Investors in the National Stock Exchange of India have reason to celebrate as a major change is set to take effect on March 24. The exchange will now allow the transfer of unlisted shares through a delivery instruction slip (DIS), eliminating the need for the previous cumbersome approval process. This move is part of a broader effort to enhance accessibility for a wider range of investors, as the NSE gears up for increased market participation.
According to the latest announcement from the NSE, the activation of the DIS mechanism will streamline the transfer process for unlisted shares, bypassing the traditional two-stage approval process that has been a source of frustration for many investors. The exchange highlighted the significance of this change in a recent message to shareholders, stating that the ISIN of NSE will be unfrozen effective March 24, in compliance with Sebi’s circular from October 14, 2024.
The current transfer process, which involves a manual KYC check followed by a “fit and proper” assessment, has been plagued by delays of up to six months. These delays have been attributed to the limited resources of the NSE and the time-consuming physical verification procedures. With the implementation of the new DIS mechanism, the transfer timelines are expected to be drastically reduced to just 3–5 days, thanks to the involvement of depositories that already possess comprehensive investor data.
The impetus behind this procedural change stems from the growing discontent among investors regarding the sluggish transfer process. Institutional investors, in particular, have been vocal about the challenges posed by lengthy delays, which have often led to fluctuations in share prices and disrupted transactions. The soaring demand for NSE shares in the unlisted market, with prices doubling over the past year, underscores the need for a more efficient transfer mechanism.
As of the end of December 31, 2024, NSE boasted 20,444 shareholders, with its shares trading at Rs 1,850 per share on an ex-bonus basis. However, Sebi regulations mandate that only investors meeting the “fit and proper” criteria are eligible to hold stock exchange shares. Additionally, any shareholder acquiring over 2% of shares must obtain regulatory approval within 15 days, while a 5% stake necessitates prior clearance from Sebi.
For investors looking to transfer shares offline via DIS, certain information such as the ISIN code, DP ID, and Client ID must be provided, along with the selection of the appropriate transfer mode—either off-market or inter-depository. It is essential for investors to adhere to these guidelines to ensure a smooth and timely transfer process.
In conclusion, the upcoming change in the transfer mechanism for unlisted shares at the NSE represents a significant step towards improving efficiency and accessibility for investors. By simplifying the transfer process and reducing timelines, the exchange aims to address the concerns raised by investors and facilitate smoother transactions in the market. As always, investors are advised to seek guidance from a qualified financial advisor before making any investment decisions to ensure they are well-informed and make sound choices for their financial future.