IPOs to compulsorily have T+3 listing from today; funds to unblocked earlier

All the Indian companies will mandatorily have T+3 listing at the bourses from December 1 onwards, where 'T' stands for closure date of the issue. It means that the listing candidates will have to make their debut at Dalal Street within three-working days after bidding for the issue ends.

The Securities and Exchange Board of India (Sebi) had halved the IPO listing timeline to three days from six days earlier, in June this year. The new rule was implemented in two phases, where it was optional from September 1, 2023 and made mandatory from December 1, 2023.

Explaining the rationale, the capital market watchdog then said that the move is likely to benefit issuers who would receive securities listed in a shorter period along with those who have not been allotted securities as they will get their money back faster.

Mahavir Lunawat, Managing Director at Pantomath Capital Advisors said that IPOs get queued up and investors don’t get to participate when multiple issues run parallel. "Reduced timeframe will enable investors to plan better, especially at a time when the Indian market is gearing up for significant capitalization," he said.

It is operationally more efficient and a shorter turnaround time means investors have better liquidity as funds would remain blocked for less duration, said Narendra Solanki, Head - Fundamental Research, Anand Rathi Shares and Stock Brokers. "This in turn opens up more options to deploy funds in other avenues. Overall impact on the markets if any could be positive only," he said.

The new move will unblock the funds of bidders in half the time. The retail investors, who have limited capital to invest usually have their funds blocked for a longer period and sometimes miss the opportunity to invest elsewhere. This will reduce their opportunity cost, if they are not among the allottees.

On the other hand, Non-institutional investors, the NIIs or the HNIs, will also be benefitted from the new rule. They usually borrow funds for investments at a higher rate of interest and thus, their cost for funds will be reduced significantly.

Manish Chowdhury, Head of Research, StoxBox believes that the decision of SEBI to reduce the time period of listing from six days to three days from the date of issue closure is a step in the right direction. The decision will benefit both the issuers as well as investors.

"Moreover, the investors in the issue would benefit from the quick refund of the applied amount. We feel that the decision is aimed to benefit all stakeholders involved in the IPO process by enabling them to optimally utilize their available resource pool," he said.

It is a wonderful move by the Indian capital market regulator (SEBI) as it would give faster access to the capital raised to companies enhancing the ease of doing business and for investors its gives early credit and increase liquidity wherein, they can participate in secondary market or plan to apply in multiple issues, said Prashanth Tapse, Senior VP (Research), Mehta Equities.

Ratnaveer Precision Engineering became the first company to make T+3 listing. The company was listed on September 11, 2023, after selling its IPO in the range of Rs 93-98 apiece between September 4-6. Flair Writing Industries, which listed on December 1, 2023 was the last company, which did opt for T+3 listing and made T+4 debut. Plaza Wires was the last company to make T+6 debut.

According to Sebi, the move had been then made after consultation with all stakeholders including anchor investors, registrar, transfer agents, broker-distributors, banks and after a stress test. It had been confirmed to be smooth, which was explained by Madhabi Puri Bach, the chairperson of Sebi, when the new rules were announced.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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