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SEBI mulls tighter IPO bid mechanism for institutional investors

May 20, 2022

SEBI mulls tighter IPO bid mechanism for institutional investors
Institutional and high net worth individuals who bid for shares in an initial public offer (IPO) may soon have to be put in upfront cash alongside their bids – like how retail investors bid in a public issue.

The Securities and Exchange Board of India (SEBI) is reviewing the IPO bidding system and, as indicated by individuals acquainted with the turn of events, is mulling making it mandatory for the two categories of investors to submit bids alongside the requisite funds.

Right now, institutional investors and high total assets people get a little while subsequent to presenting their offers to sort out the assets.

The review comes on the heels of the government highlighting the fact that the current bidding system allows institutional investors and high total assets people to exploit the system by presenting a bid to inflate the subscription numbers only to see it canceled due to lack of funds or some other reason.

In market parlance, such offers are called ‘bidded but not banked’ applications and get automatically rejected.

Such applications are possible as the current framework allows the two classifications of investors to present a bid without acquiring the assets also. This is in sharp contrast to retail investors who can place a bid provided that they have the requisite amount of funds in their banks that get blocked alongside the bid.

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