How the e-IPO works

The proposed e-IPO will reduce the post-issue timelines (time taken from closure of issue for subscription to the date of listing) from 12 to six working days. Once the process stabilises, SEBI proposes to reduce it to two or three days.

Due to the reduction in printing of application forms, the overall cost of public issues will also come down.

Under the mechanism proposed by the SEBI, the e-IPO process flow would be as follows.

Investors will be able to submit their application to any SEBI registered stock broker or depository participant (DP) with an option of submitting an application supported by the blocked amount (ASBA) application to his bank.

The broker or DP will then lodge the application on the stock exchange or depository platform. Once the bid has been entered, the clearing corporation will block the bid amount from the broker’s account. Brokers would furnish the cash collateral to the clearing corporation.

Brokers will use the National Automated Clearing House (NACH) platform to receive upfront payment from the investor.

The money for bids made through DP will be blocked by ASBA banks or will be transferred to the issuer’s designated account with the clearing corporation.

For ASBA applications, the existing process of bidding and blocking of funds by the bank will continue.

Investors will not be able to withdraw bids after issue closure.

The bid book will be made available to the registrar by stock exchanges and depositories. Details of payment confirmation for the bids will be made by banks, clearing corporations and depositories to the registrars.

Based on the bids and payment made, the registrars will finalise the basis of allotment of shares.

Once stock exchanges approve the allotment, the registrars will instruct clearing corporations, depositories and banks to credit funds in the public issue account.

Excess money will be refunded to the investors by the stock broker /depository participant /bank.

Instructions will then be issued to depositories to credit the securities directly to the investors’ demat account.

Then, stock exchanges will issue the listing and trading notice.

Investors would get SMS/e-mail alert for allotment under the IPO, similar to that being sent to investors for secondary market transactions.

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