The Securities and Exchange Board of India (Sebi) recently brought out a consultation paper proposing the reduction of timeline for listing of shares in public share sales from the existing T+6 days to T+3 days. Sebi has sought feedback from the public till June 3. Ashley Coutinho takes a look at what the new timeline means
Faster listing timelines
Sebi has been striving to shorten the time duration from issue closure to listing. In 2010, the timeline was reduced from 22 days to 12 . The regulator had made its intent clear in a 2015 consultation paper. “The post issue timelines will reduce from T+12 days to T+6 days. Once the process gets stabilised, timelines can be further curtailed to T+3/2 days. Further, on account of reduction in printing of application forms, the overall cost of public issues will also come down,” the paper said. T is the day of issue closure.
Behind Sebi’s latest proposal
Over the last few years, Sebi has pushed systemic enhancements across the IPO ecosystem to streamline activities in the processing of public issues, to reduce listing timelines from T+6 to T+3. The inputs of all stakeholders including stock exchanges, SCSBs, sponsor banks, NPCI, depositories and registrars have been taken, including on readiness to process the public issues in the proposed T+3 framework. Extensive back-testing and simulations have been carried out by the various stakeholders.
The shortened timelines will benefit both issuers as well as investors. Issuers will have faster access to the capital raised, and investors will get the opportunity to have early credit. It will help qualified institutional buyers. It will trim costs, and increase the reach of retail investors. It will reduce the investor’s exposure to market volatility.
The current listing process
One day prior to the issue opening, the company has to submit 1% of the issue as security deposit to designated stock exchange (DSE). On the same day, the company allocates the shares to the anchor investors. The issue can be open for minimum of three days and maximum of 10 days.
On the T+2 working day, the company submits the documents as per the checklist of the exchange. On the T+3 working day, the basis of allotment is carried out at DSE. On the T+4 working day, the company submits the listing documents to the exchange. On T+5, the company has to submit credit confirmation from the depository, or dematerialised shares to the allottee’s account, and the exchange will issue a circular to the market for listing of shares with effect from the T+6 working day. On T+6, the company gets listed on the exchange.
Some challenges remain
The processing of Asba applications has been streamlined by mandating the exchanges to accept these in their electronic book-building platform only with a mandatory confirmation on the full application monies blocked. The systemic changes have been carried out by the exchanges, SCSBs, syndicate members, and the same has come into effect for public issues opened on or after September 1, 2022. For applications processed via UPI, the bid book of stock exchanges shall include only those applications with corresponding successfully blocked amounts in full.
“The process of reconciliation of all the applications through Asba and different categories of institutions along with finalising the basis of allotment will not happen quickly. That said, technology plays an ever-increasing role, which will make the transition to T+3 feasible,” said Pranav Haldea, managing director, PRIME Database.
“Sebi will give enough time for the transition. The logistics between the banks transfering the funds to the company account and the registrar doing all the processing work of the application will need to be done smoothly. Its all blocked money and the number of applications have also reached manageable levels,” added Pranjal Srivastava, partner-investment banking at Centrum Capital.