SEBI has reduced the time post closing of an IPO and its listing on the bourses to 12 days from the earlier 22 days. This has been mandated for all issues opening with effect from 1st May. This would reduce the uncertainty in the market place between the closure of an IPO and the listing of the same.
SEBI proposes to reduce the time by a further 5 days and bring it to 7 days in course of time. Yet another change which would be applicable from 1st May is that QIB’s would also have to pay 100% of the bid amount against the mere 10% that they were paying earlier. This change is likely to reduce the oversubscription which was seen in some issues in the recent past and make the subscription levels more realistic.
Readers will recall that the IPO of Persistent System Limited had seen a subscription of 144 times. Similarly DQ entertainment had seen the QIB portion subscribed over 93 times and in the case of ARSS Infrastructure it was over 49 times. Man Infracontruction saw a subscription of over 96 times.
Though it is early to comment on what would be the effect of these changes on the QIB’s, two things are very clear that the reduction in time to listing is a very welcome step and secondly making QIB’s also pay 100% brings all investors on a level playing field. Initially oversubscription in the QIB category is likely to reduce and this would have an impact on overall subscription of IPO’s. This could in the medium term make IPO pricing more attractive and if that does happen it would do a great service to investors across categories.