ASBA catches on after QIB entry

Brokers also push this mode of payment after issuers give incentives.

Nearly half the application amount collected in recent public issues has come through the application supported by blocked amount (Asba) route with a majority of institutional investors opting for this mode of payment.

Under Asba, the application money is blocked in the investor’s bank account till the finalisation of the basis of allotment. The money is debited only on allotment of shares and the rest of the blocked money is released.
 

GAINING TRACTION
PERCENTAGE OF APPLICATION AMOUNT THAT CAME 
THROUGH ASBA

• Nearly half of the application amount in recent issues came through Asba
• Majority of QIBs are now applying through this route
• Brokers have started getting commission on Asba 
  applications

Large public issues that have come after May 1, after which qualified institutional buyers (QIBs) were allowed to apply through Asba, have got a good response for this mode of payment, data available with registrars show.

For example, in the follow-on public offer of state-run Engineers India, open between July 27 and July 30, about 56 per cent of the over Rs 13,000 crore application amount came through Asba. Close to 62.8 per cent of the QIB application amount and 22.3 per cent of the retail application amount came through Asba.

In SKS Microfinance’s initial public offer (IPO), 41.7 per cent of the total application amount came through Asba. Also, 52.6 per cent of the QIB amount and 11.7 per cent of the retail application amount (see chart) came through this route.

“Gradually, participation through the Asba route is increasing,” said Haren Modi, chief operating officer of Link Intime India, a leading registrar to public issues. “More and more investors will be able to avail of the facility once the number of banks and branches that offer this service go up.”

As on July 15, the number of self-certified syndicate banks offering the facility to investors was 32.

The Securities and Exchange Board of India, which intends to reduce the timeline for public issues to seven working days by December from the present 12 working days, is pushing Asba. Recently, it asked stock exchanges to make Asba forms available on their websites.

Brokers who were not inclined to push Asba to their clients because of lack of incentive are also now pitching for this investor-friendly mode of payment. “Earlier, only banks were getting the commission. Now, issuers have also started giving incentives to brokers,” said Anil Bhattar, president-equity, at Mumbai-based Kantilal Chhaganlal Securities.

Brokers are now getting 1.5 per cent on the allotment amount as brokerage on applications their clients file through this route.