What lacks is that the primary IPO markets are not that efficient, because of the time lag and delays. That’s what was quoted by the SEBI Chairman, Mr. Bhave, in a recent interview. Mr. Bhave comes up with an excellent suggestion about how the investors can benefit from the IPO without actually having to send the money over the the Book Running lead managers.
Mr. Bhave quotes the example of the recently concluded Reliance Power IPO listing. He mentions that around 4.5 million applications were received from investors. None of the investors got full allocation as the issue was heavily subscribed. Hence, the same 4.5 million applications were required to have 4.5 million refund orders. Therefore, a total of 9 million transactions were to be performed. Secondly, the postal department was also involved, which is another reason for time delay in several of the cases. We need to improve upon this time delay.
What can be done in this case is that we can have a mechanism, where the investors don’t need to send any money cheques with the IPO application. He can simply maintain that money in his respective bank account and there can be some data provided by the banker to the IPO registrar saying that this much money has been locked in the investors bank account for the purpose of applying for the IPO. During the IPO book building time, the money will remain in the investors account, but will be unavailable to him for alternate use. Hence, once the shares are allotted, that much money will be taken from his bank account and the remainder will be again freed from the locked state. This will not only reduce the transaction processing heavily, but will also reduce the time lag. It will also involve more transparency in the system.
| A very nice and efficient idea. Let’s see when this will actually get implemented. | Table of Contents |
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