Gone are those days when you had to fill a paper application form, write a cheque or provide cash and submit the form to your broker to apply for an IPO. Now, all you need is an Internet Banking facility with any of your bank accounts. This process is called ASBA (Application Supported by Blocked Amount) and it significantly reduces the hassle of applying to an IPO. For this example, I’ll tell you how to apply for an IPO via SBI’s Internet Banking, Onlinesbi (this also applies for other associate banks’ of SBI as the interface is the same).
SBI IPO via ASBA
As a prerequisite, needless to say, you need to have a Demat account with any brokerage house (just Demat account is sufficient; you don’t need to have a trading account) and have sufficient balance in your bank account.
Log in to your Onlinesbi account and go to e-Services and find IPO (Equity) – ASBA. If there are any live IPO’s, you can simple proceed to apply to it by filling the required boxes, viz, your Name (as given in your DP account), PAN, Depository service (NSDL or CDSL), DP ID and Client ID.
Once you fill these details, you can save these details under a nickname so that you can quickly recall these details the next time you apply for an IPO.
In the Bidding fields, enter your Bid quantity (quantity should be in multiples of required denomination) and Bid amount per share. There is also an option of Cut-off, which when selected, will allot you shares at final allocation price or cut-off price. When you select cut-off price, you will hence not have the option to enter any specific bid amount. This will make you eligible to be in a position to receive some shares (if at all) regardless of the final price selected.
For any IPO, there is a price range, say Rs.100 to 120. When the issue gets oversubscribed, normally, the final issue price will be decided as Rs.120 per share (retail investors will have further discount). So if you apply at cut-off price, you are essentially bidding at Rs.120 per share. Those who bid anything less than Rs.120, say, Rs.115 per share will not be eligible for allocation.
Similarly, when the issue is not fully subscribed, the final allocation price will be decided based on the average bid amount. Say if its decided as Rs.115 per share, you will be considered for allotment if you bid at cut-off where as you will not be considered for allotment if you bid anything less than Rs.115.
But do note that bidding at cut-off will NOT guarantee you share allocation. It just makes you eligible to stand in the queue. Allocation may be done on a first come first serve basis or based on a electronic draw or some other system.
You can only submit one bid if you bid at cut-off price while you can submit up to 5 bids if you bid using specific amount.
Just to let you know, most retails customers bid at cut-off prices and for highly popular IPO’s it makes no sense to bid at anything other than cut-off price.
Lien amount, IPO Allocation and refunds
Once you submit your application, the amount will be blocked as Lien amount. You cannot withdraw this amount till the date of allotment but you will continue to earn interest over this lien amount from your bank. This is a huge advantage if you bid with higher amounts.
On the allocation date, if you are allotted any shares, the corresponding amount will be debited from your lien amount and the rest will be credited back to your normal bank account. Many people ask for IPO refund, but there is no refund in ASBA as the amount is not taken out of your account at any point of time until and unless you are allotted shares. In other words, till the time of allotment, your amount stays with you, so there’s no question of refund with ASBA. You only pay for what you are allotted.
Previously, during paper application days, investors who were allotted only some shares out of their total application had to wait for days, even months, to get their refund. Now, it happens on the same day as the allotment happens.
ASBA without Internet Banking facility
You can apply to IPO’s via ASBA even if you don’t have Internet Banking facility. You can visit your bank and fill a paper ASBA form and submit it there. Or, you can visit NSE or BSE site and go to IPO section and apply online there. Here, you will need to provide your bank details, such as your A/C number, IFSC code along with your DP account details and your IPO bidding details.
You will get same benefits as when you’re applying via Internet Banking.