MUMBAI: Market regulator Sebi is working with the Reserve Bank of India (RBI) for a smooth rollout of the proposed e-IPO process. This will reduce paperwork in public offerings to nearly zero, halve the timeline for listing of a company to just six days and also reduce costs of listing substantially. Several banks are currently working to roll out the ASBA (Applications Supported by Blocked Amount) system through all the branches, which is crucial for launching the e-IPO process. Sebi has set January 1, 2016 as the date for launch of this paperless public offering system.
“We are working with RBI for further expansion of ASBA’s coverage,” said a senior Sebi official. “Several bank staff are being trained so that ASBA could be offered through all branches,” the official added. ASBA is a process for applying in IPOs under which funds equivalent to an investor’s IPO application money is blocked till the shares are allotted. In case of partial allocation of shares in the IPO, an amount equal to the allotment is debited from his account and the balance is unblocked.
For e-IPOs to succeed, it is important for seamless and speedy transfer of money from investors to company’s IPO account and, in this, the ASBA process plays a very crucial role. According to a recent Sebi analysis of IPO applications, more than 99.5% came from centres where ASBA facility was available and ASBA applications accounted for 99.9% of the total bid amount received from all investors.
“Considering the reach and advantages of ASBA, it shall now be mandatory for all investors to make ASBA applications. Amongst many other significant advantages, ASBA enables investors to give the mandate for payment of application money in the application form itself without suffering loss of interest for the intervening period. It also obviates the hassle of refund of money by the issuer as per the difference in application amount and the amount for which shares are finally allotted,”.
In the run-up to the Sebi decisions, brokers had petitioned Sebi to allow them to take money from their customers who wanted to apply through the e-IPO process and subsequently the brokers will apply in the public offering on their behalf. However, Sebi found that allowing such a process will be a risky proposition for investors and so the regulator declined the brokers’ request.
