With the primary market expecting initial public offerings worth over Rs 40,000 crore (Rs 400 billion) this year, the Securities and Exchange Board of India is considering steps to ensure that retail investors find it easier to invest in IPOs.
The infrastructure committee under market regulator Sebi is looking into the details of the matter so that it can amend some of its norms to facilitate investors and avoid the allotment crisis faced during the public offer of ONGC last year, sources said.
"Investors have to fill up application forms for an IPO at least thrice. This leads to confusion on reconciliation. However, multi-data capture can be avoided by using the information present in depositories like National Securities Depository Ltd and Central Securities Depository Ltd," an NSDL official said.
At present, investors have to state his or her name, bank account, PAN (permanent account number) and other things in at least three forms.
However, all this information is present with depositories. The only information that is needed from the investor is his or her Client Identification Number and Depository Identification Number in the IPO forms.
Using the Client ID and DP ID numbers, the bank can transfer the funds to the company that has come up with the public offer.
The shares can be transferred and allotted to the investors through the depositories.
Another proposal that Sebi is considering is shortening the period of allotment of shares to three days. This would ensure that investors' money is not locked up for a longer time.
Sebi, along with the Reserve Bank of India, is also expediting the process of introducing straight through processing (STP) facilities in more centres so that funds can be quickly transferred from the banks to market participants.
The RBI has already asked banks to implement Real Time Gross Settlement (RTGS) in more number of cities.
"By the next fiscal, the RBI wants to ensure that RTGS facility is available in almost 500 cities where capital market transactions are carried out," sources said.
The National Stock Exchange has online trading terminals in about 500 cities but banks initiated RTGS in about 215 cities till December.
The moves are intended to increase the participation of retail investors in the capital market.
Retail investors are being given importance in the wake of recent boom in capital market with public offers worth Rs 100,000 crore (Rs 1,000 billion) coming up in the next three years, market sources said.
However, they expressed concern over the lack of infrastructure and other enabling facilities to involve the retail investors.
Prime Database has listed public offerings worth Rs 63,000 crore (Rs 630 billion) for this year including mega IPOs from Tata Sons, Reliance Infocomm, Idea, Hutch, BPL Communications, Tata Teleservices, Jet Airways and Air Deccan.
Major PSUs like BHEL, ONGC, Power Finance Corporation, PowerGrid, NHPC, Haldia Petrochemicals, Gujarat State Energy Generation, Gujarat State Petroleum, NFL, Neyveli Lignite and Shipping Corporation of India are planning to tap the market.
About 11 banks -- PNB, Bank of Baroda, Oriental Bank of Commerce, Allahabad Bank, Dena Bank, Syndicate Bank, HDFC Bank, J&K Bank, Centurion Bank and Yes Bank -- are also in the process of tapping the market.