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Showing posts with label IPO Gyan. Show all posts
Showing posts with label IPO Gyan. Show all posts

Thursday, November 9, 2017

ASBA Full Form & How It Works While Applying For IPOs?

What is ASBA?

ASBA full form and its process in IPO
Do you know ASBA full form is Application Supported by Blocked Amount, ASBA is a new investor-friendly way to apply for initial public offerings (IPOs). It is an interface for banks to participate in the process of IPO payments as proposed by the capital markets regulator, the Securities and Exchange Board of India (SEBI). The objective of introducing ASBA is to ensure an investor's funds leave his bank account only on allotment of shares in public issues.

The ASBA process also ensures that only the required amount of funds is debited to the investor's bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated. The banks participating in an IPO process can upload the bids with respect to their customers into the electronic books of BSE and NSE. The interface facilitates not only the controlling branch but also the designated branches of the banks to directly upload the bids into the electronic books.

Also Read: Potential Multibagger Stock 2019 Report - Free Download

ASBA provides an alternative mode of payment in issues whereby the application money remains in the investor's account till finalisation of basis of allotment in the issue. The process facilitates individual investors bidding at cut-off, with single option, to apply through self-certified syndicate banks (SCSBs), in which the investors have accounts. SCSBs are banks that meet the conditions laid down by SEBI.

Role of SCSB
  • Accept application
  • Verify application
  • Block funds to the extent of bid payment amount
  • Upload the details on the web-based bidding system of the exchange
  • Unblock once the basis of allotment is finalised
  • Transfer the amount for allotted shares to the issuer
This will co-exist with the current procedure of investors applying through sub-syndicate and syndicate members, with a cheque as a payment instrument. The ASBA is an application containing an authorisation to block the application money in the bank account to subscribe to an issue. If an investor is applying through ASBA, his application money will be debited from the bank account only if his application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn.

Under the ASBA facility, investors can apply to any public or rights issues by using their bank account. Investor have to submit the ASBA form (available at the designated branches of banks acting as SCSB) after filling in details such as name, PAN number, demat account number, bid quantity, bid price and other relevant details to the branch with an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. The investor should ensure the details that are filled in the ASBA form are correct. Otherwise, the form is liable to be rejected.

In case if you applied in IPO of recently listed Coal India through ICICI direct or any other SCSBs, you might experienced that applied amount was always visible in your available balance but was not available to withdraw (blocked amount)because it could not be used by you untill the IPO allotment process is over. This is possible only because of ASBA facility.

Advantages of applying through ASBA facility

1. No need for cheque payment: The investor need not pay the application money through a cheque. He has to submit the ASBA which accompanies an authorisation to block the amount in the bank account - to the extent of the application money.

2. Refunds don't arise: The investor does not have to bother about refund, as in ASBA only that much money - to the extent required for allotment of securities - is taken from the bank account, only when his application is selected for allotment after the basis of allotment is finalised.

3. Interest ensured: The investor continues to earn interest on the application money as it remains in the bank account, which is not the case in other modes of payment.

4. Simple form: The application form is simpler. The investor deals with a known intermediary - his own bank. An investor who is eligible for ASBA has the option of making an application through the ASBA, or through the existing facility of applying with a cheque.

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Frequently Asked Questions on ASBA (Source: NSE)

1. What is “ASBA”?

ASBA means “Application Supported by Blocked Amount”. ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed.

2. Detailed procedure of applying in IPO through ASBA.

Under ASBA facility, investors can apply in any public/ rights issues by using their bank account. Investor submits the ASBA form (available at the designated branches of the banks acting as SCSB) after filling the details like name of the applicant, PAN number, demat account number, bid quantity, bid price and other relevant details, to their banking branch by giving an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. Investors shall ensure that the details that are filled in the ASBA form are correct otherwise the form is liable to be rejected.

3. Who can apply through ASBA facility?

SEBI has been specifying the investors who can apply through ASBA. In public issues w.e.f. May 1, 2010 all the investors can apply through ASBA. In rights issues, all shareholders of the company as on record date are permitted to use ASBA for making applications provided he/she/it: _ is holding shares in dematerialized form and has applied for entitlements or additional shares in the issue in dematerialised form; _ has not renounced its entitlements in full or in part; _ is not a renouncee; _ who is applying through blocking of funds in a bank account with the SCSB

4. Where can the investors get the ASBA forms for any issue?

The investor can generate e-form from NSE website for any issue. The same link is also available on BRLM’s (Book running lead manager) website also.

5. What advantage an investor has in applying through ASBA?

Applying through ASBA facility has the following advantages: (i) The investor continues to earn interest on the application money as the same remains in the bank account. (ii) The investor does not have to bother about refunds, as in ASBA only that much money to the extent required for allotment of securities, is taken from the bank account only when his application is selected for allotment after the basis of allotment is finalized.

6. Is it mandatory to apply through ASBA only? 

It is mandatory for all public issues opening on or after January 01, 2016.

7. Where should I submit my Application Supported by Blocked Amount (ASBA)? 

Investor may submit application form to his trading member or to a SCSB.List of Self Certified Syndicate Banks (SCSBs) and their designed branches i.e. branches where ASBA application form can be submitted, is available on the NSE website and on the website of SEBI (www.sebi.gov.in). The list of SCSB would also be given in the ASBA application form.

8. What is Self certified Syndicate Bank (SCSB)? 

SCSB is a bank which is recognized as a bank capable of providing ASBA services to its customers. Names of such banks would appear in the list available on the website of SEBI and the same is also available on NSE website.

9. Can I submit ASBA in any of the banks specified in the list of SCSBs? 

No, ASBA can be submitted to the SCSB with which the investor is holding the bank account.

10. How many applications can be made from a bank account? 

Five (5) applications can be made from a bank account per issue.

11. Am I required to submit ASBA only physically?

No, you can either fill up the physical form and submit the same to the SCSB/Trading member or apply electronically/online through the internet banking facility/online facility (if provided by your SCSB/Trading member).

12. Who should I approach if I find that I had given all correct details in the ASBA form, but application has been rejected stating wrong data?

You have to approach the concerned SCSB for any complaints regarding your ASBA applications. SCSB is required to give reply within 15 days. In case, you are not satisfied, you may write to SEBI thereafter at the following address:
Investor Grievance Cell, Office of Investor Assistance and Education,
Securities and Exchange Board of India
Plot No.C4‐A,'G' Block, Bandra Kurla Complex, Bandra(East), Mumbai: 400051
Tel: +91‐22‐26449000 / 40459000 Fax: +91‐22‐26449016‐20 / 40459016‐20

13. Whether my bank account will be blocked or only the amount to the extent of application money is blocked? 

No. the entire bank account will not be blocked. Only the amount to the extent of application money authorized in the ASBA will be blocked in the bank account. The balance money, if any, in the account can still be used for other purposes.

14. If I withdraw my bid made through ASBA, will the bank account be unblocked immediately?

If the withdrawal is made during the bidding period, the SCSB deletes the bid and unblocks the application money in the bank account. If the withdrawal is made after the bid closure date, the SCSB will unblock the application money only after getting appropriate instruction from the Registrar, which is after the finalization of basis of allotment in the issue.

15. Do I necessarily need to have a DP account with the SCSB where I intend to submit the ASBA application?

No. Investors need not necessarily have their DP account with the SCSB, where they are submitting the form.

16. Can I submit my ASBA application to a broker?

Yes. You can submit the ASBA application to your broker.

17. Who is responsible for errors in the data uploaded in the electronic bidding system in case of public issue?

In case there is an error in the data furnished in the application form submitted by investor, the investor shall be responsible. In case there is an error by SCSB/Trading member in entering the data in the electronic bidding system of the stock exchanges, the SCSB/Trading member shall be responsible.

18. Will I get the acknowledgement of receipt for applications submitted through ASBA?

Yes. The SCSB/Trading member shall give a counterfoil as an acknowledgement at the time of submission of ASBA and also the order number, generated at the time of uploading the application details, if sought by the investors in case of need.

19. What happens when the issue fails/is withdrawn?

In case the issue fails/withdrawn the SCSB shall unblock the application money from the bank accounts upon receiving instructions from the Registrar.

20. In case of any complaints regarding ASBA application whom can I approach?

In case of any complaints the investor shall approach the bank, where the application form was submitted or the Registrars to the issue.

21. In case a person is having bank account with a branch, for example, at Kolkata can he submit IPO application through ASBA at a branch of the bank in Guwahati.

Yes, this can be done provided that your bank have core banking facility and the ASBA form is submitted at a branch which is identified as designated branch by the bank.

Friday, July 22, 2011

Subscribe to L&T Finance IPO at cut-off Price


The L&T Group's financial services subsidiary L&T Finance Holdings that controls five separate entities will hit the capital markets on July 27 to mobilise up to Rs 1,245 crore from the primary markets by diluting up to 17% of its stake.

The issue, which opens on July 27 and closes on 29th, will be priced in the range of Rs 51 to 59. This is the first public issue from the house of L&T since the parent's listing way back in 1950.

L&T Finance Holdings Ltd (LFHL) is promoted by Larsen & Toubro Ltd ("L&T") one of the leading business corporate in India, with interests in engineering, construction, Electrical & Electronics manufacturing and services, IT and financial services.

LFHL is a financial holding company of L&T offering a wide & diverse range of financial products and services across the corporate, retail and infrastructure finance sectors. It is registered with the RBI as a Systemically Important Non-Deposit Taking Non-Banking Financial Company (NBFC). Main operations of LFHL is under four business groups, Infrastructure Finance, Retail Finance, Corporate Finance and the Investment Management Group.

Investment Rationale

1. Strong parentage and brand equity of L&T:

L&T brand is one among the most well trusted & valued brands in India which provides a significant competitive advantage, particularly in attracting new customers and talent and accessing capital. L&T enjoys a high level of trust, admiration and esteem with the general public.

2. Diversified and balanced mix of high growth businesses:

LFHL has well diversified its business model covering variety of many complementary, high growth business segments across four core business groups, including infrastructure, construction equipment, transportation equipment, rural products, microfinance, corporate loans and leases, supply chain finance, capital markets. Many of its segments, such as agricultural and rural development, infrastructure and energy have been identified by the GOI as focused areas under its latest Five Year Plan. We believe that this balanced mix of high growth businesses has provides the ability to produce a steady, growing revenue stream.

3. Strong distribution network:

The Company has established presence in 23 states in India. As on date it has 890 points-of presence across India, comprising 113 branch, 330 meeting centers, 33 Sales points and 414 customer care centers across all business groups and segments. This pan-India presence allows LFHL to cater to a large customer base across various business segments, from retail customers and small and medium enterprises to large companies.

4. Good financial and capital position:

LFHL has strong credit ratings from both CARE and ICRA. On Feb, 2011, L&T Finance had a CARE rating of AA+, ICRA rating of LAA+ and L&T Infra a CARE rating of AA+ (which offer high safety for the timely servicing of debt obligations and carry very low credit risk). These credit ratings, coupled with strong brand equity enables LFHL to access funds at competitive rates from a wide variety of market participants across a diverse array of products, including secured and unsecured loans from banks and financial institutions, commercial paper and long term debentures in the institutional and retail markets.

Saral Gyan Recommendation

When compared with its peers in the same segment on P/BV basis Shriram Transport and M&M Finance are trading at 3.2x and 2.8x as on date, while LFHL has arrived with competitive pricing model ranging with a price band of Rs 51–59 which is below its peers considering the post IPO money.

LFHL is a pure play in the burgeoning high growth business segments like infrastructure financing and construction equipment, transportation equipment financing space. We are positive on the business outlook of diversified and balanced mix of LFHL businesses.


With the above rationale like Strong brand, track record and management expertise, we believe IPO will oversubscribe by atleast 20 times in retail category and investors can get 30% listing gains. Long term investors need to stay invested for decent returns in long term.

Saral Gyan Team recommend investors to subscribe for LFHL IPO at cut off price of Rs. 59.

Thursday, October 21, 2010

Coal India IPO on Fire - Oversubscribed 11.85 Times

Rs 15,000-cr issue gets bids worth Rs 1,83,000 crore; IPO gets 11.85 times oversubscription so far; Retail quota oversubscribed; FIIs put in maximum bids.

The mega IPO of Coal India Ltd (CIL) is heading for a thumping success for the government. The 15,000 crore issue has attracted bids worth a record Rs 183,000 crore so far, indicating an oversubscription level of 11.85 times. The issue received huge response from qualified institutional investors (QIBs), especially foreign investors (FIIs). Even the retail portion which will close on Thursday has already been oversubscribed after a sluggish opening on Monday.

According to investment banking sources, the good response to the Coal India issue is expected to encourage other public sector companies like Hindustan Copper, MOIL, Power Grid and Indian Oil to come out with issues in the coming months. With the retail quota in CIL IPO getting oversubscribed, the apprehension among investment bankers about the IPO has evaporated. Many PSU issues earlier this year evoked luekwarm response from retail investors. "By the time the issue closes on Thursday, the value of total bids would have crossed Rs 200,000 crore. This is a record in the IPO market," said a banker.

While there were 63.16 crore CoaI India shares up for sale, bids came for 748.64 crore shares, showing a subscription level of 1,185 per cent. As Wednesday was the last day for submitting QIB applications, there were frenzied bidding for the IPO. Domestic institutions who were keeping a low profile till Tuesday swung into action today and put in bids for 180.7 crore shares worth Rs 45,500 crore. FIIs put in bids for 493.3 crore shares valued at Rs 120,000 crore. As per the BSE data, the QIB quota which closed on Wednesday was oversubscribed 24.7 times.

According to the NSE, the non-institutional quota (including companies and HNIs) has been oversubscribed 289 per cent (2.89 times). The retail investor quota has already witnessed 110 per cent oversubscription. While 19.86 crore shares are on offer for retail investors, bids for 21.80 crore have already come in by Wednesday. The retail portion is expected to get further good response on Thursday, bankers said. Coal India's IPO is the largest ever by an Indian company so far. "The IPO has achieved several purposes. It has met with good response. Secondly, it has fired up the IPO market. It has also diverted money, mainly FII money which was earlier going directly to the stock market. When the IPO opened, FII inflows to the stock market dropped significantly," said a market source.

However, the huge response to the Coal India IPO sucked liquidity away from the stock market. As a result, Dalal Street declined for the second straight session on Wednesday with China's key interest rate hike and a strengthening dollar adding to the investors' nervousness. The Bombay Stock Exchange's 30-share barometer Sensex, which had lost 186 points on Tuesday, ended the day at 19,872.15, down another 110.98 points, or 0.59 per cent — its lowest close since September 29, when the index had settled at 19,956.24. On the National Stock Exchange, the 50-share Nifty Index fell below the 6,000 level to close at 5982.10 points, down over 45 points. The Sensex decline was in line with sluggish Asian markets, as sudden rate hike on Tuesday by the Chinese central bank raised apprehensions.

Monday, September 27, 2010

Subscribe to Techpro Systems at Upper Price Band of 355

The initial public offer of Tecpro Systems, a material handling company, has opened for subscription.

The company is offering 75.5 lakh shares through this issue and a price band is at Rs 340-355 a share. The issue will close for subscription on September 27 for QIB bidders and on September 28 for non-QIB bidders. Bids can be made for a minimum of 15 equity shares and in multiples of 15 shares thereafter.

Techpro System with its strong presence in bulk handling material is one of the major beneficiaries of strong investment in the core sector of power, steel, port etc. Pertinently, the power sector alone is expected to add 40000 MW by FY12, which will turn out to be an emerging opportunity of more than Rs 17000 crore. Techpro System continues to enjoy highest EBIDTA margin in Industry (15%) & PAT Margin (7.5%).

Techpro Limited top-line has grown at a CAGR of 70% from FY06-FY10; while operating profits and PAT have grown at a CAGR of 89.7% and 85.8% from FY06-FY10 respectively. Company’s profitability has grown more than its top-line exhibiting strong operating performance and maintaining healthy balance between debt -to- equity helps the company in delivering superior returns on equity. In terms of margin company’s operating margin and net profit margin stood at 15.4% and 7.4% way above industry peer average of 11.9% and 4.2% during FY10 respectively.

In terms of Return on equity company reported a average RoE of 35% (FY08-FY10) as compared to peer average of 23% (FY08-FY10). On the higher price band of Rs 355 the stock is trading at 16.5x FY10 diluted EPS of Rs 21.5 while peer average is 17.3x FY10 basis.

Given the strong performance and superior return ratios company should trade at a premium to its peers, hence we recommend investor to subscribe to the stock at higher end of price band of Rs 340-355.

Issue is expected to get overwhelming response from retail, non institutional investors as well as QIBs and can be easily oversubscribed by more than 20 times. Investors can easily expect listing gain of 15% to 20% from Tecpro Systems.

Sunday, September 12, 2010

Initial Public Offering - IPO

An Initial Public Offering - IPO is the first sale of a corporation's common shares to public investors.

The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, they also impose heavy regulatory compliance and reporting requirements.

The term only refers to the first public issuance of a company's shares; any later public issuance of shares is referred to as a Secondary Market Offering.

A shareholder selling its existing (rather than shares newly issued to raise capital) shares to public on the Primary Market is an Offer for Sale.

IPOs generally involve one or more investment banks as "underwriters." The company offering its shares, called the "issuer," enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares.

A large IPO is usually underwritten by a "syndicate" of investment banks led by one or more major investment banks (lead underwriter). Upon selling the shares, the underwriters keep a commission based on a percentage of the value of the shares sold.

Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the IPO, take the highest commissions. The lead underwriter in the main selling group is also the lead bank in the other selling groups. Because of the wide array of legal requirements, IPOs will also involve one or more law firms with major practices in securities law.

The offering will include the issuance of new shares, intended to raise new capital, as well the secondary sale of existing shares. However, certain regulatory restrictions and restrictions imposed by the lead underwriter are often placed on the sale of existing shares.

Public offerings are primarily sold to institutional investors, but some shares are also allocated to the underwriters' retail investors.

Monday, May 24, 2010

Understanding IPOs

IPOs or initial public offerings are among the most exciting and closely followed events in the stock market. Although the excitement has cooled somewhat since the frenzy of the late 1990s when anyone with an idea that involved the word “Internet” could raise million of Rs., the same cycle was experienced in case of "Real Estate" companies before 2008 market crash, however, IPOs still raise the market’s collective blood pressure.

IPOs mark the transition of a company from a privately held to publicly held firm. Every incorporated business issues stock, however there are usually just one, two or a few stockholders, since most businesses start out small.

These companies can’t sell stock to the general public beyond a small number of investors. If a company wants to raise a significant amount of capital without going into debt, one of the ways is to sell stock to the public.

SEBI

Before a company can do this, it must register with the SEBI (Securities and Exchange Board of India) and prepare a public offering. This offering includes a prospectus and a number of other legal documents.

The prospectus is the accounting and legal document. Everything good and especially bad or risky about the company, the senior staff, and majority stockowners is reported in the prospectus for the world to see.

The company contracts with an investment bank or banks to underwrite or handle distribution of the shares it wants to sell. The underwriters and the company agree on an opening price of the stock based on earnings or potential earnings and growth, but also what they think the market will bear.

The investment banker then offers bundles of the stock to major broker clients who then offer first chance purchase rights to their big retail and institutional customers, with everyone along the way taking a markup of some degree.

By the time most investors get a chance to buy the shares in the open market, they have gone through several hands already and, if the stock is hot, the price is substantially above the initial offering price the company agreed to in the beginning.