Do you plan to make underwriting by merchant bankers mandatory for every issue?
This issue came up for discussion in the primary market advisory committee, but no view has been taken on that. Some people are questioning the price band given by the merchant bankers. The argument is that if the merchant bankers recommend such price bands with full responsibility, they should underwrite the whole issue. The counter-argument given by the industry is that since we are following the book-building process and discovering the price, where is the question of full underwriting?
Are some of issues overpriced?
I would say that the gap between the closure of an issue and its listing is partly responsible for such thinking. The market can move and in 20 days it can move tremendously. Normally, an issuer would leave something on the table for the investors. How much to leave on the table is a matter of judgement, and if the gap between the closure of an IPO and its listing is reduced the judgement would appear less questionable. The solution to this issue lies in reducing the time. In any case, Sebi does not take a view on pricing.
So, you are not looking at the pricing of IPOs?
Pricing is best left to the market.
Any plan to tackle the rampant grey market?
There is no price during the gap between an IPO closure and its listing and people want to form the price in the so-called grey market. Reduced time gap should at least partly provide a solution.
The government is pushing for wider public participation in listed firms.
The government is receiving comments on its draft paper on this issue and, once it takes a view, we will have to look at the issue.
Generally, a larger participation by non-promoters in the shareholding of a listed firm is a good thing because it ensures a diverse set of shareholders and the price formation in the secondary market becomes more reliable. We need to look into how the dynamics is going to work in the context of public sector, or listed companies which have small non-promoter holding.
Your agenda for the secondary market?
Grey area: There is no price between an IPO closure and its listing and people want to form the price in the so-called grey market. Reduced time gap should at least partly provide a solution, says Bhave. (Photo: Ashesh Shah/Mint)
We must keep our market competitive. We have given the institutional investors direct market access to market. Institutional investors the world over have such access and prefer it. This is because of the delay involved in the process of placing orders with brokers and worries about front-running. This has been a long-standing demand from the institutions as well as exchanges.
The world keeps on innovating and we have to keep our eyes and ears open and, at least, make sure that our markets don’t fall behind on account of regulatory delays. Our idea is to remain up to date in the areas of trading and settlement.
Will we see the settlement system shifting from T+2 to T+1?