Changes Introduced for Streamlining the Process of Public Issues of Equity and Convertibles

SEBI, by way of its circular dated November 1, 2018, in its endeavor to provide an efficient fund-raising process, and in consultation with various stakeholder groups, has decided to introduce the Unified Payments Interface (‘UPI’)[1], as a payment mechanism supported with the Application Supported by Block Amount (‘ASBA’), for applications in public issues through various channels. This will be done by retail investors through various kinds of intermediaries (i.e. syndicate members, registered stock brokers, registrar and transfer agents and depository participants). This new process is expected to improve efficiency and reduce the duration from issue closure to listing by up to three working days in a phased manner. Prior to the introduction of ASBA, this process usually took 12 working days.

For the purpose of public issues, UPI would allow the facility to block the funds at the time of the application. In order to ensure that there is parity across the various channels for the submitted application, it has been decided that the investor must only use his/her own bank account linked UPI ID to make an application in public issues. Further, merchant bankers are required to ensure appropriate disclosures with respect to UPI in offer documents and advertisements of a company undertaking a public issue.

This circular is applicable to all red herring prospectuses filed for public issues opening on or after January 1, 2019.

[1] UPI is an instant payment system, developed by the National Payments Corporation of India (‘NPCI’), which enables merging several banking features and allows instant transfer of money between any two persons’ bank accounts using a unique payment address.