Sebi extends Asba to institutional investors

In line with its aim of improving the primary market’s efficiency, the Securities and Exchange Board of India (Sebi) has extended the Asba (application supported by blocked amount) facility to institutional investors. Currently, it is only available for retail investors and high net worth individuals. The new norms would be applicable for all public issues from May 1.

Under Asba, introduced in September 2008, money is blocked in the investor’s account while he bids in a public or a rights issue. The money is debited from the account only at the time of allotment. If there is high oversubscription and the investor is not allotted any share, no money is debited from his account. This, in turn, simplifies the refund process, reducing the timeline of initial public offers (IPOs). According to Sebi estimates, 15-20 per cent retail bids were through the Asba facility in some recent issues.

The Sebi move coincides with the new norms on margin payments for qualified institutional buyers (QIBs). At its board meet last month, Sebi had said that QIBs would have to pay 100 per cent money upfront while applying in issues that open on or after May 1. Currently, QIBs pay only 25 per cent of the money while bidding.

According to market players, extending Asba to QIBs will reduce the timeline for public issues. Sebi has already reduced the timeline between issue closure and listing to 12 days for all issues that open on or after May 1.

“Stock exchanges, merchant bankers, registrar to an issue and bankers to an issue acting as self-certified syndicate banks are advised to ensure that appropriate arrangements are made to accept Asba forms from QIBs also in addition to the existing categories of investors,” said the Sebi circular.