The Securities and Exchange Board of India (SEBI) has taken a significant step to enhance the efficiency of Initial Public Offerings (IPOs) by halving the timeline for listing shares on stock exchanges after the IPO closure. This move aims to provide substantial benefits to both investors and issuers in the capital markets.
Shorter Listing Timeline Implementation
SEBI’s new directive entails a reduced listing timeline for shares. This adjustment, designed to expedite the listing process, will initially be introduced as a voluntary option for public issues commencing on or after September 1. However, it will become a mandatory requirement for all issues starting from December 1, 2023, onwards, as per the circular issued by the capital markets regulator.
Transition to T+3 Listing Timeline
Under the revised guidelines, IPOs will now be mandated to list within three working days (T+3 days) after the closure of the IPO, in contrast to the previous requirement of six working days (T+6 days). The ‘T’ symbolizes the issue closing date, which serves as the starting point for the new timeline.
This new listing timeframe will need to be explicitly disclosed in the offer documents of public issues, as highlighted by SEBI.
Revised Process for Allotment and Fund Transfers
Companies seeking to conduct IPOs under the new guidelines will be required to finalize the allotment process before 6 pm on T+1 day. Additionally, the transfer of funds to unsuccessful applicants will occur on T+2 day.
The regulatory authority emphasized that the shortened timelines for listing and share trading will prove advantageous for both issuers and investors. Issuers will experience expedited access to raised capital, thus fostering an improved environment for conducting business. Simultaneously, investors will gain quicker credit and liquidity for their investments, enhancing their overall experience.
Investor Compensation and Application Verification
SEBI has also established a system for calculating compensation to investors in case of delays in unblocking ASBA (Application Supported by Blocked Amount) application money. This calculation will commence from T+3 day.
Furthermore, the role of the Registrar to an issue will include third-party verification of applications. This process will involve matching the Permanent Account Number (PAN) in the demat account with the PAN in the applicant’s bank account. Applications with PAN discrepancies will continue to be considered as invalid for allotment purposes.
Origin and Implementation
This transformative decision comes after SEBI’s board approved a proposal in June of the current year. By reducing the IPO listing timeline, SEBI aims to promote efficiency and transparency in the capital markets while fostering a conducive environment for investors and issuers alike.