IPO reforms: NSE kicks off mock e-bid process

The National Stock Exchange (NSE) on Monday conducted the first round of mock electronic bidding process for implementing application supported by blocked amount (ASBA), an alternative mode of payment for initial public offerings (IPOs), proposed by capital markets regulator, Securities and Exchange Board of India (Sebi).

Eight banks — Punjab National Bank (PNB), Bank of India (BOI), HDFC Bank, ICICI Bank, Axis Bank, Union Bank of India and two others — participated in the first round, that was successfully completed on Monday.

ROUND ONE

NSE has developed a web-based interface through which electronic bidding would take place

 

This application would be given to banks, who in turn will set up certain designated branches, known as administrators

 

Other branches of that bank will report to the administrator

 

In the mock bidding process, NSE had a dummy IPO with a price band and had asked banks to create dummy files, that were uploaded to the interface

 

BSE however, has not started the process as yet

NSE has developed a web-based interface through which electronic bidding would take place. This web-based application would be given to banks, who in turn will set up certain designated branches, known as administrators.

Other branches of that bank will report to the administrator. In the mock bidding process, NSE had a dummy IPO with a price band and had asked banks to create dummy files, that were uploaded to the interface.

The exchange plans to have the mock bidding sessions till Thursday. After that, NSE will be ready to go live though there might be minor tweaking, if necessary, said an NSE spokesperson, speaking to Business Standard. Banks, especially public sector banks, are very keen to offer this to investors, he said.

The Bombay Stock Exchange, however, has not started the process as yet.

Sources in Asia’s oldest exchange said a mechanism for mock bidding for IPOs will be put in place shortly.

Sebi chief CB Bhave had said at a public meeting in July that the pilot project would begin by end-August. “Once the system stabilises, institutional investors will have to pay 100 per cent money with their application (currently, they pay 10 per cent).

This system is expected to come in by year-end. We will start will banks and some branches that show readiness to implement this,” Bhave had said, speaking to Business Standard, at the time. Sebi had first mooted this proposal in May 2008, inviting comments from the public.

According to Sebi’s proposal, the ASBA process will require self-certified syndicate banks (SCSBs) to accept applications from investors, block the funds to the extent of the bid payment amount and then upload the details in the electronic bidding system.

Once the basis of allotment is finalised, the amount required by the issuer will be released and the remaining will be unblocked by the SCSB.

Banks will be responsible for resolving the investor grievances. In case of failure of an issue, the bank will have to immediately release the block on receipt of request from the registrars who are required to maintain electronic records relating to the bids received from the SCSBs.

Book running lead managers will have to intimate the issue opening date to SCSBs in writing.

In case the company withdraws the issue, the lead managers would have to inform the SCSBs of the developments and provide investor-wise details on allotment and non-allotment to each bank.