SEBI Discussion Paper on Revisiting the capital raising process January, 2015 TM
Discussion Paper on Revisiting the capital raising process The Securities and Exchange Board of India (SEBI) released a discussion paper on Thursday dated January 8, 2014 proposing couple of norms and one of them is to shorten the time duration between the closure of a fresh public issue (IPO) and the day of listing Key Objectives :- To explore way and means to curtail the timeline for listing from the closure of issue To reduce the cost of public issuances To broad base the retail investors reach across the country for submitting applications. Current time duration 12 days Proposed 6 days
Proposed Non ASBA Process Investors will submit an application to Stock broker, DP, RTA & SSCB.. On receipt of application Stock broker / DP/ RTA / SSCB will bid and clearing corporation will block amount from the stock brokers account. Stock brokers will be advised to use NACH mechanism thereby receive upfront payment confirmation Details of payment confirmation for the bids will be made by banks, clearing corporations and depositories to the RTA Finalization of basis of allotment by RTA and on approval of same by SE, RTA to give instructions to clearing corporation and banks to credit funds in the public issue accoun.t Excess funds would be refunded to the investors and depositories to give instructions to credit securities to investors demat account SE will issue listing & trading approval. Abbreviations Stock broker = SEBI registered stock broker DP = Depository participant SCSB self Certified Syndicate bank RTA Registrar transfer Agent SE Stock Exchange
Proposed Timeline Events ASBA Bids Non ASBA Bids Other Activities T T+1 T+2 Last day of Bidding Final Certificate from SCSBs Syndicate, Non Syndicate Members, Depository Participant and RTA to forward a schedule and application forms to respective SCSBs for blocking of funds. Final Collection certificate for ASBA application made through Syndicate, Non-Syndicate Member, Depository Participant and RTA Availability funds with Stock Broker from Syndicate or Non Syndicate member Clearing Corporation for validation containing the application number and amount, who may use this file for reconciliation. Final Certificate from Clearing Corporation about the amount collected. T+3 NA NA Other SE to share the bid file with Designated Stock Exchange (DSE) DSE to provide End Of Day File (Full Book) to RTA Validation of DP ID/ CL ID will be done by the Exchange with the depositories data by the EoD. Submission of documents by issuer company and merchant banker to stock exchanges (documents presently filed on T+2) Registrar to give instructions to Depositories to carry out lock-in for pre issue capital. Registrar to prepare list of rejected bids based on mis-match between electronic bid details and Depositories data base. Registrar to undertake Technical Rejection test based on electronic bid details and prepare list of technical rejection cases. Registrar to undertake and complete reconciliation of final certificate received from SCSBs and CC) with electronic bid details. Minutes and Technical Rejection approval from BRLM and issuer Submissions of electronic files and basis documents to exchanges and approval of same by exchanges
Proposed Timeline Events ASBA Bids Non ASBA Bids Other Activities T+5 T+4 - - Applicant to receive credit of allocated shares and / or unblock the unutilized money Applicant to receive credit of allocated shares and / or refund of money (same point as above) Transfer of funds to Public Issue/ Refund Account (Clearing Corporation) and unblocking of ASBA Applicants Accounts by RTA on approval of allotment by the company Intimation of basis of allotment by RTA to other SE Application to SE to obtain listing and trading permission by company Advertisement in Newspaper about Allotment Listing reports to issuer / CA/CS certificate for allotment Upload of allotment data to CDSL/NSDL Registrar to Complete Dispatch of allotment instructions Registrar to receive confirmation of credit from NSDL & CDSL and Issue Reconciliation certificate of drop cases, if any Issuer and Registrar to file confirmation of demat credit and refund dispatch with Stock Exchange(s). Confirmation of lock in shares by depository to registrar Company to deposit commission for Non Syndicate members) based on RTA report. SE to give Listing and Trading Approval SE(s) to transfer the commission to Non Syndicate Members through Clearing Corporation based on RTA report. T+ 6 Commencement of Trading from 6 th working day Note T = Closure of Issue SCSB self Certified Syndicate bank RTA Registrar transfer Agent SE Stock Exchange
Comments Should the requirement of having an abridged prospectus along with application form be made nonmandatory? Should ASBA be mandated for all investors?? Should NACH mechanism by NPCI be mandated for collecting payment from investors? For Public comments If ASBA is continued as a voluntary mechanism for retail investors, should it be made voluntary for non-retail investors as well? Any suggestions/modifications on the mechanism proposed above in order to achieve reduction in time and cost of capital raising?
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