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ASBA MEANING

9 Mins 08 May 2023 0 COMMENT

INTRODUCTION

Today, the default method for retail investors to apply in an IPO is through the Applications Supported by Blocked Amounts (ASBA) method. What is the ASBA meaning and what is ASBA all about. In this segment we will look at the ASBA IPO meaning and also what is ASBA IPO. ASBA allows you to invest in an IPO without debiting the funds to your account till the date of allotment.

UNDERSTANDING THE CONCEPT AND WORKING OF ASBA

Today retail and HNI investors can apply for an IPO through the Application Supported by Blocked Amount (ASBA) methodology. In this model, the application is made by an investor, with an authorization to the Self-Certified Syndicate Bank (SCSB) to block funds in Savings or Current Account. Remember, that ASBA cannot be applied to OD accounts and to loan accounts. In an ASBA, the application amount is only blocked on the date of application and only on the date of allotment, the actual amount is debited. If the actual allocation is less than the application, the balance amount is automatically released from ASBA lien.

ASBA can be used for all equity book built IPO, debt and rights issues. ASBA facility can be used for Initial Public Offer (IPO) and Follow-on Public Offer (FPO) too. Under ASBA, the funds that are blocked in the account, continues to earn interest in application processing period. Bank only mark a lien on the deposit account of the investor for the application amount and on allotment, the relevant amount is debited and the balance (if any) sees the lien being removed. Lien is removed immediately after finalization of basis of allotment.

APPLYING FOR IPOS AND RIGHTS ISSUES VIA ASBA

As stated earlier, the ASBA facility can be used for public issues (IPOs) and also for rights issues. There are some  basic conditions that have to be satisfied in both the cases. Here are some prerequisites to apply for IPO and rights using ASBA facility.

  • The ASBA application must belong to the one of the approved categories eligible to apply in IPO as per SEBI guidelines
  • The investor must have a Demat account with any of the SEBI authorized Depository Participants (DPs) and must also have a Permanent Account Number (PAN)
  • There should be sufficient clear balance (without pledge or lien) to cover the application amount. Note here that amounts are only blocked in ASBA and debit only happens at the time of allotment.
  • ASBA facility can only be availed against clear balance in savings or current account. ASBA is not available on any type of overdraft account or loan accounts.
  • Like in the case of an IPO, ASBA facility in right issues will only be available to shareholders whose name appear in the register of the company as a shareholder on the record date for the rights.
  • The rights ASBA applicant must also have a demat account with any of the Depository Participants (DPs) with Permanent Account Number (PAN). Such rights shares must be held in dematerialized form.
  • Those who have applied for rights entitlements (RE) are also eligible for using ASBA for rights. However, the facility is not available for those who renounced their rights entitlements in whole or in part.
  • All other basic conditions applicable to an IPO also apply for a rights issue.

WITHDRAWAL AND MODIFICATION OF ASBA APPLICATION

How can an ASBA application be withdrawn or modified and is it permitted? Here are some important points you should be aware of.

a) Retail investors with bid amount less than Rs200,000 can modify, revise or delete the bid within the bidding period. i.e. till the closure of the bid period.

b) For all other categories of investors; including QIBs and Non-Institutional Bidders of over Rs2 lakhs can neither withdraw the bid nor lower the size of their bids at any stage. For these categories only, upward revision of bid is allowed. Deletion facility is not available.

c)  Demat account need not be with the bank whose account you are using. The demat account can be with any DP and yet the ASBA facility can be used with  your bank.

d) Investors can bid via ASBA either through the bank account or through their UPI id linked to their own bank account.

e)  In the case of debt issues, only withdrawal of ASBA applications is permitted, modifications cannot be made.

HOW TO ACTUALLY USE ASBA FACILITY

It is very easy for investors with internet banking facility on their savings or current accounts to bid online for the ASBA facility. In such cases, submission of physical application form to any branch is not required. The online ASBA can be used irrespective of the branch of the bank where you hold the account. When you apply for IPO via ASBA on Internet Banking platform, a lien or hold is marked on the total amount at the highest price bid by the applicant. Application money stays blocked till the finalisation of basis of allotment. Wrong information will make bid liable to be rejected. ASBA bids can be placed offline also.

Disclaimer:ICICI Securities Ltd.( I-Sec). Registered office- ICICI Venture House, Appasaheb Marathe Marg, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The non-broking products / services like Mutual Funds, Insurance, FD/ Bonds, loans, PMS, Tax, Elocker, NPS, IPO, Research, Financial Learning etc. are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism.