BackDYK | More brokers to submit IPO applications
Other than expanding the network of brokers, Sebi has also changed the commission methodology.
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This year’s Union budget proposed that companies raising at least 10 crore should sell their initial public offer (IPO) in electronic form through the broker network of stock exchanges. Accordingly, the Securities and Exchange Board of India (Sebi) has introduced a system where you can get an IPO form online and then submit it to any broker registered with stock exchanges. Earlier, you could apply for an IPO mainly through merchant bankers to an issue and brokers that they approved.
What’s the change?
Now any interested party—you or the broker or self-certified syndicate banks, or SCSB, (in case of applications supported by blocked amounts, or ASBA)—can download the IPO form from an exchange’s website. The new system can be used for ASBA as well as non-ASBA applications. Sebi has also specified that stock exchanges need to ensure that price bands are pre-printed.
The forms can be submitted at specified broker centres as of now. Eventually, you will have at least 1,000 locations as part of the broker network of stock exchanges. The brokers’ contact details will be displayed on stock exchanges’ websites in four-six months.
How does it work?
After filling the form, submit it to a designated broker centre, specifying the mode of payment. Brokers will stamp applications as acknowledgement and then upload the bid on the exchange’s website. The broker will then either deposit the cheque, prepare an electronic schedule or send it to the banker of the issue and in case of ASBA to the respective ASBA-linked SCSB branch.
You can log on to the exchange website and create a user identity, which will enable you to check the status and details of your application a day after the exchange has received the bid. Brokers will be finally responsible for any investor complaints.
Commission based on applications, not allotment
Other than expanding the network of brokers, Sebi has also changed the commission methodology for brokers. Now brokers will receive commission on the basis of applications rather than allotment, which can be a big incentive for them to promote an IPO. As part of this new mechanism, applications uploaded on exchange websites from syndicate and non-syndicate brokers will be distinguished and listing of the IPO will not happen till the issuer pays the brokers’ commission to stock exchanges. The stock exchanges in turn will pay the brokers.
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