InvestorQ : Did demat make a big difference to IPO markets?
Ria Roy made post

Did demat make a big difference to IPO markets?

Sam Eswaran answered.
3 years ago
Have you seen an IPO form in the old days and the IPO form nowadays? Actually, IPO was a very opaque process in the old days. There was absolutely no transparency. You would apply for the shares and then wait for 2-3 months to know whether you got the allotment or not. Once the shares were received, they could be sold in the market and realizing the funds would take another 15 days because it was all done through physical certificates. Look at the IPO application format (relevant section) of recent IPOs given below.
Today, you just mention your DP ID (where you have a DP account) and your Beneficiary ID (your BO account number). The combination of these two becomes your unique identifier and the shares of the IPO are directly credited to your demat account. The whole process is done in less than 7 days. With ASBA in place, you don’t even have to worry about losing interest in your bank account. It just gets blocked and on the date of allotment, the balance is unblocked. It is as simple as that.
To understand the role of demat, one needs to look at how the IPO markets have moved into 7-day allotment of shares and listing. In the past, it would take 3 months and your funds will be locked in for that long. Demat actually makes the entire IPO process a lot more efficient. Trading in the demat format is a lot more cost effective. When brokers were dealing in physical shares there was stamp duty payable on each transfer. They had to maintain huge back office staff to handle bad deliveries, signature mismatches, verification etc. The demat system obviates all these issues and substantially reduces the cost of trading. In fact, brokers have been actually able to reallocate their staff to more productive uses. For brokers and for investors; demat has come as a major boon!