MUMBAI: The Securities and Exchange Board of India (SEBI) is reviewing the process of raising capital by companies to reduce the overall post-issue timeliness; cut the cost of public issuances and facilitate retail investors across the country to be able to fill applications.
A key suggestion by the market watchdog is to empower a retail investor to be able to apply for shares by filling forms online and routing it through his stock broker; depository participant; registrar and transfer agent, among others to expand the network.
The regulator is moving in the direction suggested by Finance Minister Arun Jaitley in his budget announcement recommending that all IPOs for more than Rs.10 crore be made in electronic form that can be submitted through the vast national network of stockbrokers.
The market watchdog expects to halve the time taken to six days between share sale and listing. The time-period can further be squeezed to 2-3 days and expenses curtailed by adopting the following process - once an application has been put on the bidding platform by a stock broker, the clearing corporation will block 100 per cent funds from the cash collateral of the stock broker.
SEBI commends the use of National Automated Clearing House (NACH) system being used by the National Payments Corp of India (NPCI).
The NACH is a web based solution to facilitate interbank, high volume, electronic transactions, that are repetitive and periodic in nature. NACH can run multiple ECS systems and provide a framework for harmonisation of standard and practices and remove local barriers and inhibitors.
Through NACH system, an investor can give instructions to his banker for multiple debits at different points of time for making IPO applications, says the market watchdog.
This will help eliminate the delay on account of cheques in the process. SEBI is putting out its suggestions to get public comment by January 30, 2015.
It has however, also suggested certain conditions for eligibility of companies, such as a minimum market capitalisation of Rs.3,000 crore, having the entire shareholding in dematerialised form and the company should have redressed all investor complaints.
Similar processes can be used for sale of debt instruments, the capital market regulator has suggested.