Capital markets regulator Securities and Exchange Board of India (Sebi) on Wednesday announced a cut in fees of some primary market processes in an effort to reduce the transaction costs of investors and also decided to explore ways to reduce the time it takes to complete an initial public offering (IPO) and list shares.
The volume of transactions in the primary market has been high, and this has triggered a “rationalization” of fees in it, C.B. Bhave, chairman of Sebi, said at the press conference that followed the board meeting—the first after Bhave took over as the chairman of the regulator.
The rationalization covers fees levied by Sebi on mutual funds while filing offer documents for new schemes and those charged on IPOs, and experts said they would not significantly benefit investors.
Asset management companies (AMCs) that manage mutual fund assets and companies that come out with IPOs would benefit more, they said
“Sebi has been driving cost reduction for investors, but the impact (of fees rationalization) will be negligible,” said Dhirendra Kumar, chief executive of Value Research, a firm that researches mutual funds.
An AMC’s expense on a new scheme is generally more than the ceiling fixed by Sebi. Consequently, the AMC bears the residual cost, said Kumar. The current move would benefit AMCs, he added.
Explaining the reasons to reduce the time it takes to make an IPO and list shares, Bhave said that once the process time was reduced, the period for which investors’ money is locked also comes down.
“As you collapse the timing, the need of grey market also disappears,” the Sebi chairman said referring to the unregulated trading in companies where an IPO process is under way.
Sebi has not fixed a timeline to implement steps to reduce the time to make an IPO. The idea is to come with a road map that identifies reforms in the IPO process, said Bhave.
The regulator had earlier set up a group on review of issue processes (GRIP) that looked at reforms in primary market processes. GRIP’s views would also be taken into account when the final road map is drawn, Bhave added.
On Wednesday, the regulator also decided to form a committee of independent board members to oversee the proceedings started by Sebi against the National Securities Depository Ltd (NSDL), following irregularities detected earlier in the IPO process.
Bhave, who was head of NSDL when Sebi started proceedings, said he had requested the board to keep him out of the proceedings.
A plan proposed by the National Stock Exchange (NSE) and the Madras Stock Exchange that would allow the latter’s members to trade on NSE’s platform was also approved, though only in-principle. The?bourses?are?yet?to submit details of the deal to Sebi.