Investments simplified

IPO Process

An investor needs to first obtain an IPO/ FPO application form. Forms are normally available from share brokers, lead managers, syndicate members and collecting banks.

In the case of fixed price issues, the application form along with a cheque/demand draft for the requisite amount has to be deposited with the designated collecting bankers to the issue, whose names and addresses are printed on the application form.

Application forms should be filled carefully as incomplete/ incorrect forms can be rejected due to incomplete details

The ASBA (“Applications Supported by Blocked Amount (ASBA)”) process is available in all public issues made through the book building route, as well as for all rights issues. ASBA co-exists with the cheque mode of payment for all retail investors (application value less than Rs 2 lakhs) whereas for Qualified Institutional Buyers and large buyers, ASBA is the only option.

Investors can obtain ASBA bid-cum-application forms from the Designated Branches or Controlling Branch (which is the Co-ordinating Branch for the Registrar to the Issue, Stock Exchanges and Merchant Bankers) of the SCSB.  These forms are also easily available to investors from the website of Stock Exchanges. Currently, SEBI has prescribed a single form for ASBA as well as non ASBA application.

Investors can also download and print ASBA application forms from the websites of the Stock Exchanges. Each ASBA form, so downloaded, has a unique application number and can be used for making ASBA applications in public issues. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of a particular public issue. For revisions of bids, investors also can access a bid revision form.

The unique application number on the form is important from a control and processing point of view. Therefore, applications made using photocopy of the downloaded form are not accepted.

A hyperlink to the BSE or NSE websites for this facility is also provided on the websites of Merchant Bankers and SCSBs. Websites of various brokerage firms now allow their clients to apply for IPO/ FPOs online.

ASBA Process in brief

An ASBA investor has to submit an ASBA physically or electronically through the internet banking facility, to the SCSB with whom the bank account to be blocked is maintained. Syndicate/ Sub-Syndicate members may also procure ASBA forms from the investors and submit it to SCSBs (Syndicate/ Sub- Syndicate members would be required to upload the bid and other relevant details of such ASBA forms in the bidding platform provided by the stock exchanges and forward the same to the respective SCSBs. SCSBs carry out further action for such ASBA forms such as signature verification, blocking of funds etc. and forward these forms to the registrar to the issue).

The application money remains blocked in the bank account till finalisation of the basis of allotment in the issue or till withdrawal/ failure of the issue or till withdrawal/ rejection of the application, as the case may be. The application data is thereafter uploaded by the SCSB in the electronic bidding system through a web enabled interface provided by the Stock Exchanges.   

ASBA facility in rights issue enables a shareholder of the company as on record date to apply through ASBA mode by selecting the option of ASBA either (i) in Part A of the application form of rights issue, or (ii) in the plain paper application as to whether they desire to avail of the ASBA option, to the Self Certified Syndicate Bank (SCSB) with whom the bank account to be blocked, is maintained. A shareholder who has renounced his/ her entitlements cannot apply using the ASBA route.

The Issuer ensures that adequate arrangements are made by the Registrar to the Issue to obtain information about all ASBAs and to treat these applications similar to non-ASBA applications while finalizing the basis of allotment.

An application can be withdrawn before the date of allotment. The investor can change or revise the quantity or price in the bid using the form for changing/ revising the bid that is available along with the application form. However, the entire process of changing of revising the bids should be completed within the date of closure of the issue.

Unified Payments Interface

The option of a UPI based IPO application is now mandatory for retail investors who have accounts with banks whose names appear on the SEBI website. If the applicants’ bank is on the UPI list, the   applicant needs to mention the UPI ID as payment option. The applicant will receive a ‘block mandate’   request on the chosen UPI app. This request will have to be accepted by entering the UPI PIN. Upon acceptance of the request, the required amount is blocked. Depending on the number of shares allotted by the Company, the funds are debited from the bank account.        

 

The price at which a retail investor should apply

A retail investor does not necessarily have to make a bid at a specific price. It is best that the investor uses the cut-off option ensuring that the application is considered valid at all prices, including the final price decided by the issuer. For making bids at cut-off price, the payment has to be made at the highest price of the price band.

 

 

Allotments in IPOs

Reservations on a Competitive Basis

Reservation on Competitive Basis can be made in a public issue to the following categories:

  • Employees of the Company
  • Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company.
  • Persons who as on the date of filing the draft offer document with SEBI are associated with the issuer as depositors, bondholders or subscribers to services of the issuer.

In a public issue by a listed company, the reservation on competitive basis can be made for retail individual shareholders and in such cases the allotment to such shareholders shall be on a proportionate basis.

Basis of Allotment

After the closure of the issue, the bids received are aggregated under different categories, such as reserved allotments, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIIs) and Retail Individual Investors. The Registrar and Transfer Agent carries out a detailed reconciliation exercise with the SCSBs so that all applications are accounted for. It is at this stage that the R&T agent can decide for the Company whether the Issue is undersubscribed or oversubscribed and if so, to what extent. It is at this stage that the category wise number of applications received and the number of shares applied for is known. This is followed by the rejection of applications under different heads like incomplete details, multiple applications by the same entity, incorrect details like PAN, DP details etc. A Basis of Allotment is then drawn up. The R&T agent alongwith the issuer and lead manager then approach the Stock Exchange where the listing is proposed for finalization of the basis of allotment  

All allottees except anchor investors and retail individual investors are allotted shares on a proportionate basis within their respective investor categories. The allotment to each retail individual investor cannot be less than the minimum bid lot subject to availability of shares in retail individual investor category and the remaining available shares, if any, are allotted on a proportionate basis. This allotment is invariably carried out using a random system logic and cannot left to any individual’s discretion.

Once the basis of allotment is finalized, the Registrar to the Issue sends an appropriate request to the SCSB for unblocking the relevant bank accounts and for transferring the requisite amount to the issuer’s account. In case of withdrawal/ failure of the issue, the amount is unblocked by the SCSB on receipt of information from the pre-issue merchant bankers. The unsuccessful applicants are intimated first, viz. the refunds are processed, so to say. The DP account of the successful applicants are credited with the ISIN that the security has been allotted. This is followed by the listing on the Stock Exchanges. The Issuer is required to allot and/ or refund the application money within 15 days from the date of closure of the issue. In practice currently though, it is seen that Companies finalize this entire process from the date of opening of the Issue till the date of listing of the securities in less than 10 days.

The Issuer is required to pay interest at the rate of fifteen percent per annum if the allotment letters or refund orders have not been dispatched to the applicants within the stipulated timelines.