In a move directed to reduce the time frame of the issue process in the primary market, market regulator Securities and Exchange Board of India (Sebi) has decided to extend the facility of Application Supported by Blocked Amount (ASBA) to high networth individuals and corporate investors. Currently, ASBA facility was available to only retail investors in an IPO or rights issue. Market participants were arguing strongly for the extension of this facility to non-retail investors as it would help reduce the time taken after the closure of an IPO and its listing.
ASBA is the process where an investor?s application money is blocked in a designated bank account and is transferred to the escrow account only upon allotment of shares.
To make ASBA more attractive and flexible the regulator has further removed restriction on the total number of bids that an investor can make and also on the revision of bids.
According to Sebi, ?The restrictions on investors under ASBA phase-I viz that only retail investors could apply and only at cut-off, that there shall be not more than one bid, that bids cannot be revised etc will no longer be there under ASBA Phase II.? ASBA Phase II will be applicable to all the issues opening on or after January 1, 2010.
ASBA has started gaining popularity among the issuers and investors in the recently concluded IPOs. ?ASBA has been implemented in more than twenty issues since its introduction. Given the inherent benefits of ASBA to investors, issuers and the market per-se, it has been decided to expand the reach of ASBA to other investor categories also,? the regulator said.
Sebi chairman CB Bhave, while addressing a capital market conference in November, had said the IPO application via ASBA constituted 20% to 25% of the total applications in the last three months. In order to bring down the time frame for an IPO after its closure till listing to seven days from the current twenty days, the regulator would make ASBA facility available to non-retail investors as well.
Market participants feel that this facility would be gradually extended to qualified institutional buyers, once the regulator makes necessary changes to its guidelines that would require even institutional investors to pay 100% upfront margin in an IPO application from the current 10%. Sebi has asked self certified syndicate banks to appropriately modify their system and certify their readiness by December 25 to be eligible for accepting ASBA in any issue with effect from January 1, 2010.