Mumbai: Primary market reforms are on top of the agenda of India’s capital market regulator Chandrasekhar Bhaskar Bhave. He wants to kick off the exercise by cutting down the time between a company’s public issue and the listing of its stock from 21 to seven days. He also wants to iron out glitches in Sebi’s investigation and legal wings and make sure that involved parties are heard before any judgement is passed. In his first interview after taking over as Sebi chairman on 17 February, Bhave, 57, sets out his agenda for reforms. Edited excerpts:
The market is not in the best of health. Isn’t it an ideal time for reforms as nobody will accuse you of spoiling the party?
Primary agenda: IPO reforms are top priority, says Sebi chief C.B. Bhave. (Photo: Ashesh Shah/Mint)
All times are good times for carrying out reforms.
What’s your agenda for the primary markets?
I always hear the argument that while the secondary market processes have been made very efficient, in the primary market it takes a long time for an IPO (initial public offering) to get listed after it closes. The delay throws up issues of its own and we try to address the issues in different ways, instead of reducing the time gap. Why can’t we reduce the gap? We are far more technologically equipped today than when we started the secondary market reforms in the mid-1990s.
Let’s take the case of Reliance Power Ltd’s IPO. We had something like 45 lakh applications, and along with these 45 lakh applications, 45 lakh payment instruments were put through the clearing system. None of the applicants gets full allotment of shares in such hugely subscribed issues. This means for every single applicant, refund is due—either fully or partly. So, another 45 lakh refund orders need to go through the clearing system. Overall, 90 lakh instruments need to go through the clearing system and the postal department needs to carry these instruments. This is an anachronism when the banks are technologically well equipped.
How do you address this?
Why does money have to leave an investor’s account when he is applying for shares? Can we have a mechanism to lock the money in the bank account when one applies for shares? The banker can give the data to the registrar. Essentially, till the shares are allotted, the investor cannot use the money meant for the shares even though no physical transfer of money takes place at the time of application (of shares). Once the allotment is done, the registrar can instruct the bank to transfer funds, depending on the shares allotted, and remove the lock. We can eliminate the movement of instruments both ways—as application money and refund.