T+3 IPO Listing: The IPO must be listed on the third day after closing day
The T+3 timeline for IPO listing, which was approved by markets regulator Sebi in June, has become mandatory from today, December 1, 2023. Till now, it was voluntary. It means that now, the IPO must be listed on the third day after closing day. For example, if the IPO is closing on 5th of a month (T), the shares will be listed on stock exchanges on 8th of the month (T+3). Earlier, it was T+6.
Experts said the move will allow investors to allow for more IPOs as the short IPO listing timeline will lead to the early release of the blocked amount.
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They also said the reduction in timelines for listing and trading of shares will also benefit issuers. Issuers will have faster access to the capital raised thereby enhancing the ease of doing business.
The Sebi board approved the revised IPO listing timeline to T+3 in June, the circular on which was released in August. The T+3 listing timeline was voluntary for all public issues opening on or after September 1, 2023. However, It has become mandatory on or after December 1, 2023.
In the T+3 system, the IPO allotment will also be done early — the next day of IPO closing. The registrar needs to finalise the basis of allotment in T+1 at or before pm, as against T+3 earlier.
The compensation to investors for the delay in unblocking of ASBA application money shall be computed from T+3 day, according to a Sebi circular in August.
How Will The T+3 IPO Listing Work?
T= IPO Closing Day
T+1= Basis of Allotment
T+2= Share Credit to Demat Account
T+3= Listing Day.
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What Experts Say
On T+3 system, Bhavik Gandhi, head (operations) at Mirae Asset Capital Market, said, “It is a great move for both issuers and investors. Issuers can expedite fund utilisation, fostering rapid business growth. For investors without allotment, funds are released sooner — accessible for alternative purposes just three days post IPO closing, is a notable improvement from the previous six days. Investors securing allotment, often eyeing listing gains, can now exit the market on T+3, receiving sale proceeds on T+1 in the secondary market, a significant enhancement compared to the previous T+7 (T+6+1) settlement.”
Furthermore, HNI clients opting for IPO funding will experience a reduction in interest payment duration, down from around 7 days to a mere 4 days, spanning from IPO closing to the listing date of IPO shares. This regulatory shift signifies a positive stride towards efficient market processes, he said.
Amit Goel, co-founder & chief global strategist of Pace 360 (SEBI registered multi asset PMS), said, “Overall, this move by Sebi aims to streamline and expedite the listing process, ensuring efficiency and adherence to specific timelines in the securities market.”
He added that this shorter settlement period will significantly enhance market liquidity and expedite the access to funds for investors, fostering a more agile trading environment. The increased efficiency in the listing process could attract more participation and interest from investors, potentially amplifying trading volumes.
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Moving Towards Short Settlement System
On January 27, India became the first major economy to move to T+1 for all shares. The Indian share market fully shifted to a shorter (T+1) trading cycle from January 27. Before that, the domestic equity market followed the T+2 settlement cycle, which means if you buy a share on Monday, it will be credited into your demat account on Wednesday (T+2). With the T+1 trading settlement system from January 27, investors will be able to get the shares in their demat accounts and sell them the next day (Tuesday, in this case).
In July, Sebi Chairperson Madhabi Puri Buch also said the capital markets regulator is working on instant transaction settlement in the stock markets.
