ORIGINAL ARTICLE

ISSN No : 2230-7850

Monthly MultidisciplinaryResearch Journal

Indian Streams

Research Journal

Executive Editor

Ashok Yakkaldevi

Editor-in-chief

H.N.Jagtap

Vol 3 Issue 4 May 2013

Mohammad HailatDept. of Mathmatical Sciences, University of South Carolina Aiken, Aiken SC 29801

Abdullah SabbaghEngineering Studies, Sydney

Catalina NeculaiUniversity of Coventry, UK

Ecaterina PatrascuSpiru Haret University, Bucharest

Loredana BoscaSpiru Haret University, Romania

Fabricio Moraes de AlmeidaFederal University of Rondonia, Brazil

George - Calin SERITANPostdoctoral Researcher

Hasan BaktirEnglish Language and Literature Department, Kayseri

Ghayoor Abbas ChotanaDepartment of Chemistry, Lahore University of Management Sciences [ PK ]Anna Maria ConstantinoviciAL. I. Cuza University, Romania

Horia PatrascuSpiru Haret University, Bucharest, Romania

Ilie Pintea,Spiru Haret University, Romania

Xiaohua YangPhD, USANawab Ali KhanCollege of Business Administration

Flávio de São Pedro FilhoFederal University of Rondonia, Brazil

Kamani PereraRegional Centre For Strategic Studies, Sri Lanka

Janaki SinnasamyLibrarian, University of Malaya [ Malaysia ]

Romona MihailaSpiru Haret University, Romania

Delia SerbescuSpiru Haret University, Bucharest, Romania

Anurag MisraDBS College, Kanpur

Titus Pop

Pratap Vyamktrao NaikwadeASP College Devrukh,Ratnagiri,MS India

R. R. PatilHead Geology Department Solapur University, Solapur

Rama BhosalePrin. and Jt. Director Higher Education, Panvel

Salve R. N.Department of Sociology, Shivaji University, Kolhapur

Govind P. ShindeBharati Vidyapeeth School of Distance Education Center, Navi Mumbai

Chakane Sanjay DnyaneshwarArts, Science & Commerce College, Indapur, Pune

Awadhesh Kumar ShirotriyaSecretary, Play India Play (Trust),Meerut

Iresh SwamiEx - VC. Solapur University, Solapur

N.S. DhaygudeEx. Prin. Dayanand College, Solapur

Narendra KaduJt. Director Higher Education, Pune

K. M. BhandarkarPraful Patel College of Education, Gondia

Sonal SinghVikram University, Ujjain

G. P. PatankarS. D. M. Degree College, Honavar, Karnataka

Maj. S. Bakhtiar ChoudharyDirector,Hyderabad AP India.

S.Parvathi DeviPh.D.-University of Allahabad

Sonal Singh

Rajendra ShendgeDirector, B.C.U.D. Solapur University, Solapur

R. R. YalikarDirector Managment Institute, Solapur

Umesh RajderkarHead Humanities & Social Science YCMOU, Nashik

S. R. PandyaHead Education Dept. Mumbai University, Mumbai

Alka Darshan ShrivastavaShaskiya Snatkottar Mahavidyalaya, Dhar

Rahul Shriram SudkeDevi Ahilya Vishwavidyalaya, Indore

S.KANNANPh.D , Annamalai University,TN

Satish Kumar Kalhotra

Editorial Board

International Advisory Board

Welcome to ISRJISSN No.2230-7850

Indian Streams Research Journal is a multidisciplinary research journal, published monthly in English, Hindi & Marathi Language. All research papers submitted to the journal will be double - blind peer reviewed referred by members of the editorial Board readers will include investigator in universities, research institutes government and industry with research interest in the general subjects.

RNI MAHMUL/2011/38595

Address:-Ashok Yakkaldevi 258/34, Raviwar Peth, Solapur - 413 005 Maharashtra, IndiaCell : 9595 359 435, Ph No: 02172372010 Email: ayisrj@yahoo.in Website: www.isrj.net

Title APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) – A BIRD'S EYE VIEWSource:Indian Streams Research Journal [2230-7850] MALLIKARJUN BALI AND S. B. KAMASHETTY yr:2013 vol:3 iss:4

.

KEY WORDS:

Application , Blocked , Bird's Eye , ASBA.

INTRODUCTION

This mode is available to the investors for only such issues which are being made through book built route.

This is an additional method of payment, available to all categories of investors through participatory banks (SCSB's). The purpose of adding this new payment option is to reduce the turn around time for Stock listing and to make the refund process faster.

Technically there is no refund process for this kind of payment option as only the required money for allocated shares is withdrawn from the investors account. Investor can use the remaining money as soon as the required money is withdrawn and the money gets unblocked. As companies cannot list there shares before completing the refund process, ASBA will reduce their load on refund process and ultimately will make the listing process faster. WHAT IS ASBA?

ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed.

Abstract:

The market regulator (SEBI) has introduced, vide its circular dated July 30, 2008, a new mode called Application Supported by Blocked Amount (ASBA) for submitting bid for Initial Public Offer (IPOs), Follow-on Public Offer (FPOs) and Right Issue (RIs). With the introduction of this mode, the Retail investors have an option to submit bid either through existing mode or through this new mode. Under the conventional mode, retail investors have to pay the application money while submitting bid. However, under this new mechanism, the investor need not pay application amount upfront, where as, the banker simply blocks the application amount in investors account. The new move will enable the investors to earn interest on the money so blocked besides making the issue process more efficient and less time consuming.

APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) – A BIRD'S EYE VIEW

MALLIKARJUN BALI AND S. B. KAMASHETTY

Assistant Professor, Department of Management Studies,BLDEA's V P Dr. P. G. Halakatti College of Engg & Tech.,

Ashram Road,Bijapur.Karnataka.Chairman and Dean, Department of Commerce and Management,

Karnataka State Woman's University,Plot No-84, Vivek Nagar West, Jalnagar Main Road, Bijapur,Karnataka.

ORIGINAL ARTICLE

Volume 3, Issue. 4, May. 2013Indian Streams Research Journal

ISSN:-2230-7850Available online at www.isrj.net

ASBA is a supplementary process of applying in public issues. It co-exists with the normal process of using cheque as a mode of payment while submitting the applications. Banks provide this value added service free of cost. Therefore, it makes sense for the investors to avail this facility and avoid hassle of waiting for refund orders in case of non-allotment or partial allotment of shares applied for.

Earlier Qualified Institutional Buyers (QIBs) are not allowed to participate in IPOs through ASBA facility. Currently, as per SEBI guidelines all Non-Retail investors i.e. Qualified Institutional Buyers and Non-Institutional Investors, making application in public/ rights issue shall mandatorily make use of ASBA facility.

KEY FEATURES

ASBA is an application for subscribing to an issue, containing an authorisation to block the application money in a bank accountA bank which desirous to offer this facility has to get itself registered with SEBI and such bank is called as Self Supported Syndicate Bank (SCSB) Easy to apply in IPO, FPO and Rights Issues.Enjoy continued Returns on Blocked Amount. Option to revise/withdraw the bid.

INVESTORS BENEFITS FROM ASBA

No loss of interest, since the application amount is not debited to the CASA (current and savings account) on application. The amount for which no shares have been allotted is available immediately on completion of allotment process. There is no need to wait for the amount to be refunded by the company and be credited to the account. Since the amount is available in the account, it is considered for calculation of the Average Quarterly Balance (AQB). Multiple bidding facility is available to the Investors. Investors can revise/withdraw the bid before the end of the Issue in the prescribed format. Investors deals with the known intermediary The ASBA form is simpler than existing one.Who can use ASBA?Any investor who satisfies the below conditions is eligible and can apply for shares under ASBA mode: All Categories of investors- both retail as well as non-retail investorsHolds a savings/current account with the SCSB. Has a valid PAN Mechanism for filling bid and allotment

· An ASBA investor, intending to subscribe to a book built public issue, shall submit a completed ASBA form to a Self Certified Syndicate Bank (SCSB), with whom the bank account is maintained, through one of the following modes –

a)Submit the form physically with the Designated Branches (DBs) of the SCSB (Physical ASBA) orb)Submit the form electronically through the internet banking facility offered by the SCSB (Electronic ASBA)

It is interesting to note that the investors need not necessarily to have both Demat account and Bank account with the same banker.· The SCSB shall give an acknowledgement specifying the application number to the ASBA investor, as a proof of having accepted his/her ASBA in a physical or electronic mode.· If the bank account specified in the ASBA does not have sufficient credit balance to cover the application money, the ASBA shall be rejected by the SCSB· After accepting ASBA form, the SCSB uploads the details like, application number, DP ID, Client ID, Bid Quantity, Bid Price, PAN etc, in the electronic bidding system provided by the Stock Exchanges(s) for the particular public issues.· The SCSB (Controlling Branch (CB) or DBs) shall generate a Transaction Registration Slip/ Order number, confirming upload of ASBA details in the electronic bidding system of the Stock Exchange(s). The Transaction Registration Slip/Order number shall be given to the ASBA investor as a

2

APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) – A BIRD'S EYE VIEW

Indian Streams Research Journal • Volume 3 Issue 4 • May 2013

proof of uploading the details of ASBA, only on demand.· In case an ASBA investor wants to withdraw his/her ASBA during the bidding period, he/she shall submit his/her withdrawal request to the SCSB, which shall do the necessary, including deletion of details of the withdrawn ASBA from the electronic bidding system of the Stock Exchange(s) and unblocking of funds in the relevant bank account.

The Stock Exchange(s) shall make available the updated electronic bid file to the Registrar to the Issue.

The SCSB shall send the following aggregate information to the Registrar to the Issue after closure of the biding period.

1)Total number of ASBAs uploaded by the SCSB2)Total number of shares and total amount blocked against the uploaded ASBAs.

The Registrar to the Issue shall inform each SCSB about errors, if any, in the bid details, along with an advice to send the rectified data within the time as specified by the Registrar.If a retail investor wishes to withdraw his/her ASBA after the bid closing date, he/she shall submit the withdrawal request to the Registrar to the Issue. The Registrar shall delete the withdrawn bid from the bid file. But, Non-retail investor cannot withdraw the bid, however, they can make revision that too upward revision.The Registrar to the Issue shall reject multiple ASBAs determined as such, based on common PAN.The Registrar to the Issue shall finalize the basis of allotment and submit it to the Designated Stock Exchange for approval.Once the basis of allotment is approved by the Designated Stock Exchange, the Registrar to the Issue shall provide the following details to the CB of each SCSB, along with instructions to unblock the relevant bank accounts and transfer within the timelines specified in the ASBA process;

1)Number of shares to be allotted against each valid ASBA2)Amount to be transferred from the relevant bank account to the issuer's account, for each valid ASBA3)The date by which the funds shall be transferred to the issuer's account4)Details of rejected ASBAs, if any, along with reasons for rejection and details of withdrawn/unsuccessful ASBAs, if any, to enable SCSBs to unblock the respective bank accounts.

SCSBs shall unblock the relevant bank accounts for,

1)Transfer of requisite money to the issuer's account against each valid ASBA2)Withdrawn/rejected/unsuccessful ASBAs

The CB of each SCSB shall confirm the transfer of requisite money against each successful ASBA to the Registrar to the Issue.The Registrar to the Issue shall credit the shares to the demat account of the successful ASBA investors.This new mode offers several benefits to the investing community over the traditional mode of applying bid. (Table No. 1)

3Indian Streams Research Journal • Volume 3 Issue 4 • May 2013

APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) – A BIRD'S EYE VIEW

Table No-1Exhibit showing the differences between Existing and New mode of submission of bid

CONCLUSION:

Though the market regulator has introduced ASBA to facilitate the primary market issue process, but, there are some gray areas, which it has to look into, to increase the usage of this facility for applying bid.

At present, there are two separate forms printed with separate colour codes – one for ASBA and another for non-ASBA applicant. Having two different forms may lead to a situation where ASBA forms may not be available in far-flung cities, which may force investor to submit bid through the existing mode. As such, it would be better to have a common form with a check-box for ASBA.

As of now, this facility is being offered only by few banks and that too few branches of such banks. When the ASBA mode was introduced the applications coming through this mode was very insignificant (1% of total application). Now this facility is hovering at around 25% of the total application. However, this 25% does not indicate significant popularity of this new mode of applying bid. This trend will continue unless all banks takes part in this process and make it mandatory for retail investors too. ASBA continues to be poorly advertised, if it is promoted well, both investor and banker will realize that it is a win-win for all.

REFERENCE:

Business worldVarious issues of The Economic Times news paperVarious issues of The Business Line news paperVarious issues of Financial Express Various issues of Business Standardwww.sebi.gov.inwww.chittorgarh.com/newportal/ipo

4Indian Streams Research Journal • Volume 3 Issue 4 • May 2013

Particulars Existing Method New Method Submission of Bid Through the investor’s

brokerage firm. Through the SEBI registered bankers.

Payment Method Through the cheque and to be submitted along with application.

It is not necessary to make payment at the time of submitting of bid. However, the banker will simply block the amount at the time of uploading the details in the bidding platform.

Earning of Interest The investor earns no interest. The investor continues to earn interest as the amount is with the banker.

Refund The company will have to refund the amount to the investor within the time limit

No question of refund.

Impact of Listing As company cannot list its share before entire process of issue is completed including refund, which delays the listing.

As there is no question of refunding, so it causes no delay for listing.

Commission It goes only to the broker It is shared by both broker and banker.

APPLICATION SUPPORTED BY BLOCKED AMOUNT (ASBA) – A BIRD'S EYE VIEW

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