How to Apply for an IPO Through ASBA?

There are different ways for investors to apply for shares when a company carries out an Initial Public Offering (IPO). In India, one of the most commonly used methods is ASBA (Application Supported by Blocked Amount), a straightforward procedure that enables investors to apply for an IPO without having to pay the application amount immediately.

Under ASBA, the amount required for the application will be held in your bank account until the IPO allotment process has been completed. The money is deducted only if shares are allotted to you. If you do not receive an allotment, the blocked amount is released.

What is ASBA?

ASBA means Application Supported by Blocked Amount. It is an IPO application facility provided by SEBI, through which an investor can apply for public issues by blocking the needed amount in their bank account.

Let us say that you have applied for an IPO with a value of ₹50,000. Rather than making a payment of ₹50,000 to the company, your bank will block the amount in your bank account. During the time the amount is blocked, you will be able to earn interest on the amount in your bank account.

In case of allotment of shares, the blocked amount will be debited. Otherwise, the blocked amount will be released.

How Does ASBA Work?

The process of ASBA is quite simple. To begin with, you require an account with a bank that offers ASBA services. Here, the ASBA facilities could be online ASBA facilities or physical ASBA facilities provided by banks.

During the application process, you have to fill out information such as the name of the IPO, number of shares, bid price, along with your PAN and demat account details.

Once you submit the application, your bank will block the necessary amount in your account. This amount is not transferred to the company immediately.

Once the process of IPO is complete, the shares are allotted to you depending on the applicable allotment process. Once you receive the shares, the relevant amount is deducted from your account. The remaining blocked amount, if any, is then released back.

Steps to Apply for an IPO Through ASBA

Here is a simple step-by-step process:

Check the IPO details

Before applying, check the IPO opening and closing dates, price band, lot size, and other issue details.

Log in to your bank account

Use your bank's internet banking platform if it offers online ASBA.

Select the IPO

Go to the IPO or ASBA section and select the issue you want to apply for.

Enter your details

Provide your PAN, demat account information, bid quantity, and price. Make sure these details are correct.

Submit the application

Review the information and submit the IPO application.

Amount gets blocked

Your bank blocks the application amount in your account.

Wait for allotment

After the allotment process, the amount for the allotted shares is debited, while the unused amount is released.

Also Read: How to Invest in an IPO?

Benefits of Applying Through ASBA

One major benefit of ASBA is that your money remains in your bank account until it is actually required. You do not have to make an upfront payment to the company.

It also reduces the need to worry about getting your money refunded if you do not receive shares. The bank simply releases the blocked amount.

Another benefit is convenience. Investors can often submit ASBA applications through internet banking, making the process easier than visiting a bank branch.

However, investors should make sure they have enough funds in their account when submitting the application. If the required amount is not available, the application may not be processed successfully.

FAQs

What is ASBA in an IPO?

ASBA stands for Application Supported by Blocked Amount. It allows investors to apply for an IPO while keeping the required money blocked in their bank account until the allotment process is completed.

Is money debited immediately when applying through ASBA?

No. The application amount is generally blocked in your bank account. It is debited only for the shares allotted to you.

What happens if I don't get IPO shares?

If you do not receive an allotment, the amount blocked for the IPO is released back to your bank account.

Can I apply for an IPO through internet banking using ASBA?

Yes, eligible investors can apply through the internet banking facility of participating banks that offer online ASBA services.

Can I cancel an IPO application made through ASBA?

Cancellation or modification depends on the applicable IPO rules and the stage of the issue. Investors should check the issue documents and their bank's ASBA process to confirm the applicable conditions.