What is ASBA? Full Form, Benefits and Detailed Application Process

What is ASBA? Full Form, Benefits and Detailed Application Process

2 January, 2025

Synopsis

  • SEBI developed by ASBA to simplify public offerings.
  • In ASBA, your application money remains in your bank account until the allotment process is complete.
  • The funds simply remain blocked in your bank account.

Applications Supported by Blocked Amounts (ASBA) is a process developed by Securities and Exchange Board of India (SEBI) to simplify the application process for Initial Public Offerings (IPOs) and Follow-on Public Offerings (FPOs). This mechanism allows investors to apply for shares while ensuring that the application funds are blocked in their bank accounts until the shares are allotted.

What is ASBA?

It is an alternative mode of payment in which the application money remains in the investor's bank account and is not transferred to the issuer until the allotment process is completed. This system eliminates the need for investors to make upfront payments for IPOs.

Benefits of ASBA

ASBA offers several significant benefits for investors, making it an attractive choice when applying for IPOs or rights issues.

  • Reduced Fund Blocking- With ASBA, the funds required for your application remain blocked in your bank account, minimising the duration of the fund lock-in period. Unlike traditional methods, where funds are transferred upfront, ASBA ensures that you retain access to your funds until the shares are allotted.

  • No Need for Refunds- One of the key advantages of ASBA is the elimination of the need for refunds. With ASBA, your funds remain blocked until the shares are allotted or your application is withdrawn. If your application is unsuccessful or withdrawn, the blocked amount is released without the need for processing the refund.

  • Earnings on Blocked Amount- With ASBA, investors can continue to earn interest on the blocked amount until the shares are allotted. This ensures that the funds are not sitting idly in your account.

  • Flexibility and Convenience- ASBA provides flexibility and convenience compared to traditional application methods. With ASBA, you can apply for multiple IPOs or rights issues simultaneously through a single application. Additionally, modifying or withdrawing your application is hassle-free, giving you greater control over your investment decisions.

IPO Application Process by ASBA

To help you navigate through the ASBA application process, here is an outlined step-by-step guide.

  • Obtain a Unique Application Number (UAN)- You start by obtaining a UAN from your bank, which will serve as a reference for all your ASBA applications.

  • Select the Right Issue and Options- Next, research and analyse the IPOs or rights issues available for investment. Consider factors such as the company's financials and growth potential and select the issues you wish to apply for.

  • Fill the ASBA Application Form- After that, you collect the ASBA application form from your bank or download it from their website. Then, you fill in the necessary details, including personal information, bid details and the UAN.

  • Verify and Submit the Application- Double-check all the information provided in the application form for accuracy. Once verified, submit the ASBA application to your bank.

  • Block the Amount in the Bank Account- Your bank will block the application amount in your bank account, ensuring the funds are reserved for the IPO or rights issue. This secures the funds until the allotment process is completed.

Some insights

  • Research the company and its financials- Before investing in an IPO, it is important to thoroughly research the company's business model, financial performance and growth prospects.

  • Understand the ASBA process- You must familiarise yourself with the ASBA process, which involves blocking a specific amount of funds in your bank account for the IPO subscription.

  • Choose the right IPOs- You should typically select IPOs that align with your investment goals, risk appetite and time horizon. Part of this involves looking for companies with strong fundamentals and good growth potential.
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Investors today have access to various methods for applying to IPOs, FPOs, DPOs and rights issues. One such method gaining popularity is ASBA. Hence, it is important to develop a thorough understanding of ASBA and learn how to effectively leverage its advantages. Open a Demat Account online with HDFC Securities today and experience easy access to your investments.

*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not an investment recommendation. Investments are subject to market risks and other risks.

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