The Securities and Exchange Board of India (Sebi) is re-looking at Asba , or Application Supported by Blocked Amount, norms to make the facility more popular. This will, in turn, accelerate the process of launching primary issues.
Sebi introduced Asba for public issues in September 2008 to bring down the time taken for initial public offers (IPOs). Under Asba, the applicant can submit his/her bid even as the money stays in the bank account. The money is debited at the time the shares are allotted. This eliminates delays related to refunds, speeding up the process. While the facility was available only for retail applicants initially, it was extended to institutional investors in April.
According to two persons familiar with the development, a section of stock brokers and investment bankers recently made a presentation before regulatory officials and suggested certain changes in the current practices to get more investors on board. The suggestions included changes in the commission structure and doing away with separate Asba forms.
“Asba commissions go to banks, which are not properly equipped to market IPOs,” an investment banker said on condition of anonymity. “Sebi needs to understand that selling IPOs in not part of core banking skills. The performance reports of bank employees are not based on selling IPOs. Brokers can push Asba and so should be given a share in the commission,” he said.
The Asba commission has been a point of debate ever since the system was introduced. It gathered steam after the regulator said banks would get an incentive for pushing Asba. Brokers involved in marketing IPOs were miffed at this as they felt that banks were getting incentive for a job that was in their domain. Market players said Asba could take off in a big way if brokers were given incentives to promote it.
“The issue of sharing commission needs to be pursued aggressively,” said Prithvi Haldea of PRIME Database. “Banks might not have the marketing strategy for IPOs. An incentive structure needs to be built incorporating the broking fraternity,” he said.
Another suggestion put forth by a section of market players is doing away with separate Asba forms. At present, the issuer has to get two different forms printed with separate colour codes — one for Asba and the other for non-Asba applicants.
This may lead to a situation where Asba forms may not be available in far-flung cities. “One can have a common form with a check-box for Asba,” said a domestic broker involved in IPO distribution. “Just imagine what happens when an investor who lives in a Tier-III city wants to use Asba but the forms have not been dispatched. He will not wait and will apply through the normal route,” he said.
“Asba continues to be poorly advertised,” said Haldea. “If it is promoted well, both investors and bankers will realise that it is a win-win for all. At present, the Asba facility is available with only a few banks and their select branches,” he said.
According to a status note prepared by a regulatory committee in 2009, total ASBA applications in some IPOs accounted for around 12 per cent of the total retail applications. While latest numbers are not available, market players say the facility has so far got a subdued response due to a host of factors, including lack of awareness, limited reach due to separate application forms and the cold response from the broking community due to lack of incentives. It is widely believed that Sebi will have to fine-tune the ASBA process soon as it is a vital link in the regulator’s overall aim of bringing down the IPO process to seven days. While the facility is available along with the normal method, the market regulator eventually wants the process to become paperless. In this, ASBA will play a key role.
