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Shortening the Listing Timeline for Public Offers

Finsec Law Advisors

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To reduce the time taken for listing of equity shares and convertible securities in an IPO, from 12 days to 6 days, SEBI had recently amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. In furtherance of this, SEBI has provided an indicative timeline of activities as per the revised schedule in its circular dated November 10, 2015.

The major change is in relation to the mode of payment of subscription monies in public offers. Previously, acceptance of physical cheques led to significant delays in the processing of bids and consequently delayed the finalisation of the basis of allotment. In addition, physical cheques were also misused to support fraudulent applications in order to generate artificial demand for public offers. SEBI has now done away with the practice of accepting cheques for subscribing to IPOs and has made it mandatory for all investors to use the Application Supported by Blocked Amount (ASBA) facility for paying subscription monies. Under the ASBA facility, the necessary funds are blocked in the investor’s bank account to ensure successful payment upon allotment, after which, the funds are either transferred to the issuer or released in the investor’s account. This has shortened the listing timeline by 5 days. If the date of closure of an issue is taken to be “T”, the basis of allotment would now be prepared in T+3 days, as opposed to the earlier time of T+8 days. The ASBA mechanism also eliminates the need for refunding money in case of oversubscriptions or if the issue fails. This has shortened the timeline by another day.

In addition to shortening the timeline, SEBI has also widened the catchment area for public offers by enabling various additional classes of intermediaries, such as share transfer agents and depository participants, to collect public offer applications. This would potentially make public offers more accessible and increase retail participation.