Processing of ASBA applications in Public Issue of Equity Shares

Prabhat Nigam

10 Sep, 2022

On 30^th May 2022, vide circular number SEBI/HO/CFD/DIL2/P/CIR/2022/75, the Securities and Exchange Board of India (SEBI) has issued a Circular stating that processing of ASBA applications in Public Issues of equity shares and convertibles can only begin once the bid money has been blocked in the bank account of investors. SEBI has made provisions of this Circular applicable to all the categories of investors, viz. QIBs, NIIs, Retail and other reserved categories and also for all those modes through which the applications are processed.

What is ASBA?

The full form of ASBA^[1] is Application Supported by Blocked Amount, which means that the application made by an investor contains an authorisation to block his/ her application money in the bank account for subscribing to an issue. Where an investor is applying through ASBA, the application money shall be debited from the bank account only if his/ her application gets selected for allotment.

Who are the entities to whom the circular on Processing of ASBA applications is applicable?

The circular on “Processing of ASBA applications in Public Issue of Equity Shares and Convertibles” is applicable to the following entities:

1. All Registered Merchant Bankers
2. All Recognised Stock Exchanges
3. All Depositories and Registered Depository Participants
4. All Registered Stock Brokers
5. All Bankers to Issue (Self-Certified Syndicate Banks- SCSBs)
6. All the Registered Registrars to an Issue and Share Transfer Agents
7. National Payments Corporation of India (NPCI)

The particulars of this Circular will also be applicable to all the categories of investors, such as retail investors, Qualified Institutional Buyers (QIBs), Non-Institutional Buyers (NIIs) and also to other reserved categories. Furthermore, the applicability will also extend to all modes through which the applications are processed.

Highlights of the Circular on processing of ASBA applications in Public Issues of equity shares   

Background

The facility of ASBA or Application Supported by Blocked Amount in Public Issues was prescribed by the SEBI vide Circular number SEBI/CFD/DIL/ASBA/1/2009/30/12 dated 30^th December 2009  for all the categories of investors except for the Qualified Institutional Investors (QIBs).

SEBI came out with another Circular CIR/CFD/DIL/2/2010 dated 6th April 2010, which extended the facility of ASBA to Qualified Institutional Buyers in public issues, which opened on or after 1st May 2010.

The facility of Unified Payment Interface (UPI) was extended as an additional payment mechanism along with ASBA for Retail Individual Investors by SEBI vide Circular number SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated 1^st November 2018. SEBI, through another Circular number SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated 28th June 2019, mandated that the facility of UPI shall come into effect from 1st July 2019 for the applications made by the Retail Individual Investors submitted through Intermediaries.

Streamlining the bidding process

A review has been conducted of the processing of ASBA applications in Public Issues by market intermediaries and Self-Certified Syndicate Banks. SEBI, as part of its continuing efforts to streamline the bidding process and also to ensure orderly development of the securities market, felt the need for implementing the process of ASBA applications in public issue in line with the abovementioned Circulars.

SEBI said that all the ASBA applications in public issues should be processed once the application monies have been blocked in the investor’s bank accounts. In furtherance of this implementation process, all the intermediaries and market infrastructure institutions have been advised to put in place appropriate systemic and procedural arrangements within three months from the date of issuance of this Circular, i.e. from 30th May 2022.

The stock exchanges are bound to accept the ASBA applications in their electronic book building platform only along with a mandatory confirmation on the application monies blocked.

Advisory to all the Stakeholders

SEBI has advised all the stakeholders in the process to take appropriate steps to ensure compliance with the particulars of this Circular. Merchant Bankers have been advised to coordinate with the stakeholders in this regard.   

Compulsory application through ASBA

It is mandatory for all the investors to apply through ASBA only in case of public issues and rights issues.     

Date of Coming into effect

The particulars of this circular shall be applicable for public issues opening on or after 1^st September 2022 onwards.  

Conclusion

This Circular on Processing of ASBA applications in Public Issue of Equity Shares has been issued after exercising the powers conferred on the SEBI under section 11 read with section 11A of the SEBI Act, 1992.

Read our Article:Application Supported By Blocked Amount (ASBA)