Market regulator SEBI has no immediate plans to hike the quota available for retail investors in initial public offerings (IPOs) despite several issues in recent months seeing huge oversubscription, its Chairperson Madhabi Puri Buch said on Friday.

“We will analyse the IPO data in depth and only after that we will take a call on this (whether quota be hiked or not),” Buch said on the sidelines of Global Economic Policy Forum 2023, jointly organised by the Department of Economic Affairs and Confederation of Indian Industry (CII). 

She said that SEBI was now analysing data and noted that many retail investors are now seen to be flipping (within a week) after investment in IPOs. 

In her address at the Policy Forum, Buch highlighted that SEBI had decided to do away with pro-rata allotments (in IPOs) as the level of over subscription in IPOs was getting inflated because of pro rata mechanism. 

“The level of over-subscription was getting inflated. The price discovery mechanism was being corrupted. This process (pro rata) led to certain unnatural price discoveries. Demand is being inflated because of the way allotment was being done,” she said.

Buch was replying to a query from the audience on whether SEBI will take steps to better understand random allotments to retail and HNIs in IPOs and why was pro rata stopped.

“We were trying to correct a mechanism which was unhealthy in terms of giving an impression of much higher demand than actually was”, Buch explained.

Meanwhile, Buch said that SEBI will introduce an optional T+0 settlement facility by the end of March 2024 and optional instant settlement in one year from that date.

SEBI will also introduce the concept of Application Supported by Blocked Amount (ASBA) mechanism for secondary market trades by January next year, Buch added.

Buch also said that SEBI is in talks with foreign investors and stakeholders so as to bring further changes to REITs/InVITs framework and help add another ₹300 lakh crore in market capitalisation.

Already SEBI has been introducing several changes to the REITs/InVITs framework. Buch also said that SEBI is engaging with Government for more regulations needed on REITs/InVITs.

Buch noted that REITs/InVITs are good for retail investors as these products protect them from the effect of inflation.