Sebi reduces lock-in period post IPO; top stocks to watch

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Dealers operating in the unofficial market hailed the market regulator Sebi’s decision to reduce the lock-in of pre-IPO securities held by a person other than promoters to six months against 1 year earlier.

Market watchers believe that the step will encourage investors to invest in the pre-IPO market which is still in nascent stage. Now even short to medium term investors will also be able to participate in this segment.

Abhay Doshi, Founder, Unlisted Arena told Money9.com that one of the key concerns for pre-IPO investors was price volatility after listing as the investors could not take an exit in volatile conditions up to one year earlier which would be now only six months.

“At present, Paytm, Mobikwik, Sterlite Power Transmission and Tamilnad Mercantile Bank are hot cakes in pre-IPO segment, we may see even much larger interest in these stocks as they are on the edge of bringing an IPO,” said Doshi.

Paytm has filed a draft red herring prospectus with the Securities and Exchange Board of India (Sebi) to launch Rs 16,600-crore IPO. The public issue will comprise a fresh issue of equity shares worth Rs 8,300 crore and an offer-for-sale (OFS) of shares worth Rs 8,300 crore. On the other hand, digital payments startup One MobiKwik Systems last month also filed preliminary papers with the markets regulator to raise Rs 1,900 crore through an initial share sale.

Sebi on August 6 relaxed the post-IPO lock-in requirements for shareholders, such as private equity and venture capital funds and domestic high net-worth or family offices. “The lock-in of pre-IPO securities held by persons other than promoters shall be locked in for a period of six months from the date of allotment in the IPO instead of existing one year. The period of holding of equity shares for venture capital fund or alternative investment fund (AIF) of category I or category II or a foreign venture capital investor shall be reduced to six months from the date of the acquisition of equity shares instead of existing one year,” it said.

Manish Mittal, CEO, Delistedstocks.in said, “Sebi’s new rule will definitely increase the confidence among investors. We may also see rise in liquidity in the unlisted market.”

In another development, Sebi also relaxed the lock-in period for promoters’ investments after the stock market listing of the company from 3 years to 18 months under certain conditions.