SEBI contemplates reducing time to list rights issue shares
18, Mar 2019
Prelims level : Capital Market Mains level : GS - III
After reducing the time to list shares on the stock exchanges post-closure of initial public offerings (IPOs), markets regulator SEBI is aiming to cut down the time for listing of rights issue shares.
Initial Public Offerings (IPO)
- Initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time.
- Through this process, a private company transforms into a public company. Initial public offerings are used by companies to raise expansion capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises.
- A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares trade freely in the open market, money passes between public investors.
- Although an IPO offers many advantages, there are also significant disadvantages, chief among these is the costs associated with the process and the requirement to disclose certain information that could prove helpful to competitors, or create difficulties with vendors.
- Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy document known as a prospectus.
- Most companies undertake an IPO with the assistance of an investment banking firm acting in the capacity of an underwriter who provide several services, including help with correctly assessing the value of shares (share price), and establishing a public market for shares (initial sale).
- SEBI is the statutory regulator for the securities market in India.
- It was established in 1988 and given statutory powers through the SEBI Act, 1992.
- HQ: Mumbai.
- Purpose: Protect the interests of investors in securities, promote the development of securities market and to regulate the securities market.
- SEBI is responsive to needs of three groups, which constitute the market i.e.
- Issuers of securities,
- Investors and
- Market intermediaries.
- It has three functions:
- Quasi-legislative (drafts regulations in its legislative capacity),
- Quasi-judicial (passes rulings and orders in its judicial capacity) and
- Quasi-executive (conducts investigation and enforcement action in its executive function).