Keep Your IPO money till allotment

Mumbai, May 13 Investors no longer have to wait for weeks for refund of their IPO application money.

The application money earmarked for an IPO will now remain in the applicant’s bank account till the allotment is finalised, thus eliminating the refund process, SEBI said on Tuesday, addressing a long-standing grouse among investors, particularly in the retail segment.

“The modalities in this regard would be worked out separately,” said a news release from SEBI, issued after its Board met on Tuesday.

“The Board approved, in principle, the concept of making lien on bank account as an alternative mode of payment in public/rights issues.”

This means that the money marked for the IPO will not be used for any other payment obligation during that period.

At the same time, the applicant will enjoy 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 of January 2008 does not occur again.