Collection Of Applications Via ASBA Route Is Just 13%
THE merits of Application Supported by Blocked Amount (ASBA), splashed across public issue advertisements, have done little to popularise the facility among retail investors.
Lack of investor awareness, non-availability of forms and the tussle between banks and brokers are said to be the main reasons for the tepid response towards ASBA.
Collection of retail application through the ASBA route has been around 13-15%, despite primary market intermediaries and capital markets regulator Sebi striving to make the option more popular. ASBA refers to an application mechanism for subscribing to initial public offers (IPO), which ensures that the applicant’s money remains in his bank account till the shares are allotted. The mechanism requires the applicant to give an authorisation to block his application money in the bank account. The bank account is debited only after the allotment is finalised, or the IPO is withdrawn or fails.
Going by Prime Database data, retail application through the ASBA route in public issues of companies like Mahindra Holidays, Excel Infoways, Raj Oil Mills and Adani Power have been below 2% of total retail collection. Medium-sized issues, especially in bullish market conditions, are attracting more applications through the ASBA route; retail applications (through ASBA) in IPOs like Godrej Properties, JSW Energy and Globus Spirits have been in excess of 20%.
“Applications in most public issues have been from smaller cities which are not widely (or seriously) covered by self-certified syndicate banks (SCSB). ASBA forms are not available in the rural branches of most SCSBs,” said Haresh Hinduja, vice-president-IPO, Link Intime Spectrum Registry Services, adding, “Lack of awareness is one of the main reasons for ASBA not becoming popular among retail investors.”
Echoing Mr Hinduja’s view, Sharad Rathi, merchant banking head of Almondz Global says: “Investors have concerns (investing through the ASBA route) as to whom will they approach in case of nonreceipt or wrong allocation of shares. Banks are also not doing much to promote ASBA as it yields them only meagre commissions,” he added.
According to merchant bankers, banks feel shortchanged, as they receive lesser brokerage than brokers, who are instrumental in marketing the issue and making clients apply through ASBA. Self-certified syndicate banks (SCSBs) are required to collect ASBA application forms, block, unblock and unlock investor money and data processing. Data processing (or entry of investor data) was earlier done by registrars to the issue. As per ASBA rules, apart from handling share allotment, registrars are only required to fill up certain fields in the application form, check DP code and mark allotment money and the sum to be returned to investor. Broking commission for handling public issues generally range between 0.5 and 1.5%. In the case of ASBA applications, banks get just about 30-40 bps on the total amount mobilised. Brokers, on the other hand, pocket about 20-60 bps of money mobilised from retail and HNI investors. Brokers, at times, are also remunerated on the basis of application forms received, sources in merchant banking circles said.
