The primary market advisory committee of the Securities and Exchange Board of India has barred qualified institutional buyers from withdrawing their bids even though they have the freedom to revise them.
The merchant banking community says that this would mean not only can the QIBs revise the prices but also the quantity of their bids.
"Theoretically, they can revise the bid to zero. Which is tantamount to withdrawing the bid," said Mahesh Chhabria, chief operating officer of Enam Financial Consultants Pvt Ltd.
Merchant bankers feel that the freedom to revise bids could lead to a situation where there could be price manipulation. A senior merchant banker asked, "What if they revise it to below the issue price?"
The proposal to change the definition of retail investor and peg it to the amount invested rather than to the number of shares applied for is also expected to create difficulties, they said.
Merchant bankers also feel that the reduction in listing time to six days from the present 15 days is too ambitious and may not be feasible since the clearance of cheques takes a long time.
"Under the current clearing mechanism, it would take at least 12 days for the listing to take place," said a merchant banking head.
One alternative being suggested is that the merchant bankers should apply on behalf of retail investors and then make allotments to them.
This is the way it happens in more advanced markets. But Sebi is not yet considering this option, merchant banking sources said.
Sebi's primary market advisory committee has proposed that retail investors should be defined as those investing below Rs 50,000.