sebi: Sebi: IPO bids only if money blocked in a/c

MUMBAI: Markets regulator Sebi on Monday said that only those applications in public offers in which the required money is blocked in investors’ bank accounts would be uploaded onto the exchanges’ platform and counted as valid. The move is aimed at reducing the menace of false applications, which were especially seen in a large number of recent IPOs. In these, bids were placed but investors didn’t allow blocking of money in their accounts by authorising UPI transactions.
Currently, in every IPO, the investor first applies in the offer through online bids put through his broker. Once the application is accepted on the exchange, a UPI authorisation link is sent for approval. After the investor approves the UPI authorisation code, funds equivalent to the application money is blocked in the investor’s bank account. This blocking is called ASBA (application supported by blocked amount). Those who can’t use UPI are also allowed by depositing an ASBA form with their banks through their bidding broker.
In several IPOs recently, a large number of investors bid in offers but didn’t authorise the UPI link. This falsely inflated the total number of applications in the IPOs. Such bids were rejected. In the Rs 21,000-crore LIC IPO, about 20 lakh applications were rejected, mostly for non-authorisation of ASBA through UPI mode.
From September 1, all applications in public issues will be processed only after the application money is blocked in the investor’s bank accounts, Sebi said on Monday. “Stock exchanges shall accept the ASBAs in their electronic book-building platform only with a mandatory confirmation of the application monies blocked,” the regulator said. This will be applicable for all categories of investors – retail, qualified institutional buyers, non-institutional investors and other reserved categories and also for all modes through which the applications are processed.
In IPOs, often the number of times an offer is subscribed and the number of applications induce other investors to come in and bid. This creates a vicious cycle of a higher numbers of bids and subscription amounts that induce more investors, which in turn leads to even more bids and subscriptions. However, some unscrupulous intermediaries were manipulating the system through the UPI authorisation process. And Sebi’s directive would put a stop to this, traders said.


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