Reduction of Timeline for Listing of Shares in Public Issue from Existing T+6 Days To T+3 Days
A historic step has been taken by SEBI in the timeframe of listing of securities on August 9, 2023 which will have significant impacts on investors, issuers and all market participants.
August 09, 2023 marks a historic day in the Indian market, bringing about a significant change that will impact investors, issuers, and all market participants.Through Circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated August 09, 2023, the Securities and Exchange Board of India (SEBI) has reduced the listing and trading timelines from the existing T+6 working days which came into effect from January 01, 2016, to T+3 working days (‘T’ denotes the day of closure of the issue). This change promises a range of benefits for both issuers and investors.
The alteration in listing and trading timelines presents a game-changing advantage for both issuers and investors. Companies raising capital through the issuance of shares will experience expedited access to the funds raised. This acceleration enhances the overall ease of doing business, streamlining the process of fundraising and allowing companies to deploy capital more swiftly. On the investors’ side, this reduction in timelines translates into quicker access to liquidity for their investments, thus improving the investment experience.
Currently, the IPO application period spans at least three working days and not more than ten working days. Typically, the bidding period remains open for three working days in India. For instance, if an investor submits an IPO application using the Application Supported by Blocked Amount (ASBA) method on the first day of the issue period, their funds remain blocked from that day till T+4 meaning the working day after finalisation of the Basis of Allotment i.e., BOA+1. This implies that the funds of that investor will stay idle for seven working days, or approximately nine days. However, with the newly implemented reduction in the timeline, investor funds will be unblocked on T+2 days, and that too by 4 PM.
The updated timelines bring about advantages for both issuers and investors alike. Notably, issuers will now receive their funds within T+2 working days, marking a substantial enhancement compared to the previous T+4 working days. Similarly, investors will enjoy expedited unblocking of funds in case of non-allotment, with funds becoming available on T+2 working days instead of the previous T+4 working days timeframe. Furthermore, the compensation to investors for delay in unblocking of ASBA application monies (if any) shall be computed from T+3 day.
These revised timelines are optional for public issues opening on or after September 01, 2023, allowing issuers and intermediaries to transition at their own pace. Starting December 01, 2023, they become mandatory for public issues opening from that date onward, establishing a standardised framework. This landmark reduction in the timeline for listing shares in a public issue reflects SEBI’s commitment to enhancing the efficiency and effectiveness of the Indian securities market. It streamlines the process, benefits both issuers and investors, and contributes to the overall growth of the market.
As we move forward, these revised timelines are poised to contribute significantly to the ease of doing business in the Indian securities landscape. However, it’s important to note that this reduction in listing and trading timelines might present some challenges for the intermediaries involved, especially the lead managers and registrars to the issue. Intermediaries play crucial roles in co-ordinating various aspects of the IPO process, including managing investor applications, allotment, and ensuring compliance with regulatory requirements.
The compressed timeline could demand a more efficient and streamlined workflow, requiring these intermediaries to swiftly adapt their processes and systems to meet the new demands. While these challenges exist, they also provide an opportunity for market participants to innovate and improve their operational capabilities, ultimately contributing to a more agile and responsive IPO ecosystem.