How IPO Listing Timeline To T+3 from T+6 Will Help Investors Save A Lot Of Money?

In a major good news for companies looking to step into stock market, brokers and investors, market regulator SEBI has decided to reduce the timeline for initial public offering (IPO) listing to 'T+3" from earlier 'T+6'. In simple words, it means that IPOs will be able to list in three working days time after the closure of the issue, compared to the current six working days time period. That also means that allotment of equity shares, refund initiation and credit to demat accounts will also be done in three days. This is expected to help investors save a lot of money.

Sebi has directed that the timeline to "T+3" should be followed voluntarily for public issues that are opening on or after September 1, 2023. However, it will become mandatory for public issues that are opening on or after December 1, 2023, to follow the new rule.

According to Mukesh Kochar, National Head of wealth at AUM Capital Market, this is a welcome step taken by SEBI to reduce the listing timeline. This is a win-win for all the stakeholders. It will save the time and resources of exchanges, merchant bankers, banks, depositories & brokers.

How do investors benefit?

Kochar added that the issuer will benefit as they will be getting the funds in lesser time at the same time investors will get their shares or refunds also in lesser time. So the cost of funds for the investors' community will come down as they will be able to redeploy the refund amount and save the interest cost if any. So SEBI is taking continuous steps to simplify the process and to benefit the investors.

Further, Varun Sridhar, CEO, of Paytm Money, said SEBI's circular on reducing the IPO timeline from T+6 to T+3 is a landmark move in making the IPOs process more efficient for both investors & issuers.

As per Sridhar, investors benefit from faster turnaround of capital, and for HNIs, this means lower borrowing costs. This also reduces the impact of adverse market movements between issue close and listing, thus reducing the risks in the IPO process due to external events. Mandatorily matching the PAN in the Bank account and the IPO application also greatly reduces errors in the IPO process. In conjunction with the settlement cycle reducing from T + 2 to T + 1, and the possible introduction of a type mechanism for secondary transactions, India and SEBI are progressing rapidly to become one of the world's most advanced capital markets.

Unlisted companies can go public by launching their IPOs in the primary market. The IPOs are usually a mixture of fresh issue and offer for sale (OFS) where equity shares are offered to qualified institutional buyers (QIBs), non-institutional investors (NIIs) and retail investors. Companies can file their draft prospectus with the regulator Sebi, exchanges and the Registrar of Companies (ROC) for listing on the stock exchanges. Following this, the issuer receives observations from regulatory authorities. After complying with all observations, the issuer can open the offer inviting the general public to invest in the IPO subject to stipulated timelines.

Post the successful completion of the IPO, the shares of the company are listed for trading on exchanges.

One of the benefits of investing in an IPO is that the shares bought during the time period of the offer can be sold in the open market once they are listed. If the IPOs are listed at a premium from the issue price, investors gain massively. Also, traders get the opportunity to buy the stock at a discounted rate before they go public, hence cheaper buying.

Apart from this, there is a fair chance for retail investors to grab the opportunity in the IPO as a portion is reserved for them. As per the Angel One website, SEBI has decreed that if the issue is oversubscribed, subject to availability, all retail investors be allotted at least one lot of shares. If one lot to each investor is not possible, a lottery system should be used to allocate IPO shares to the public.

Disclaimer

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