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Operational challenges, including manpower issues, have hit the penetration of primary markets beyond the top cities. The ASBA (application supported by blocked amount) platform, introduced by the Securities and Exchange Board of India (Sebi) in 2008 to facilitate smooth participation in the initial public offering (IPO) market, is yet to be implemented in totality across small centres due to the unavailability of trained staff.
Investment bankers say bank branches in tier-II and tier-III cities are inadequately trained to handle the slew of subscription forms. “The ASBA platform is available in most branches. But often, due to fewer staff in smaller centres, only one person is available to operate the system, with no second line of defence,” said B Madhuprasad, vice chairman, Keynote Corporate Services.
This means if the person equipped to upload the subscription forms into the system is on leave during an IPO, it leaves investors from that centre unable to participate in the issue. Recently, for a small and medium enterprise IPO, 20-25 investors from a tier-II centre were unable to participate, as the trained staff was absent at that time, said a merchant banker handling the issue.
“Sebi has gone ahead and made the platform compulsory, without ascertaining whether the staff and the branches are geared to handle the system. It is a headache to handle issues through such centres,” said an official with an investment banking firm.
Under the ASBA platform, investors’ application amounts are blocked in bank accounts. The money, after the subscription amount is deducted, is released once the IPO allotment process is completed. ASBA has been made compulsory for all investors with a ticket-size exceeding Rs 2 lakh; this includes nigh net worth individuals and institutions.
Industry officials say the inefficient implementation of the ASBA platform defeats the purpose for which it was introduced—-to reduce the IPO time line. “During the IPO period, a lot of time is wasted in contacting other ASBA-compliant branches in the same locality or at a tier-I centre. Often, investors lose interest in such issues if it takes too long,” said an official at the investment-banking arm of a state-owned bank. For state-owned banks without an investment-banking arm, it is more difficult to understand the IPO subscription process, say officials.
For such banks, Sebi has provided an option of syndication, through which these can outsource the process to the branch of another bank. This, however, made little business sense, as there was no money to be made in the IPO applications processing business, said merchant bankers,.
Others blame an inactive IPO market for such apathy on the part of banks. Last year, the IPO fund-raising market hit a 10-year low; about three dozen companies together raised Rs 1,600 crore.
