SEBI has issued new guidelines for application process of public issues to make the existing issue process more efficient. SEBI has introduced an alternative process for applying in public issues through book building mode called Application Supported by Blocked Amount (ASBA) process.
In ASBA, the bank will block the applicant’s money corresponding to the value of the shares applied for in the applicant’s bank account itself. The money is blocked in the account till the issue’s allotment and cannot be used for any other purpose. If shares get allotted to the applicant,
to the applicant, money gets transferred from the applicant’s bank account to the issuer. If the applicant’s bid is rejected, then the money will be released immediately.
ASBA will co-exist with the current process, where cheque is used as the mode of payment. Only investors who are bidding at cut-off can use this scheme. Further, investors cannot revise their bid, though they can withdraw their bid in the period. The ASBA process will be offered by “Self Certified Syndicate Banks” (SCSB). Banks that wish to offer this facility must submit a certificate to SEBI in a prescribed format for inclusion of its name in the SCSB list, which will be displayed on the SEBI Web site. Once listed, the bank shall then be deemed to have entered into an agreement with the issuer and shall be required to offer the ASBA facility to all its account holders for all issues to which the ASBA process is applicable. The new rules will come into effect, once the SCSBs are identified by the SEBI. Other intermediaries like the merchant bankers, registrars to the issue and stock exchanges, have also been notified by SEBI, to make adequate changes in their systems to ensure that the applications that come through the new channel are treated on par with those from conventional channel.
Banks will be responsible for resolving investor grievances. In case of failure of an issue, the bank will have to immediately release the block on receipt of request from the registrar.
Registrars are required to maintain the electronic records relating to the bids received from the SCSBs.
Book running lead managers will have to intimate in writing the issue opening date to SCSBs. In case the issue is withdrawn, the lead managers will have to inform the SCSBs. They will also be responsible for providing details on allotment to each bank. They will also have to be involved in post-issue activities such as allotment, refund, despatch and giving instructions to SCSBs, and regularly monitor “redressal of investor grievances arising therefrom”.
ASBA will provide relief to retail investors, whose IPO application money gets blocked even though they are not allotted shares. This process will do away with the complaint prone refund process. The time between a public issue and listing will also be reduced as listing happens only after the refunds are made, making the process more efficient. In the new arrangement, the allotment process has to be completed within 15 days of the closing date of the issue.
