CDC Introduces Centralized E-IPO System

Central Depository Company (CDC), with the active support of the banking system and guidance of Securities and Exchange Commission Pakistan (SECP) has introduced the concept of Centralized E-IPO system (CES). The E-IPO system will allow retail investors to apply for subscription of shares electronically through internet, mobile phones or ATMs etc.

E-IPO will not only make the whole IPO process more efficient but will also help increase investor base and facilitate investors belonging to the remote areas.

Investors having a valid CNIC, bank account with any scheduled bank and CDC account can electronically register themselves “24/7 throughout the year” via the CDC E-IPO website here. Only registered investors can make application for the subscription of securities through any of the banking channels (ATM, net banking, mobile App and over the counter) using e-IPO facility.

The E-IPO is a part of SECP’s revamped public offering regime. The main objective of the regulatory framework is to promote ease of doing business and streamline the entire public offering process for debt and equity securities to bring efficiency to it.

Revamped IPO Framework

The revamped public offering framework has been divided into three parts, i.e. process for public offering, methods of public offering and functions and responsibilities of various intermediaries involved in the process, i.e. consultants to the issue, underwriters, book runners etc.

In the new public offering regulatory framework, an issuer would not be eligible to make a public offer, if the issuer or its directors, sponsors or substantial shareholders have overdue/ defaults appearing in their credit information bureau reports or have been declared defaulter by PSX.

The conflict of interest has been reduced through appointment of independent intermediaries such as consultant to the issue, underwriter, book runner etc.

The entire process for public offering has been simplified especially in terms of time and cost involved, to make it easier for the corporates to raise the funds through Capital markets. In terms of the new regime, any company going for IPO has to appoint an independent consultant to the issue who after detailed examination shall submit an application for listing of securities along with draft prospectus to PSX.

The PSX shall place the draft prospectus on its website for a period of at least seven working days for seeking public comments. The comments received, if any, on the draft prospectus shall be suitably incorporated and addressed by the consultant to the issue to the satisfaction of PSX. Earlier there was no such requirement of seeking public comments on the draft prospectus.

Contrary to the previous regime, flexibility has been introduced with regard to the book building process by allowing 100% book building with no retail offer. However, such companies shall be traded only among the sophisticated investors on a separate board other than main ready board. Furthermore, the issuer has also been allowed determination of strike price through 100% book building and the bidders would be initially allotted 75% shares. The public subscription will be held for the remaining 25% shares and in case of under subscription of retail portion, the same will be allotted to successful bidders on pro rata basis. This flexibility will not only eliminate the underwriting cost of the public offering but would also ensure efficiency.

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