The Securities and Exchange Board of India (SEBI) vide its circular dated 1 November 2018 (SEBI Circular) laid down the roadmap for shortening the timeline for listing in a public issue, from the existing framework of T+6 working days, to 3 working days from the date of issue closure. The framework was to be implemented in a phased manner. One of the key changes to achieve T+3 listing, was the introduction of the UPI payment mechanism and phasing out of the Syndicate ASBA mechanism. Our ERGO on the SEBI Circular can be accessed here.
In Phase-I, the SEBI Circular permitted retail individual investors (RIIs) to bid through four channels, viz. (i) Self-Certified Syndicate Banks, through ASBA process (SCSB ASBA); (ii) syndicate member, stock broker, depository participant and registrar to the issue by blocking of funds, through ASBA process (Syndicate ASBA); (iii) 3 in 1 account offered by selected stock brokers (3 in 1 Account); or (iv) syndicate members, stock brokers, depository participants and registrar to the issue for blocking of funds through UPI mechanism (UPI Application) (Phase-I). Initially, the Phase-I of the SEBI Circular was to continue for a period of three months or launch of five main board public issues, however, SEBI vide its circular dated 3 April 2019, extended the timeline for the implementation of Phase-I till 30 June 2019. On 28 June 2019, SEBI vide a circular (Phase-II Circular), stipulated that Phase II of the SEBI Circular will come into effect from 1 July 2019.
UPI as a payment mechanism has not yet proved to be the preferred choice for retail investors bidding in public issues. This is evidenced by the negligible number of applications received through the UPI mechanism in the recent public issues undertaken in Phase-I. Significant efforts would be required by intermediaries to educate the RIIs about application through UPI Mechanism.
Historically, public issues have received the highest number of applications through the Syndicate ASBA channel. Hence, in the absence of Syndicate ASBA, the implementation of Phase-II will be the real test for the success of the UPI mechanism. We estimate that the 3-in-1 Account and SCSB ASBA channels will garner a higher number of applications in the forthcoming public issues.
- Sudhir Bassi (Executive Director) and Raghav Bhatia (Associate)
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