Madhabi Puri Buch ,Chairperson,Sebi
Amid concerns in some quarters over the exorbitant valuation of certain initial public offerings, Sebi Chairperson Madhabi Puri Buch has said the regulator would certainly look into the matter if disclosures on the valuation are meaningless
Capital markets regulator Sebi aims to introduce same-day settlement of trades on stock exchanges by March 2024 and eventually have real time settlement, its Chairperson Madhabi Puri Buch said on Saturday.
Already, the watchdog reduced the settlement timelines to as short as one day.
“Sebi wants the T plus zero (T+0) settlement norm to be in place from March-end 2024 and T plus instantaneous settlement 12 months from thereon,” Buch told reporters here after the regulator’s board meeting. T+0 refers to the same-day settlement of trades and instantaneous settlement means settling the transactions on a real time basis.
According to Buch, market markers are of the view that it makes better sense to move directly from T+1 hour to T+instantaneous as there is no benefit to be drawn from the middle ground which is T+0.
The investment banker-turned-regulator said that Sebi is “fully open” to the suggestions made by the market makers on instantaneous settlement of trades.
She said that the new settlement will be parallel to the existing settlement system and will fully be optional. Moreover, it will be available on select large products, and even that will be optional to choose from.
The country’s stock markets moved to T+1 settlement, where trades are settled the next business day, in January this year. Earlier, it was T+2 system. The changes from T+2 to T+1 and T+ 1 hour have been eventless from an infrastructure point of view, she added.
Sebi’s plans hinge on the success of the newly introduced Application supported by the locked amount (Asba) for secondary market transactions.
Earlier, concerns were raised by certain foreign portfolio investors on the shortening of the settlement cycles citing forex-related worries.
In July, the chairperson announced that Sebi was aiming to introduce instantaneous settlement of trades on the stock exchanges by next fiscal. Later, in September, Sebi official said the regulator will introduce one-hour trade settlements by the end of this fiscal, in the run-up to making such processes instantaneous.
Sebi will look into if disclosures on IPO valuation are meaningless
Amid concerns in some quarters over the exorbitant valuation of certain initial public offerings, Sebi Chairperson Madhabi Puri Buch has said the regulator would certainly look into the matter if disclosures on the valuation are meaningless.
The comments have come amid a slew of share sales hitting the capital market recently. Last week, five companies, including Tata Technologies, came out with their IPOs that garnered a record Rs 2.6 lakh crore in application amount.
To a query about high premiums for some shares in IPOs, Buch said, ”Of course, we are fully with you on this as the rationale given for high premia are nothing but some meaningless English words”.
”We are certainly going to look into it and address the issue,” she said.
When asked about concerns in some quarters that some IPOs are priced exorbitantly, the Sebi chief said, ”If disclosures on valuation are meaningless then we will certainly look into it.” It can be noted that to boost investors’ interest in little-known companies’ IPOs, the issuers and their investment bankers quote low face value but the issue is priced high citing a very high premium.
On whether Sebi is planning to advise issuers and other market makers to space their issues in a more timely manner and with enough gaps between two issues, Buch said that is not the job of the regulator.
”After all, timing the market is not our job”.
”We want to leave issue timing to the market. Else that will be unfair on our part as a Sebi mandated time may not be the best for the issuer and the investors. A company comes to the market to raise money at a time that’s best suited for them.
”Also, we aren’t worried about the issue scrambling as from a regulatory perspective our job is to ensure that the system can take the load which our market is doing perfectly well,” she said, adding institutional capacity is not a problem at all.
“At least nothing negative has come to our notice yet on this front,” she said.
To a query on whether Sebi will allow a green-shoe option as is permitted in other market activities wherein the issuer has the freedom to retain over subscription to a considerably larger amount, she said the answer is no as it has to be addressed from a practical and conceptual perspective.
”From the practical side, it is possible but from a conceptual angle, this is not possible as unlike a debt issue or any other market instrument wherein there is no equity dilution, an IPO it precisely is an equity issue. So if we allow a green shoe option it will lead to an undesired dilution of equity which and other implications,” she said while briefing reporters after Sebi’s board meeting here on Saturday.