How to apply for IPO- the ASBA way

Now that you have learned about the basis of IPO allotment, it is time to understand how to apply for an IPO through ASBA. This process may seem complex at first, but it is quite straightforward and very efficient. Using ASBA (Application Supported by Blocked Amount), you can easily apply for an IPO without worrying about the hassle of transferring funds upfront. Instead, your money stays right in your bank account until the shares are allotted to you. This method ensures that your funds are only used if you get the shares, adding an extra layer of security to your investment. Let us look at how you can make your IPO applications smooth and worry-free through ASBA.

What is ASBA?

ASBA, or "Application Supported by Blocked Amount," is a convenient way to apply for an IPO. When you use ASBA, you authorize your bank to block the application money in your account instead of transferring it upfront. This means your money remains in your bank account and is only debited if your application is selected for allotment after the finalization of the basis of allotment or if the issue is withdrawn or fails.

ASBA is designed to streamline the process of applying for IPOs, rights issues, and Follow-on Public Offers (FPOs) that are made through the book-building route. It works alongside the traditional method of using cheques for payment and submitting applications. With ASBA, you don't have to worry about your money being stuck if you don't get the shares you applied for. It's a safer and more efficient way to participate in public offers, making the investment process smoother for you.

Let us now look at the procedure to apply for an IPO through ASBA.

How to apply for an IPO through ASBA?

Applying for an IPO through the ASBA route is straightforward and user-friendly. Banks allow ASBA IPO applications during the subscription period of the IPO. Typically, online IPO applications can be submitted from 10 AM on the opening date until 5 PM on the closing date. However, most banks only offer this service until 2 PM or 3 PM on the final day.

To begin, log into your net banking website or mobile app and navigate to the 'Online IPO' section. From there, select the IPO you wish to apply for and enter your bidding details, such as category, quantity, and the amount you want to invest. Make sure you have sufficient funds in your bank account to cover your bid, then submit your IPO application. The bank will block the specified funds in your account (marking a lien) and send your application to the stock exchange. The exchange accepts your bid and assigns an application number, which the bank will relay back to you, confirming the successful submission of your bid.

Once the IPO bidding period ends, the exchange shares the bidder details with the registrar, who then conducts the allotment process to determine the share allocation for each applicant. When the allotment is finalized, the shares are transferred to your demat account. On the listing day, you can begin trading the shares you've been allotted. This process not only simplifies your IPO application, but also assures that your funds are only blocked until the allotment is completed. If your application is successful, the funds are used to purchase the shares. If not, the funds remain in your account. This makes the ASBA process both secure and efficient, providing peace of mind while you invest.

Benefits of applying for an IPO through ASBA

The ASBA process offers several benefits to investors. Firstly, there's no need to pay the application money by cheque; instead, the required amount is simply blocked in the investor's bank account, allowing them to continue earning interest on it. This means investors don't have to worry about refunds, as only the amount corresponding to the allotted securities is debited from their account once the allotment is finalized. The application form is also simpler, making the process more user-friendly. Investors deal directly with their own bank, a familiar intermediary, which adds to the convenience and trustworthiness of the process.

Additionally, there's no loss of interest since the application amount remains in the savings account until allotment. This amount is also considered when calculating the Average Quarterly Balance (AQB), which can be beneficial for maintaining account requirements. Moreover, customers have the flexibility to revise or withdraw their bids before the end of the issue period using the prescribed format with their bank.

Eligibility criteria

SEBI has outlined specific eligibility criteria for investors who can apply through ASBA. Since May 1, 2010, all investors are eligible to apply through ASBA for public issues. For rights issues, all shareholders of the company, as of the record date, can use ASBA to make applications, provided they meet certain conditions. These conditions include holding shares in a dematerialized form and applying for entitlements or additional shares in the issue in a dematerialized form. The shareholder must not have renounced their entitlements fully or partially and should not be a renouncee.

Additionally, they must apply by blocking funds in a bank account with a 'Self Certified Syndicate' Bank. When submitting an ASBA application, investors must provide accurate information regarding their PAN, DP ID, Client ID, bid quantity, and bank account number. These requirements ensure the application process is smooth and the necessary funds are properly blocked until the allotment is finalized.

In summary, applying for an IPO through ASBA offers a secure, efficient, and user-friendly method for investors. By blocking funds in your bank account rather than transferring them upfront, ASBA ensures that your money is used only if you receive the shares. This process not only simplifies the application but also provides the added benefits of earning interest and maintaining account balance requirements. Understanding the ASBA process and its advantages can make your IPO investment experience smoother and more convenient.

Happy Learning!