SMSed Into the Primary Market!!

It can be a mere coincidence that today, the day on which I wrote a blog on technology and its effects , there is an article in one of the business dailies about the new software that will help you to reach the primary market in a jiffy. The newspaper article rightly starts off with the line “Your cell phone is set to get a lot busier”. I think it is apt in its prediction. With so many applications like buying of movie tickets, books, transferring money, paying utility bills and even getting those weekly forecast already there, the new one will definitely make your pocket device busier.

This first of its kind software is being developed by the Vadodara based Ekkay Magic (India) Pvt Ltd. The company is primarily into services and security solutions development.
The software is called is called SMS IPO. And according to the claims of the company it would take care of all the procedures for an IPO application. The main attraction about this software is the fact that it is the first of its kind and it will enable mobile users to apply for an IPO using his/her cell phone. This is definitely a well thought introduction as it would ease off the IPO application process in a big way. It is a handy way and it would remove the hassle of so many forms, that too complex forms. This might actually lead to an increase in the user base as well. It is another instant which would set a trend in the global primary market, highlighting the strength of technology.

Let us now understand first the traditional approach of filing an IPO. This is primarily to help us understand how this latest tech kid in the block would help us. Here are the steps to be taken in the traditional IPO application procedure:

1. Approaching the broker

2. Submission of duly filled forms along with the cheque. This is a very tedious step.

3. Issue of Acknowledgment of receipt of application & payment to the applicant.

4. Forwarding of application on realization of payment for allotment of the IPO.

5. Share Allotment/Refund of application money. This is done based on availability and other norms.

6. Intimation of the Allotment to the Stock Exchange

7. Selling of allotted shares.

For a better understanding refer the attached flow chart for the application process obtained from the presentation by the developing company of SMS IPO.

Now let us see how the new system intends to work and we will then see how it will be useful and better from the previous system.
The SMS IPO is going to follow the following basic steps:

1. Prior to opening of an IPO, a SMS would be sent to the customer

2. After the SMS opens, customer would apply by SMSing

3. Customer would get registered and would receive the acknowledgment for the same.

4. Server would gather all the SMSes upto the IPO closer date.

5. Detailed information is processed and stored in the database

6. Payment should be made to recommend banks before IPO closes. I think this can also be done through mobile banking. Although it might depend on the list of recommended banks.

Also check out the flow for the new flow suggested by the SMS IPO for the IPO application process for better understanding.

Definitely it is going to simplify the process in a big way and thus it might also attract more people to the primary market. Many people are interested but the cumbersome process sometimes acts as a deterrence. I know that the internet option is there, but sending an SMS is much easier than getting it done through the internet. Check out the image below to get an overall idea about a process flow for the new process. This is another example which is obtained from the presentation made by the developers of SMS IPO.

The software also promises to handle the various errors that might happen during the transaction. So it is secured in that regard. But as with internet here also security is going to be a concern for the users. SMS IPO aims to provide security by using an unique mobile number, an unique user id and an unique password. Apart from that as there is no internet connection involved so chances of hacking are eradicated. In addition to that the double validation, one with the end user’s unique mobile number and another with the username and password provided in the message by the user. These makes the software very secure. This double check also ensures security in case the mobile is stolen. However, the user would need to inform the concerned authorities in case of theft so that they can remove or delete his account information accordingly thus ensuring security.

Estimates say that around 80 IPOs are lined up for 2009-10. But only time will tell whether the SMS IPO can be used as a positive step to somewhat buck the bearish trend in the market and line up more users for the primary market. But one thing is sure, if it works according to the promise it makes, it would make investing in the primary market lot easier and quicker. I think the last two words are the crucial factors which makes it lucrative.