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Our Bureau

Mumbai, Sept. 25 The Securities and Exchange Board of India has decided to extend the ‘Applications Supported by Blocked Amount’ (ASBA) facility to rights issues. On a pilot basis, the facility will be offered for the rights issues of Tata Motors and Sadhana Nitro Chem, which open on September 29.

ASBA facility was introduced recently to help investors get faster refunds in the case non-allotment of shares in IPOs.

The facility will be available to all shareholders. The ASBA facility will co-exist with the current process wherein cheque/demand draft is used as mode of payment, SEBI said in a press release.

According to SEBI, the shareholder of the issuer company should hold the shares in dematerialised (demat) form in order to apply though the ASBA method.

This process will now allow the shareholders of the issuer company (as on the record date of the issue) to apply through the ASBA process by sending in their applications to the Self Certified Syndicate Bank (SCSB).

As on August 29, there are ten SCSBs under the ASBA process. ICICI Bank, HDFC Bank, SBI, IDBI Bank, Corporation Bank, Union Bank, Axis Bank, Kotak Mahindra Bank, State Bank of Bikaner and Jaipur and Bank of Baroda are the banks under this process.

The SCSB will then block the application amount in the bank account of the shareholder. The application money will remain blocked in the bank account till the Registrar instructs the bank to release the funds. The Registrars will confirm the applications and finalise the basis of allotment.

SEBI had earlier introduced this supplementary mode for applying to initial public offers. The first IPO to use this facility was the 20 Microns issue which opened on September 8.

The 20 Microns issue was subscribed a total of 4.29 times and the retail portion of the issue was subscribed a total of 10.52 times. Close to 10 per cent of retail applications received for this issue was through the ASBA method.

The ASBA method for the rights issue would be available to both retail investors as well as financial institutions, unlike for the IPOs where the ASBA method was available only for the retail investors.

More Stories on : Rights Issue | Regulatory Bodies & Rulings

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