This will not only reduce the burden on the system, but also make investors happy. In normal circumstances, the delay in getting the refund order makes an investor anxious. When there is a delay, he often writes to the registrar, but the registrar does not issue a duplicate refund order because he is not very sure whether both the refund orders (including the original one sent earlier) will be encashed. So, the registrar waits for the confirmation from the bank that the first refund order is not encashed. If the money is lying in investor’s account, he is not terribly worried whether it is unlocked today or tomorrow.
How fast can this happen?
Banks will have to be ready for this. I have had discussions with some of the banks, and they do not find this difficult. Initially, both systems will have to be allowed to operate, and gradually the new system can become the basic way.
Will we see this in six months?
I hope so. I think the beginning should be faster than that. We don’t have a time frame and these issues are still being discussed at the advisory committee (of Sebi). We are looking at various things. For instance, can we eliminate the system of physical application? Can we minimize the data capture requirement? When an investor gives the depository participant and client identification, along with the PAN number, why do we need the rest of the data as that is already captured when one opens the depository account.
Today, nobody can apply for shares without having a depository account. If KYC (know your customers) norms are followed at the time of opening the depository account, why do we need all the data again?
What’s the ideal time for an IPO to list?
It’s difficult to put down an exact number, but reducing it from 21 days to seven days is a reasonable target. We are keeping this as our goal for the time being and I am sure we can go down even below seven days. It’s much like the secondary market. When we were following the 15-day settlement system, we could not have imagined of the T+2 (trade plus two days) settlement system.
Are you planning to ask the qualified institutional investors (QIBs) to put in full money while applying for shares, instead of 10% as has been the practice?
If the money is going to remain with the investors, then it’s possible for us to ask the institutions to put in full money at the time of application for shares. This is because we are not taking the money away from their accounts. We will take away the money only when the shares are allotted to them. Many of them have difficulties in paying full money upfront as their governance structure does not allow them (to) pay unless they get the allotment of shares. The new system will take care of that.
Then, there is a feeling in the market that an unnecessary hype is created about the so-called QIB contribution (to IPOs). People announce that in 3 minutes an issue is subscribed X number of times. Unless in the first 3 minutes, the money is actually blocked, we should not say the issue is subscribed X number of times. The new system will take care of unnecessary hype.
Any plan to change the quota system for QIBs and retail investors?
The QIB portion is fixed in order to make sure that the price is discovered by knowledgable investors. QIBs are allotted shares at a price discovered by them and rest are for retail investors that include HNIs (high net worth individuals). I think the logic is sound and I don’t see any need to tweak the system.