Initial Public Offering or IPO is a process by which companies raise funds from the market. Businesses need funds for many reasons and IPO is a great way to get it.
What is an IPO?
IPO is a process of offering shares of a Company for the first time. (A Company goes public for the first time).
This is an excellent chance to buy shares of a strong growth company at a low price. You can make a quick profit. Take a look at CSB Bank IPO. Shares of Catholic Syrian Bank made a strong debut on stock exchanges up 57% from the issue price. The CSB Bank stock listed at 41% higher at Rs 275 and extended gains to 54% at Rs 300. The CSB Bank IPO was priced in a price band of Rs 193-Rs 195 a share.
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How to Apply for IPO?
ASBA or ‘Application Supported by Blocked Amount’ is a process of applying for an IPO in India. SEBI has made it mandatory for you to apply for IPO through ASBA. SEBI OR Securities and Exchange Board of India regulates IPO.
See Also: What Is An IPO?
What is ASBA?
ASBA is nothing but an authorization to block the IPO application money from your bank account. The IPO application through ASBA allows your bank to hold the subscription amount in your bank account until you accept allotment of shares. The bank simply blocks the subscription amount in your bank account when you apply for IPO. The money cannot be used for any other purpose. You do earn interest in the subscription amount.
Who Can Apply for ASBA?
- You must be a resident retail individual investor.
- You must have a Demat account with CDSL or NSDL. (These are called depositories).
- The credit balance must be clear. There must be no overdraft in a savings bank account or current account.
- You don’t bid under a reserved category.
- You have agreed not to revise your bid.
- Your bid at the cut-off with a single option as to the number of shares you have bid for.
Why Invest Through ASBA?
- Money for IPO application remains blocked in the savings bank account.
- You don’t lose interest in the funds blocked. The blocked amount gets debited after allotment. The interest then stops on the debited part.
- You don’t have to wait for refund cheques.
- Self Certified Syndicate Banks or SCSBs then unblock your application money from a frozen bank account. This happens if your IPO application is rejected or the issue gets withdrawn. SCSBs are banks which offer the facility of applying for IPO through the ASBA process.
How to Apply for IPO Online Through ASBA?
- You must log in to the net banking portal of your bank.
- You then select the IPO application option from the menu.
- You are then re-directed to the IPO online system.
- The ASBA IPO application is only for individuals. Corporates, HUFs and Trusts cannot use this to apply for IPOs.
- Applicant names must be as per the sequence of names in the depository account.
- Your net-banking user becomes the 1st applicant by default.
- In your savings bank account, a hold is marked on the total amount at the highest price bid.
- The application money continues to remain blocked till the final allotment of shares.
- The application money gets debited only after share allotment. In the case of non-allotment, the blocked amount gets released only after registrar notification.
How to Apply for IPO Offline Through ASBA?
- You must first visit the Self Certified Syndicate Bank or SCSB bank branch where you hold your account. You don’t have to hold an account at the same branch. The account can be maintained at any of the branches. Check the SCSB bank branch list at SEBI.
- You then download ASBA bid-cum-application form and print it. You can download this form at ASBA bid-cum-application forms at BSE.
- Fill bank account number, PAN, Demat account details and submit to the bank.
- The bank gives an acknowledgment after receiving your filled application. The bank blocks the amount in your account and sends your application information to the designated stock exchange like BSE or NSE.
- You must maintain a sufficient amount in a bank account, equal to the IPO application amount.
- Check your application on the status of the issue application.
- The application status is available on NSE and BSE portal until 6 days after the issue closure date.
When is ASBA IPO Application form Rejected?
- If there’s an insufficient amount in your bank account.
- The discrepancy in the application form.
- The information you have furnished is wrong.
- There is a mismatch in the name on PAN and Demat holder’s name.
- You make multiple applications through ASBA.
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