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Vivek Law
Mumbai, Sept 3: A primary market demat share allotment module which will ensure the completion of the allotment process within 10 days of closure of an issue has been commissioned by the National Securities Depository Ltd (NSDL).
While making a strong pitch for making it mandatory for all fresh issuers to offer shares only in the demat form, the NSDL chief, CB Bhave has said that in such cases if an investor insists on receiving only physical shares, the depository would rematerialise these for him free of cost.
According to Bhave, the module will bring about functional as well as structural changes in the entire issue making process followed in the country.
On the functional side, an entire issue allotment would be completed within 10 days of the closure of the issue as against 30 days currently taken for dispatching all the shares to the investors. Add to this another 10-15 days of postal time taken and it leads to a 45 day time period by when an investor receives his shares. This time period will bereduced greatly to 10 days thereby giving him liquidity for that much more time.
Explaining the procedure that will be adopted, Bhave said that an investor would only need to fill in his name and depository account number apart from details of the mode of payment. He would take this form to his depository participant who already has other details about the investor captured with him.
The DP will then electronically forward these requests to NSDL which will in turn transmit these shares to the registrar. The registrar will similarly provide the depository with details of those investors who have received the allotment and those who have not. The allotments will electronically be credited into the account of investors and the refunds will be made to those not eligible. "There will be tremendous cost saving for the company as it does not need to print any paper and not incur any postal cost. For the investor, he gets his shares much faster and does not have to go through the headaches of filling up lengthyapplication forms", said Bhave.
On the structural side, Bhave said that an investor will now start dealing directly through his DP with whom he has proximity and a working relationship. "Currently an investor deals with a registrar for all issue related problems. There is no proximity and no incentive for the registrar to service the investor. The DP on the other hand deals with the investor and is dependent financially on him as well. Moreover, he is in proximity to the investor. For an investor, this is an important change", said Bhave.
Bhave said that even as the market battles with the problem of getting rid of excessive amount of paper, it is only logical to ensure that no fresh paper is added to this system.
"Those investors who want to receive their initial allotment in physical form are most welcome to do so and we will not charge them any remat fee", said Bhave.
It is felt that with secondary market trades in some scrips being pushed to the demat form there is little incentive for an issuerto offer physical shares. But rather than complicating the issue process by having a mix of paper and demat share allotment, it is felt that it makes sense to allow shares to be allotted only in the demat form.
The disinvestment commission has already made a pitch for PSU disinvestment to be only in demat form.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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