Share registrars gear up for new IPO system

Karvy Computershare, Intime put mechanism in place for ASBA.

Registrar and share transfer agents (RTAs) across the country are getting ready to usher in the Application Supported by Blocked Amount (ASBA), an alternative mode of payment for initial public offers (IPOs). The new mechanism, proposed by the Securities and Exchange Board of India (Sebi), will shorten the time taken to complete a public issue.

MODUS OPERANDI

An investor applying for an IPO at a cut-off price can approach a designated bank branch of an SCSB and can place his bid

Officials at the bank’s branch will have to cross-check PAN, DP identity and client identity and then block the bid amount from the investor’s account

RTAs have to upload the file onto stock exchanges

Stock exchanges, in turn, will send the files to registrars

After processing, registrars will allot shares to investors and deposit the investors’ money into an escrow account

Karvy Computershare (KCL) and Intime Spectrum, two of India’s biggest RTAs, have put in place systems that give self-certified syndicate banks (SCSBs) a special access to the RTAs’ network through the website.

KCL will give a user identity and a password to each of the banks participating in the ASBA process. It has asked banks to give complete data from their system to the registry rather than only the bids. The registry will then compare the data with those data received from stock exchanges.

Both the registries will be ready to go live by the end of August. Another RTA Bigshare Services is still in the process of developing a process and is coordinating with collection banks. It expects to participate in mock sessions by the end of this month.

This is how the new system will work: An investor applying for an IPO at a cut-off price can approach a designated bank branch of an SCSB and can place his bid. Officials at the bank’s branch will have to cross-check the permanent account number (PAN), DP (depository participant) identity and client identity and then block the bid amount from the investor’s account. At the same time, they have to upload the file onto stock exchanges. Stock exchanges, in turn, will send the files to registrars.

At the registrar’s end, the file will be processed. Once that is done, the shares will be allotted and money will move from the investor’s account to the escrow account. There are some operational issues, especially with banks that have never participated in the public issue process, that still need to be ironed out. However, the process may actually be implemented for IPOs slated to hit the market as early as the next month, said sources.

Bankers feel that the file uploaded should be uniform for both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The process has been made uniform at the registrar’s end after a meeting of the registrars with five banks and both the depositories have decided that it would considerably ease the process.

“There are too many intermediaries in the entire process – investors, exchanges, merchant bankers, bankers to the issue, registrar and transfer agents. It will take time for everyone to fall in sync with this process,” said a senior banker of a public sector bank.

Last week, NSE began the mock electronic bidding process for implementing ASBA. Various banks have come forward to participate in the process.