pay the applied amount to an IPO until the shares are allotment. This
is a welcome move, since with maturing markets and expectation of high
listing premiums, a lot of investors tend to put in 1 lakh (limit set
for retail investors); but can expect to be allotted only about 1-10%
of the invested amount, depending on the popularity of the IPO (which
further depends on the marketing strength of the company). Now these
investors have to wait a long time to get their refunds. Further, the
linked accounts are not directly credited, they are paid by cheque
leading to further delays are risk on the part of the investors.
With these norms, the amount would be locked at the bank account of
the investors, and would be available only after refunds are declared.
This process has a lot of operational issues. First, a lot of retail
investors not having a demat account are allowed to invest in the
primary market. This creates problem of traceability. Second, the book
runner will have to coordinate with all the possible banks and their
branches (RTGS affiliated or not) in order to pass on the information
seamlessly. In the event of the inability of the banks to accept such
information, a section of the investor populace will be at a
disadvantage. Third, this process increases the role of the banks as
IPO investment partners. Banks may charge (the book runner or the
customer) for providing such a service. It remains unclear who will
bear the brunt. Fourth, it might be a step for SEBI to move to a
situation of uniform demat account linked savings account. This would
put most of the DPs at a disadvantage.
The online version of demat accounts has not gained enough popularity
due to lack of Internet penetration and lack of working knowledge of
computers among the general population. The above move might make IPO
investment less popular (added the fact, that markets are no longer
performing as before).
