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Applying in an IPO
Prerequisites
| 1. |
Demat
Account
An investor
has the
option to
apply for
and receive
the shares
in physical
form.
However, it
is advisable
to get the
allotment in
demat form
as the
shares
issued
through an
IPO/FPO are
tradable
only in the
demat form.
In any case,
for all IPO/FPOs
of any
security of
issue size
of Rs. 10
crore or
more, issues
have to be
compulsorily
be only in
dematerialized
form, while
QIBs and
large
investors
(applying
for more
than Rs.
1,00,000),
can apply
only in
demat form.
There are
two
depositories
in the
country-National
Securities
Depository
Ltd. (NSDL)
and Central
Depository
Services (
India) Ltd.
(CDSL) .Both
have An
extensive
network of
authorized
Depository
Participants
(DPs). An
investor can
open a demat
account with
any of these
DPs.
The investor
should fill
in his the
correct DP
ID and
Client ID
details in
the
application
forms. |
| 2. |
Permanent
Account
Number (PAN)
Where the
bids are for
Rs. 50,000
or more, the
bidder, or
in case of a
bid in joint
names, each
of the
bidders,
should
mention
his/her PAN
allotted
under the
Income Tax
Act. The
copy of PAN
card or PAN
allotment
letter is
required to
be submitted
with the
application
form.
Applications
without this
information
and
documents
are treated
incomplete
and are
liable to be
rejected.
(For more
details, the
investors
should read
the
application
form) |
| 3. |
Bank
Account/DD
Applications
for IPO/FPOs
are valid
only if
payment is
made through
a cheque or
a demand
draft.
Application
money cannot
be paid in
cash. |
Process of
Applying in an IPO/FPO
An investor needs to
first obtain an IPO/FPO
application form.
Forms are normally
available from share
brokers, lead
managers, syndicate
members and
collecting banks.
Application forms
can also be picked
up from the vendors
at major commercial
streets in most
towns (for example
outside the Bombay
Stock Exchange)
In the case of fixed
price issues, the
application form
along with a cheque/demand
draft for the
requisite amount has
to be deposited with
the designated
collecting bankers
to the issue, whose
names and addresses
are printed on the
application form.
Application forms
should be filled
carefully as
incomplete/incorrect
forms can be
rejected due to
incomplete details
ASBA
In an endeavour to
make the existing
public issue process
more efficient, SEBI
has introduced a
supplementary
process of applying
in public issues,
viz., the
“Applications
Supported by Blocked
Amount (ASBA)”
process. The ASBA
process shall be
available in all
public issues made
through the book
building route, as
well as for all
rights issues. ASBA
co-exists with the
current process,
wherein cheque is
used as a mode of
payment.
The main features of
ASBA process are as
follows:
a. Meaning of
ASBA: ASBA is an
application for
subscribing to an
issue, containing an
authorisation to
block the
application money in
a bank account.
b. Availability of ASBA bid-cum application forms: Investors can obtain ASBA bid-cum-application forms from Self Certified Syndicate Banks (SCSBs). These forms are also easily available to investors from the website of BSE or NSE.
i. Self Certified
Syndicate Bank (SCSB):
SCSB is a bank which
offers the facility
of applying through
the ASBA process. A
bank desirous of
offering ASBA
facility shall
submit a certificate
to SEBI, for
inclusion of its
name in SEBI’s
list of SCSBs. The
said list will be
displayed by SEBI on
its website at
www.sebi.gov.in.
ASBAs can be
accepted only by
SCSBs, whose names
appear in the list
of SCSBs displayed
in SEBI’s website.
On inclusion in the
list of SCSBs, a
bank shall commence
its activities as an
SCSB w.e.f. the 1st
or 15th of a month,
whichever is
earlier, from the
date of such
inclusion. It shall
then be deemed to
have entered into an
agreement with the
issuer and shall be
required to offer
the ASBA facility to
all its account
holders for all
issues to which ASBA
process is
applicable.
Given below is the list of Banks which have been authorized to accept ASBAs in all issues as on July 1, 2010.
| Sl.
No. |
Name of the
bank |
| 1. |
ALLAHABAD BANK |
| 2. |
ANDHRA BANK |
| 3. |
AXIS BANK LTD. |
| 4. |
BANK OF BARODA |
| 5. |
BANK OF INDIA |
| 6. |
BANK OF MAHARASHTRA |
| 7. |
CENTRAL BANK OF INDIA |
| 8. |
CITIBANK N.A. |
| 9. |
CORPORATION BANK |
| 10. |
DEUTSCHE BANK AG |
| 11. |
FEDERAL BANK LTD.,THE |
| 12. |
HDFC BANK LTD. |
| 13. |
HONGKONG & SHANGHAI BANKING CORP.LTD.,THE |
| 14. |
ICICI BANK LTD. |
| 15. |
IDBI BANK LTD. |
| 16. |
INDIAN BANK |
| 17. |
INDUSIND BANK LTD. |
| 18. |
JP MORGAN CHASE BANK,N.A. |
| 19. |
KARUR VYSYA BANK LTD.,THE |
| 20. |
KOTAK MAHINDRA BANK LTD. |
| 21. |
ORIENTAL BANK OF COMMERCE |
| 22. |
PUNJAB NATIONAL BANK |
| 23. |
STANDARD CHARTERED BANK LTD. |
| 24. |
STATE BANK OF BIKANER & JAIPUR |
| 25. |
STATE BANK OF HYDERABAD |
| 26. |
STATE BANK OF INDIA |
| 27. |
STATE BANK OF TRAVANCORE |
| 28. |
UNION BANK OF INDIA |
| 29. |
VIJAYA BANK |
| 30. |
YES BANK LTD. |
An
SCSB shall identify
its Designated
Branches (DBs) at
which an ASBA
investor shall
submit ASBA and
shall also identify
the Controlling
Branch (CB) which
shall act as a
coordinating branch
for the Registrar to
the Issue, Stock
Exchanges and
Merchant Bankers.
The SCSB, its DBs
and CB shall
continue to act as
such, for all issues
to which ASBA
process is
applicable. The SCSB
may identify new DBs
for the purpose of
ASBA process and
intimate details of
the same to SEBI,
after which SEBI
will add the DB to
the list of SCSBs
maintained by it.
The SCSB shall
communicate the
following details to
Stock Exchanges for
making it available
on their respective
websites; these
details shall also
be made available by
the SCSB on its
website:
| (i) |
Name
and address
of the SCSB |
| (ii) |
Addresses
of DBs and
CB and other
details such
as telephone
number, fax
number and
email ids. |
| (iii) |
Name
and contact
details of a
nodal
officer at a
senior level
from the CB.
|
ii BSE/NSE websites: Investors can download and print ASBA application forms from the websites of the Stock Exchanges i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) which provideact as an electronic interface for ASBA facility i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Each ASBA form, so downloaded, shall have a unique application number and can be used for making ASBA applications in public issues. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of a particular public issue. Investors will also have online access to soft copy of the abridged prospectus/prospectus of the public issue. For revisions of bids, investors can take print of a bid revision form.
The unique application number on the form is important from a control and processing perspectiveoint of view. Therefore, applications made using photocopy of the downloaded form shall not be accepted.
A hyperlink to the websites of BSE or NSE websites for this facility is also provided on the websites of Merchant Bankers and SCSBs.
|
c. Eligibility of Investors for ASBA:
The following
investors are
eligible to apply
through ASBA:
| (i) |
In Public Issues: All investors are eligible to apply through ASBA in public issues; |
| (ii) |
In Rights Issues: All shareholders of the issuer company as on the record date provided if he/ she/it: |
|
| (a) |
is
holding
shares
in
dematerialised
form
and
has
applied
for
entitlements
and
/or
additional
shares
in
the
issue
in
dematerialised
form |
| (b) |
has
not
renounced
his/
her
entitlements
in
full
or
in
part; |
| (c) |
is
not
a
renouncee
to
the
Issue; |
| (d) |
applies
through
a
bank
account
maintained
with
SCSBs. |
|
d. ASBA Process
in brief: An
ASBA investor shall
submit an ASBA
physically or
electronically
through the internet
banking facility, to
the SCSB with whom
the bank account to
be blocked, is
maintained. The SCSB
shall then block the
application money in
the bank account
specified in the
ASBA, on the basis
of an authorisation
to this effect given
by the account
holder in the ASBA.
The application
money shall remain
blocked in the bank
account till
finalisation of the
basis of allotment
in the issue or till
withdrawal/ failure
of the issue or till
withdrawal/
rejection of the
application, as the
case may be. The
application data
shall thereafter be
uploaded by the SCSB
in the electronic
bidding system
through a web
enabled interface
provided by the
Stock Exchanges.
Once the basis of
allotment is
finalized, the
Registrar to the
Issue shall send an
appropriate request
to the SCSB for
unblocking the
relevant bank
accounts and for
transferring the
requisite amount to
the issuer’s
account. In case of
withdrawal/ failure
of the issue, the
amount shall be
unblocked by the
SCSB on receipt of
information from the
pre-issue merchant
bankers.
ASBA facility in
rights issue shall
enable a shareholder
of the company as on
record date to apply
through ASBA mode by
selecting the option
of ASBA either (i)
in Part A of the
application form of
rights issue, or
(ii) in the plain
paper application as
to whether they
desire to avail of
the ASBA option, to
the Self Certified
Syndicate Bank (SCSB)
with whom the bank
account to be
blocked, is
maintained.
e. Obligations of
the Issuer: The
issuer shall ensure
that adequate
arrangements are
made by the
Registrar to the
Issue to obtain
information about
all ASBAs and to
treat these
applications similar
to non-ASBA
applications while
finalizing the basis
of allotment, as per
the procedure
specified in the
Guidelines.
f. Applicability of
ASBA process: ASBA
process shall be
applicable to all
book-built public
issues which provide
for not more than
one payment option
to the retail
individual
investors, as well
as for all rights
issues.
Applying for IPO/FPOs
on the Internet
Websites of various
brokerage firms now
allow the facility
to their clients to
apply for IPO/FPOs
online.
Withdrawal of an
Application after
Closure of an IPO/FPO
The Indian laws
allow for a
withdrawal of an
application before
the date of
allotment.
Proof a Bidder
can Request from a
Trading Member for
Entering Bids
The syndicate member
returns the
counterfoil with the
signature, date and
stamp of the
syndicate member.
The investor can
retain this as a
sufficient proof
that the bids have
been taken into
account.
Changing/Revising
the Bids
The investor can
change or revise the
quantity or price in
the bid using the
form for
changing/revising
the bid that is
available along with
the application
form. However, the
entire process of
changing of revising
the bids should be
completed within the
date of closure of
the issue.
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Knowing about
IPO/FPOs currently
open or are
about to hit the
market
Every week SEBI
issues press
releases for
information of
the public,
details of offer
documents filed
with SEBI and
observations
issued.
At what Price
should a Retail
Investor apply?
A retail
investor is not
required to make
his bid at a
specific price.
Since he is not
able to take a
call on the
right price, he
should use the
cut-off option.
This would
ensure that his
application will
be considered
valid at all
prices,
including the
final price
decided by the
issuer. For
making bids at
cut-off price,
the payment has
to be made at
the highest
price of the
price band. In
case a lower
price is
finalized or in
case the
investor is an
unsuccessful
allottee or is
allotted lesser
shares than
applied for, he
would get the
necessary
refund.
How to
improve the
chances of
allotment in an
IPO/FPO?
As most IPO/FPOs get
oversubscribed,
a retail
investor is
often
disappointed in
not getting any
allotments or
getting
miniscule
allotments. If
an investor has
decided on
investing in a
specific IPO/FPO
based upon
merits, he
should commit as
much resources
as he can to
that IPO/FPO. He
should apply for
as many shares
as possible,
within the limit
of Rs.1, 00,000.
It would also be
worthwhile to
apply in the
names of all
family members,
provided all of
them are
applying from
their own
accounts and all
of them have a
valid demat
account. |
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