Apply in IPO Through ASBA- IPO Application Method

Investing in Initial Public Offerings (IPOs) remains one of the most popular ways to create wealth and diversify investment portfolios. Investing in an IPO allows individuals to take an ownership stake in companies during its initial phases or just before it uses the funds raised in the IPO for future growth. However, applying for IPOs can be challenging, particularly if you are new to the stock markets. That is where the Application Supported by Blocked Amount (ASBA) comes into the picture. ASBA is a SEBI-approved mechanism that simplifies the process of applying in IPOs.

This detailed guide outlines the basics of an IPO, how ASBA works, and its advantages. Whether you apply for an IPO online or offline, this guide will provide the steps and tips to ensure a smooth investing experience.

What is an IPO?

IPO refers to the first time the shares are offered to the general public by a private company. This makes it possible for a company to raise capital from the general public and make it a publicly traded company on the stock exchange.

Why Do Companies Launch IPO?

Different reasons why companies launch an IPO are mentioned below:

• Capital for Growth: Companies use IPO proceeds to expand operations, invest in new projects, or pay off debt.

• Enhance Market Position: An IPO increases the visibility and credibility of a company in the market.

• Liquidity for Founders and Early Investors: IPOs offer an exit opportunity for early investors or founders wishing to liquidate part of their stake.

Advantages to Investors

The advantages of IPOs to investors are listed below:

• Equity Ownership: Investors have an opportunity to buy shares in a company with good future growth prospects.

• Strong Returns: In most cases, an IPO can result in significant listing day returns. This is particularly true if the company has priced its shares lower than the actual value to attract more investors and cause oversubscription.

• Regulated Process: SEBI’s oversight ensures fair pricing and transparency in the IPO process.

How to Apply for IPO Online & Offline

Applicants can submit IPO applications either online or offline, as it suits the applicant. Let’s divide each into detail.

Online Application for IPO

Today, the method of applying for IPOs online has received an excellent response primarily because of its convenient and speedy application process. Here is a step-by-step guide for online application.

1. Open a Demat Account

A Demat account is essential for filing IPOs because it stores shares electronically if the shares are allotted to the investors. 

2. Log in to Your Trading Platform

Login to your broker’s trading platform, through which you access the IPO section.

3. Select an IPO & Enter 

Look for the IPOs open for subscription. Based on your analysis, select the IPO you wish to apply for. Select the investor category and enter the number of lots you wish to apply for.

4. Submit ASBA request

Enter the UPI (Unified Payments Interface) ID. You will receive a request to approve the ASBA request.

5. Authorize Fund Blocking

Authorize the ASBA request to block funds in your bank account. The funds are only blocked and not debited until shares are allotted. 

6. Track Your Application

You will be able to track the status of your application from your trading account and the registrar’s website.

Offline IPO Application

Here is the process an individual can follow to apply for IPOs offline.

1. Get the IPO Application Form

Get this form from the nearest branch of your bank.

2. Fill up the Form

Fill out the IPO application form with the required details, such as a Demat account, PAN card, and bid information. Provide the bank account number or UPI ID you want to use for the ASBA process.

3. Submit the Form

Sign the mandate instructing the bank to block the amounts in your bank account and submit it along with the IPO application form. 

4. Confirmation and Tracking

Once submitted, receive an acknowledgment slip from the bank branch. Track the status of your application using the reference number on the slip.

What is ASBA?

Application Supported by Blocked Amount (ASBA) is a mechanism introduced by SEBI to facilitate the IPO application process. In this mechanism, the applicant does not need to transfer any money when applying for the IPO. Instead, the money stays in the bank account but remains blocked for the IPO application.

Key Features of ASBA

The key features of the ASBA mechanism are:

• Funds are Blocked in Your Account: The amount required, according to the bid information in the IPO application, gets blocked, but it continues to earn interest in your savings account.

• No Withdrawal till Allotment: Funds get debited only if shares are allotted.

• Refund Without Delay: If no shares are allotted, the blocked amount is automatically released.

• Transparency: The ASBA process is secure as no amount is deducted from the bank account.

Eligibility to Apply for IPO Through ASBA

To apply for an IPO using ASBA, you must have all the following:

• Valid Demat Account: You must have a Demat account wherein your shares will be held in electronic form.

• Bank Account with ASBA Services: Your bank should have ASBA services. Most of the big banks operating in India support ASBA.

• PAN Card: Applying for an IPO requires a valid PAN card.

• Sufficient Funds: Your account should have sufficient funds required to apply for an IPO.

How to Apply for IPO through ASBA (Online and Offline)

Online Process

• Login into your broker’s trading platform.

• Navigate to the IPO section and select the desired IPO.

• Fill out the details related to bid price, quantity, investor type, etc., and submit the UPI ID.

• Approve the ASBA request for blocking funds in your bank account and monitor the status of your IPO application.

Offline Process

• Visit the nearest branch of your bank and collect the IPO application form.

• Fill out the form with details related to the bid price, quantity, Demat account number, etc. Approve the mandate that allows your bank to block the funds required for IPO applications and submit them at your bank’s branch.

• Upon submission, the bank verifies the credentials and blocks funds in your bank account.

• Obtain an acknowledgment slip, which can be used to track your IPO application.

Advantages of Applying through ASBA

The advantages of applying for IPO through ASBA are:

• Interest on Funds: The blocked funds in your bank account earn interest until shares are allotted. 

• No Refund Hassles: Before ASBA was introduced, investors had to wait for refunds in case of non-allotment of shares as amounts were deducted at the time of application. In ASBA, the funds are released immediately as they were only blocked in the bank account. 

• No Additional Charges: ASBA applications do not have extra processing fees.

Conclusion

Applying for an IPO through ASBA is a safe and hassle-free process, wherein your money will be blocked until the shares are allocated. Moreover, investors don’t have to wait for a refund if the shares are not allotted and the funds continue to earn interest in their bank accounts. It is a SEBI-approved process that ensures hassle-free IPO investments. 

Whether applying for an IPO online or offline, ASBA has been a key component in the IPO application process due to its reliability and convenience. As IPOs witness a rise in participation by retail investors, ASBA has become a preferred method of payment in IPO applications.

Frequently Asked Questions (FAQs)