SEBI presses pause button on IPOs until bidding system is corrected
Association of Investment Bankers of India (AIBI) has said that SEBI has informed the industry body that no IPOs will be allowed till the concerns raised by DIPAM are resolved.
- May 9, 2022,
- Updated May 9, 2022 9:28 PM IST
The Securities and Exchange Board of India (SEBI) is believed to have put a temporary freeze on initial public offers (IPOs) as it reviews the public issue process amid concerns that the current framework allows applicants in the institutional and high net worth individuals categories to put in bids only to be rejected later due to lack of funds.
On Monday, the Association of Investment Bankers of India (AIBI), the industry body of merchant bankers, communicated to its members that the capital markets regulator has informed that no further IPOs will be allowed till the issue is "fixed and resolved"
According to the regulator, as per the AIBI communication, in some of the recent IPOs it was seen that bids in the non-institutional investors (NII) and qualified institutional buyers (QIB) mostly come on the last day (T) while the funds come on the next day (T+1) or even on the second day (T+2) in some cases.
However, many applications in these categories get rejected as funds are not blocked in the bank and the applications fall in the 'bidded but not banked' category.
"These bids push up the over subscription numbers even as there is no genuine intent of the applicant to apply for shares in the IPO," said a person familiar with the development.
According to another person aware of the matter, the capital market regulator is soon expected to call for a meeting with all stakeholders, including, merchant bankers and registrars.
Incidentally, this issue was raised by market intermediaries with the government - officials of Department of Investment and Public Asset Management (DIPAM), to be specific - wherein it was requested that the framework needs to be fixed immediately since a section of investors were "gaming" the system.
According to the AIBI communication, DIPAM conveyed the concerns to Sebi, which, in turn, informed the industry body that no further IPOs would be allowed till the time the watchdog is able to resolve the issue.
SEBI did not immediately respond to an email query sent by Business Today. Meanwhile, officials of merchant banking firms managing the IPOs of Prudent Corporate Advisory and Delhivery, which are scheduled to open on May 10 and May 11, respectively, said that there is no change in the issue opening dates.
Also read: FabIndia, Aether Industries, 5 others get SEBI approval to float IPOs
Also read: Individual pays Rs 28.6 lakh to SEBI as settlement charges
The Securities and Exchange Board of India (SEBI) is believed to have put a temporary freeze on initial public offers (IPOs) as it reviews the public issue process amid concerns that the current framework allows applicants in the institutional and high net worth individuals categories to put in bids only to be rejected later due to lack of funds.
On Monday, the Association of Investment Bankers of India (AIBI), the industry body of merchant bankers, communicated to its members that the capital markets regulator has informed that no further IPOs will be allowed till the issue is "fixed and resolved"
According to the regulator, as per the AIBI communication, in some of the recent IPOs it was seen that bids in the non-institutional investors (NII) and qualified institutional buyers (QIB) mostly come on the last day (T) while the funds come on the next day (T+1) or even on the second day (T+2) in some cases.
However, many applications in these categories get rejected as funds are not blocked in the bank and the applications fall in the 'bidded but not banked' category.
"These bids push up the over subscription numbers even as there is no genuine intent of the applicant to apply for shares in the IPO," said a person familiar with the development.
According to another person aware of the matter, the capital market regulator is soon expected to call for a meeting with all stakeholders, including, merchant bankers and registrars.
Incidentally, this issue was raised by market intermediaries with the government - officials of Department of Investment and Public Asset Management (DIPAM), to be specific - wherein it was requested that the framework needs to be fixed immediately since a section of investors were "gaming" the system.
According to the AIBI communication, DIPAM conveyed the concerns to Sebi, which, in turn, informed the industry body that no further IPOs would be allowed till the time the watchdog is able to resolve the issue.
SEBI did not immediately respond to an email query sent by Business Today. Meanwhile, officials of merchant banking firms managing the IPOs of Prudent Corporate Advisory and Delhivery, which are scheduled to open on May 10 and May 11, respectively, said that there is no change in the issue opening dates.
Also read: FabIndia, Aether Industries, 5 others get SEBI approval to float IPOs
Also read: Individual pays Rs 28.6 lakh to SEBI as settlement charges