IPOs In Compulsory Demat Mode. How Fair For The Small Investors?

The SEBI ruling requiring issue houses to issue public offerings (IPO's, new issues, etc.) in compulsory demat mode has created an anomaly which keeps the small and long-term investor out of the game. The benefits that would have accrued to small investors are snatched away by the larger & powerful players. The IPOs of banks and companies like Maruti Udyog, NTPC and TV Today etc. had claimed to target the small investor, but the small investor had in fact been a mere conduit to channel the holdings to larger players. This defeated the objective of creating wide-spread public participation and holding in the disinvestment of profitable stocks. Based on actual market study and observations of the author, this case study raises vital and provocative policy issues such as: Who is the beneficiary of IPOs in compulsory dematerialised mode? It also highlights the failure of SEBI (the Securities Exchange Board of India), depositories and the major stock exchanges in addressing the cause of the small and marginal investors beyond lip-service and cosmetic efforts like framing rules for orderly 'development' and 'regulation' of the capital market. This study suggests some practical solutions to correct the anomaly.