Skip to main content

Stock Market: IPO payment after allotment is final

SEBI has changed the payment process for IPOs and this will benefit individual investors

There is some good news for the investors. The market regulator, Securities and Exchange Board of India (SEBI), has changed the payment process for subscribing to initial public offers (IPO) and rights issues. Under the new process, the application money will remain in the bank account of the applicant till allotment is finalized.

Currently, the money is debited from the bank account, and based on the number of shares allotted, the excess money is returned. According to SEBI, the new system would eliminate the refund process. The modalities of the entire process will be worked out separately.

The SEBI Board has approved, in principle, the concept of making a lien on the bank account an alternative mode of payment in public/rights issues. This means the money earmarked for the IPO will not be used for any other payment obligation during that period. At the same time, the applicant will get the interest payable on the amount. This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest, said officials associated with the IPO process. Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that in January 2008 does not occur again. At that time, many investors were unable to buy scripts which were at attractive lows, as their money was locked up in a few big IPOs, and they could not meet their margin money requirements.

In the case of mega IPOs, which are oversubscribed many times, large amounts of investor funds is blocked for days. Investors don't need to wait for refund of their application money, if they are not allotted shares. Currently, retail investors have to make the full payment on application for shares, which are later refunded to the extent the shares are not allotted, which would normally take three weeks to a month. SEBI is planning to introduce a value-paid instrument, which would help banks freeze the application money till the allotment is made.

The SEBI Board also increased the minimum net worth requirement for registration as a portfolio manager to Rs 2 crores from Rs 50 lakhs. It said existing portfolio managers with lower net worth will have to increase it to at least Rs 1 crore within six months, and to the new prescribed limit in the next six months. SEBI said portfolio managers will not be allowed to pool the resources of clients like mutual funds and must keep assets of each client separately. Portfolio managers working on pooled basis have been given six months to convert their operations to individual basis.

At the same time, new IPO application forms are being designed. The new IPO application forms would avoid manual intervention. SEBI's Primary Market Advisory Committee (PMAC) has given an in principle nod for initiating steps to ensure 'no manual intervention' in the primary market issuance process. PMAC has endorsed the suggestions of the Group on Review of Issue Process (GRIP) on this matter. GRIP had recommended modified application forms that can be submitted physically as well as electronically. These measures will enable faster and more transparent processing of application forms, leading to a reduction in the time gap between closure of an IPO and its listing.

Popular posts from this blog

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now