.

In the case of mega IPOs, which are oversubscribed by many times, large amount of investor fund is blocked for days, said an analyst. For instance, Reliance Power IPO received record subscription of over Rs 7,50,000 crore, wherein the total application money deposited in banks was Rs 1,15,000 crore. A significant portion of this money was later refunded, the analyst said.

The SEBI chairman also stressed the need for supporting small and medium companies in tapping the capital market.

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