SEBI to Fast-Track IPO listing from 01 Dec 2023

sebi-brings-down-ipo-listing-timeline

In a game-changing move for the Indian stock market, the Securities and Exchange Board of India (SEBI) has announced a significant reduction in the timeline for Initial Public Offering (IPO) listings. The new regulations, which will become effective from December 1, 2023, ensure that the time taken for an IPO listing is shortened to just three days post the issue closure. This is a considerable leap from the current six-day timeline.

This decision comes as part of a broader effort by SEBI to streamline the process of IPOs and make it more efficient for both companies and investors.

SEBI’s strategic reduction in IPO listing timeline

SEBI had previously shortened the IPO listing timeline from as long as 12 days to six days in 2016, when it introduced the Unified Payment Interface (UPI) as an additional payment mechanism for retail investors.

Here’s a look at the new changes that SEBI has announced now around IPO listing timeline and what’s behind this decision:

Phased introduction: The new rule on IPO listing will be implemented in two stages. They will be voluntary for all public issues opening on or after September 1, 2023, and mandatory for those opening on or after December 1, 2023.
Specific timelines: SEBI has defined specific timelines for each of the stages of an IPO. The registrar will need to finalize the basis of allotment and submit it to the designated stock exchange for approval by 6 PM on T+1 (the day following the closure of the issue). The issuer will then need to make a listing application to the stock exchanges for trading permission by 6:30 PM on T+2.
Early credit and liquidity: The new timeline will provide investors with an opportunity for early credit and liquidity of their investment.

The changes are part of SEBI’s ongoing efforts to enhance the ease of doing business in India and align the country’s financial markets with global best practices.

Benefits of faster IPO listing to investors & companies

The reduced timeline will undoubtedly have significant implications for the stock market. For starters, it will allow investors to have quicker access to their shares after an IPO concludes. This not only speeds up the entire process but also reduces the uncertainty and the waiting period for investors.

Moreover, it provides companies with faster access to the capital raised, enabling them to put the funds to use sooner. This can be particularly beneficial for smaller companies and startups looking to scale rapidly.

The significance of the move

The move by SEBI represents a step towards aligning India’s IPO processes with global best practices. Many mature markets around the world already follow a T+3 timeline. This change could potentially attract more foreign investors who are accustomed to quicker listing timelines.

Additionally, it’s a testament to the increasing efficiency and sophistication of India’s financial systems. The ability to handle such a quick turnaround indicates the robustness of the country’s financial infrastructure.

Surge in IPOs in 2023

India is witnessing a surge in Initial Public Offerings (IPOs) with the BSE and NSE leading the world in the number of public offerings. This trend has been attributed to the country’s stable macroeconomic outlook, political stability, and impressive financial results.

India saw six IPOs during April-June 2023 on the main markets
A significant 32 IPOs came up in the SME space in Q2 2023, indicating robust growth.
About 13 companies filed their Draft Red Herring Prospectus (DRHPs) in Q2 2023, contributing to a healthy IPO pipeline.

Sectors such as hospitality and construction, automotive and transportation, diversified industrial products, and real estate have been particularly active. Foreign institutional investors (FIIs) are showing sustained inflows into India, leading to an 8% market rally since April 2023. These trends suggest a positive outlook for continued IPO activity in India.

Conclusion

SEBI’s decision to shorten the IPO timeline is a milestone in the evolution of India’s stock market. It exhibits the market’s readiness for more rapid and efficient processes, benefitting both businesses seeking capital and investors eager to participate in a company’s growth story.

As we anticipate this change, it’s clear that the Indian stock market is on an accelerated path towards global standards. An exciting journey lies ahead for all stakeholders in the market, and we can look forward to even more innovative and investor-friendly measures in the future.