The Indian IPO market of 2018 looks promising to retail investors with over 36 companies awaiting SEBI’s nod. Various sectors like infrastructure, financial services, media, hospitals and transports have entered into the IPO market making it the hottest selling commodity out there. The market has generated as much as Rs. 84,357 Cr through initial share sales in 2017-18 and is only growing with each fiscal year.
With SEBI’s mandate of reserving 35 per cent of any IPO for retail individual investors and the use of ASBA for the same in 2016, retail investors now have a wider room to explore. SEBI has also reduced the time it takes to list IPOs, thereby making more room for upcoming IPOs in the near future. So how do you capitalize over this opportunity? Well, the gateway to it begins with filing for an Application Supported by Blocked Amount, or ASBA.
The ASBA Form
Application Supported by Blocked Amount, or ASBA forms are available either on the websites of stock exchanges or from book running lead managers. Self-Certified Syndicate Banks (SCSB) also provide this service through the use of internet banking. You can physically apply for the same at the nearest SCSB bank, provided that you have either a savings or a current account with the bank.
How does ASBA help?
Through Application Supported by Blocked Amount, or ASBA, which is now mandatory as per SEBI, you can apply for public or rights issue directly from your bank account. The total cost of shares, which is the price equivalent of your investment gets put in a funds hold by your bank once the application is made.
Say you have Rs. 5,00,000 in your account and you would like to invest Rs. 2,00,000 – the maximum limit you can invest in an IPO as a retail investor, then the amount is locked in and you can now use Rs. 3,00,000 freely. You will still continue to earn interest on the total amount till the actual allotment is debited. The earlier process would have you get demand drafts made or issue cheques for payment of application money, which was more time consuming.
The entailed formalities
Apart from your name, PAN card and Demat number, you will require the bank account number, DP ID details, SCSB and the serial number of the bank branch along with bid quantity, bid price and other relevant details. It is crucial to fill the form as accurately as possible, else it may lead to rejection.
You can make a maximum of 3 bids from within the price band and the quantity could be in multiples of lot size specified by you. The highest amount equivalent bid is picked and blocked, following which your SCSB uploads the details on the bidding platform. You can revise the bids upward or downward and even withdraw or cancel it when the issue is opened. Once the allotment is finalized, the issues registrar sends the unblocking request to your bank, who then credits the shares to your Demat account.