The capital markets regulator Sebi on Tuesday voiced concern over the slow pace of primary issues, despite a good market condition, and asked investment bankers to do more "diligence" on the pricing front to get investors in. Chairman Ajay Tyagi said Sebi has given the go-ahead to initial public offers (IPOs) worth over Rs 60,000 crore in 2018, but many of them are yet to hit the street. Till October end, 24 companies raised Rs 30,959 crore through IPOs but most this been in the March quarter.

Last year was the best in terms of IPO fund raising, as the IPO market jumped to an all-time record of Rs 67,147.4 crore in fresh fund raising by over 120 companies, according to data from Prime Database.

When asked if the issue is pricing, he asked i-bankers to do more "diligence" while setting a price that will be acceptable to both the issuers as well as investors.

"Merchant bankers have a role to see that an issue is reasonably priced and which is acceptable to both issuers and investors," Tyagi said.

The Sebi chief seemed to suggest that domestic market conditions are better as compared to global peers, with firm macroeconomic fundamentals and said the rupee fall has also been arrested.

SEBI has come out with new allotment process for IPOs, which will incorporate a mechanism. Here's an attempt to understand the new mechanism of IPO allotment through an illustration:

For our exercise, let us assume the total number of specified securities (read equity shares) on offer to be 1 crore specified securities. Let's say these securities are on offer at Rs.600/- a share. Thus, specified securities on offer for Retail Individual Investors category would translate to 35,00,000 specified securities. Let's add that the issuer decides to fix the minimum application / bid size as 20 specified securities (falling within the range of Rs. 10,000 - Rs. 15,000). Application can therefore, be made for a minimum of 20 specified securities and in multiples thereof.

Let's further assume that the issue is over-subscribed 2.5 times whereas the Retail Individual Investors’ category is oversubscribed 4 times. Assume that a total of 100,000 Retail Individual Investors have applied in the issue, in varying number of bid lots i.e. between 1 – 16 bid lots, based on the maximum application size of upto Rs. 2,00,000 (i.e. Bid Lot 1 is for 20 shares, Bid Lot 2 for 40 shares, Bid Lot 3 for 60 shares and so on till Bid Lot 16 which will translate to 320 shares)

Out of the 100,000 Retail Individual Investors, let's say there are five retail individual investors A, B, C, D and E who have applied as follows:

• A has applied for 320 specified securities
• B has applied for 220 specified securities
• C has applied for 120 specified securities
• D has applied for 60 specified securities and 
• E has applied for 20 specified securities

Now, as per allotment procedure, the allotment to retail individual investors shall not be less than the minimum bid lot, subject to availability of shares, and the remaining available shares, if any, shall be allotted on a proportionate basis

The actual entitlement for allotment, thus, shall be as follows:


Okay. Now, in the above example, we assumed an overall over-subscription of 2.5 times and retail over-subscription of 4 times. But what happens if subscription if higher? Let's find out:

This time around, let's keep total no. of specified securities on offer (at Rs. 600 per share) unchanged at 1 crore specified securities. Specified securities on offer for Retail Individual Investors’ category therefore would be again: 35 lakh specified securities. Issuer decides to fix the minimum application / bid size as 20 specified securities (falling within the range of Rs. 10,000 - Rs. 15,000). Application can be made for a minimum of 20 specified securities and in multiples thereof

Let's now assume the issue is over subscribed 7 times whereas the Retail Individual Investors’ category is over subscribed 9.37 times.

Assume that a total of 200,000 Retail Individual Investors have applied in the issue, in varying number of bid lots i.e. between 1 – 16 bid lots (i.e. 16th lot at Rs.192,000 since the maximum application size of upto Rs.2,00,000)

Again, as per allotment procedure, the allotment to retail individual investors shall not be less than the minimum bid lot, subject to availability of shares, and the remaining available shares, if any, shall be allotted on a proportionate basis

Now since the total number of shares on offer to retail individual investors is 35,00,000 and the minimum bid lot is 20 shares, the maximum no. of investors who can be allotted this minimum bid
lot will be 1,75,000.

In other words,

• 1,75,000 Retail Investors will get the Minimum Bid Lot and  
• Remaining 25,000 retail applicants will not get allotment

The allotment in this case will be as follows:

The market regulator SEBI has said that the company issuing IPOs must announce the price band of the issue at least five working days before the issue opens

Currently, the price band could be announced two working days before the IPO opened. This often left very less time in the hands of investor to analyse and arrive at an informed decision. The move by SEBI is aimed at enabling the investor to take an informed call on whether the price is fair and improve the quality of investor decision making

The price band is the price range within which the company will offer the shares under the IPO. Under the regulations, the spread or the difference between the floor and the cap of the price band cannot be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price

The Securities and Exchange Board of India (SEBI) has introduced a number of sweeping changes by way of reforms that promise to revive primary markets and boost investor interest. Here's an insight into e-IPOs


Currently, IPOs are marketed through merchant bankers or syndicate members. Applications can be made only through these syndicate members. An ASBA Investor can visit an ASBA Bank branch and deposit IPO application under the current system.

To enhance retail participation in IPOs, SEBI plans to introduce electronic IPOs by utilizing broker terminal networks. The idea under e-IPO is to enable every single terminal of every registered broker of BSE and NSE to be able to accept application.

The Securities Exchange Board of India (SEBI) had earlier announced a list of reforms aimed at boosting primary market, the mutual fund industry and retail participation in the market. Of all the items on the agenda, the market regulator has not yet approved the issue of a safety net for retail participants in an IPO.

Under a safety net mechanism, certain portion of the investment made by retail shareholders could be guaranteed for a fixed period against market volatility. This concept was introduced to encourage more retail participation on initial public offers, especially at a time when investment sentiment is low in the country.

As per the proposed mechanism, a certain portion of the investment made by retail shareholders in the IPOs could be guaranteed for a fixed period, which could of six months, even if the shares' value plunge below the IPO allotment price during this time.

 This 'safety net' mechanism is being considered only for the small retail investors, who would be compensated by the promoters and other entities selling shares through IPOs in the event of the company's shares plunging below a certain threshold limit within six months of listing or the time frame set by Sebi,


Chairman UK Sinha today said that this concept required more consultation, and has therefore invited the public to voice their views on the idea of a safety net.

Finance Minister P Chidambaram has said regulator SEBI is expected to announce fresh market reform measures next month

Expressing satisfaction over wide-ranging reforms announced by Securities and Exchange Board of India (Sebi) yesterday for mutual funds and other segments, Chidambaram said he has requested SEBI Chairman U K Sinha to look into a number of other suggestions for the benefit of investors.

'The examination by the Government and Sebi is likely to be completed in the next two weeks. I have requested Sebi Chairman to schedule another meeting of the (Sebi) Board in early September when some more decisions can be taken on the suggestions that are under examination,' he said.

The Finance Minister said the measures announced by SEBI yesterday 'will stimulate financial savings among households as well as give a fillip to the mutual fund industry. More and more households should be encouraged to save in financial instruments rather than in gold'.

In wide-ranging changes to its various regulations, SEBI made it easier and more cost effective to invest and raise funds through IPOs, while allowing the Mutual Funds ( MFs) flexibility in using their fund expense charges and proposing a national mutual fund policy.

Besides, SEBI has also made provisions for retail investors getting an assured minimum lot of shares in IPOs (Initial Public Offers) and asked the companies to announce their price band at least five days in advance of the issue

SEBI has been up in the arms to boost investor interest and revive the Indian primary markets. With the said view, it has come up with a number of reforms in the IPO market, following being the key regulations introduced:

• e-IPO facility to be available at 1,000 points initially 
• All IPO applicants must get minimum allocation of shares 
• Price band to be disclosed 5 days before IPO opens
• Minimum IPO application limit band hiked to Rs.10,000-15,000
• No need to file new DRHP if issue size changes up to 20%
• Compulsory book build issue to have 75% for QIBs
• Non-retail investors cannot cut, withdraw IPO bid, but can enhance IPO bid price, size
• Funds raised for General Corporate purpose to be capped at 25% of IPO
• Minimum profit norm for IPOs pegged at Rs.15 crore

In order to curb market manipulation and speculation, SEBI has changed rules for newly-listed and re-listed stocks.

For IPOs up to Rs 250 crore in size:
- There will be a 1 hour call auction (9 AM to 10 AM).
- A price band of 5% will be applicable (5% from the equilibrium price).
- The stocks will trade in "Trade for Trade" segment for 10 days.

If no equilibrium price is discovered, the issue price will be used to calculate the price bands.

For IPOs greater than Rs 250 crore in size:
- There will be a 1 hour call auction (9 AM to 10 AM).
- A price band of 20% will be applicable (20% from the equilibrium price).

If no equilibrium price is discovered, the issue price will be used to calculate the price bands.

For re-listings:
- There will be a 1 hour call auction (9 AM to 10 AM).
- A price band of 5% will be applicable (5% from the equilibrium price).
- The stocks will trade in "Trade for Trade" segment for 10 days.

If no equilibrium price is discovered, normal trading will not commence and the stock will continue to trade in call auction sessions.


Call auction timings and details:
9:00 AM to 9:45 AM - Order entry and cancellation.
9:45 AM to 9:55 AM - Order matching.
9:55 AM to 10:00 AM - Buffer period.

SEBI has introduced new norms to be followed in case of listing of all new IPOs. The recently concluded MCX IPO would be the first one to be subjected to the new regulations on the listing day. Let's try to understand how these regulations may affect the listing price movements of MCX and future IPOs in the Indian market

According to the new norms mandated by SEBI for IPOs, investors must note that the shares offered under the IPO on the listing day, would initially go through a pre-open session period which will last for an hour between 9:00 AM and 10:00 AM. During this period, investors would be allowed to punch in orders, modify them and/or cancel them during the first 45 minutes, i.e. upto 9:45 AM. The rationale behind such a move is aimed at protecting the interest of the retail shareholders from artificial price-rigging on the bourses.

According to the new norms mandated by SEBI for IPOs, investors must note that the shares offered under the IPO on the listing day, would initially go through a pre-open session period which will last for an hour between 9:00 AM and 10:00 AM. During this period, investors would be allowed to punch in orders, modify them and/or cancel them during the first 45 minutes, i.e. upto 9:45 AM. The rationale behind such a move is aimed at protecting the interest of the retail shareholders from artificial price-rigging on the bourses.

However, the crux of the new norms introduced by SEBI states that all the IPO listings on the bourses would be controlled by circuit limits right from the listing day. According to SEBI regulations, in case the equilibrium price (price at which the bid rate matches with the ask rate) is discovered during the pre-open session, the price band for normal trading session shall be 20 per cent of the equilibrium price. In case the equilibrium price is not discovered, then the 20 per cent circuit limit would be applicable on the issue price. While the above mentioned rules are in place for companies with issue sizes in excess of Rs 250 crore, the ones with issue size up to Rs 250 crore would have set circuit limits of 5 per cent either on the equilibrium price or the issue price as stated above

The market watchdog SEBI has announced the lot sizes for SME IPOs. Recently, BCB Finance Ltd. has come up with a Fixed Priced Issue which is the first IPO in the BSE SME category 

According to the announcement, Companies in the SME sector entering the capital markets will be prescribed 'lot sizes' for shares in an initial public offering. In a circular released on Tuesday, the capital market regulator SEBI mandated specific lot sizes for IPOs in different price bands. For a price band of up to Rs.14, the lot size would be 10,000 shares. For a band of Rs 14-18, the lot size has been fixed at 8,000 shares. As the value of the price band progressively increases from Rs.14 to above Rs.1000, the number of shares in the lot size decreases from 10,000 shares to 100 shares

The market watchdog SEBI has said that normal trading upon listing of an IPO can now take place only after a call auction session. This is primarily a move to check volatile price movements on the first day of trading in newly listed and re-listed stocks

SEBI has been on a roll with crackdowns on IPOs. Now, as part of a crackdown by the Securities & Exchange Board of India (SEBI) on manipulation of public offerings, Taksheel Solutions Limited (TSL), its directors, key executives and its merchant banker, PNB Investment Services (PNB) are among those barred from accessing the capital markets