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IPOs: small and large investors on level footing from today

Retail and institutional investors will be treated alike in bidding for shares in public offers from Monday, a move also likely to bring down the high levels of over subscriptions in the primary market.

business Updated: May 02, 2010 22:21 IST

Retail and institutional investors will be treated alike in bidding for shares in public offers from Monday, a move also likely to bring down the high levels of over subscriptions in the primary market.

A new directive from the market regulator SEBI comes into effect on Monday as per which institutional investors will have to pay 100 per cent money upfront in primary issues, just like retail investors.

Up to now, institutional investors were required to put only 10 per cent as margin money in public issues.

Analysts are divided on how the new norm would impact IPO subscriptions at a time when the primary market is seeing a lot of activity. “While this move may bring down subscription from IPOs, it should not affect recovery of the primary markets. Also, it is a means of encouraging greater accountability and reducing speculation, so it is desirable in the long run,” financial research firm Celent’s senior analyst Anshuman Jaswal said.

“On a theoretical basis, it could impact subscription. But in reality, institutional players do not over trade, they apply only where they want to invest. So, unless we have a clutch of issues clubbed together in the same timeframe, in reality it is unlikely to impact IPO subscription,” HDFC Securities head (private broking and wealth management) Vinod Sharma said.