Securities Board of Nepal (Sebon) is making final preparations to implement the “Applications Supported by Blocked Amount” (ASBA) system to eliminate hassles that investors face while filing applications for share subscription.

ASBA refers to an application mechanism for subscribing to initial public offers (IPO). The system ensures that the applicant’s money remains in his/her bank account until the shares are allotted. Indian stock market regulator Securities and Exchange Board of India (Sebi) had first introduced the system for retail investors in 2008.

Sebon Spokesperson Niraj Giri said the new system will be implemented within three months.

“The new system will reduce the time taken for processing IPOs and clearing or returning amounts collected during IPOs,” said Giri. “We are currently holding talks with bankers and institutions on effective implementation of the system.”

The system allows investors to temporarily block their bank accounts for share purchases.

After finalising the allotment, the issue manager notifies the customer’s bank to debit the account as per allotted quota. In case of withdrawal or unsuccessful application, the account is unblocked. During the time frame, the customer will continue to earn regular interest.

In the case of right’s issue, the application money is debited after the registrars concerned file details to the banks. Under this new system, certain designated banks—Self-Certified Syndicate Banks (SCSB)—will be allowed to offer the facility to the applicants.

Sebon is yet to decide the number of banks to be selected as SCSBs. “We will hold meetings with commercial banks and call for applications after the final decision on ASBA is passed,” said Giri.

The board has finalised a list of delegates—merchant bankers and board employees—who will travel to India to prepare a report on effective implementation of ASBA. After that, the board will implement the system in the Nepali securities market.  

ASBA will co-exist with the current system of IPO subscription through cheques. “Investors will benefit because they will not be required to pay anything upfront,” said Prakash Tiwari, analyst and manager at Hathway Investment, a portfolio investment company. “Issues such as delay in receipt, delay in credit, misplacement of refund orders and time and costs involved in receiving refunds would be eliminated in the new system.” To apply through the ASBA, the applicant will be required to submit an application to the SCSB clarifying the “to-block-amount” which matches the bid.

According to Giri, the traditional mode of cheque payment creates unnecessary hassles and time delays. Such concerns would be addressed by the new system and the transparency of the share allotment will also be enhanced.

Nepse jumps 18.88 points

KATHMANDU: The Nepal Stock Exchange (Nepse) jumped 18.88 points on Sunday. The market quickly escalated to 1688.31 points during the first trading hour and saw slight fall before closing at 1685.17 points. Out of the nine trading groups, three—Commercial Banks, Development Banks and Finance Companies—posted gains. The market observed a total turnover of Rs1.60 billion with, 6,393,582 shares being traded. The insurance sector saw a decline on 30.17 points on Sunday. Market regulators are pessimistic about the expected returns from the insurance sector and fear that investors might suffer losses in upcoming days. “Market expectations are unrealistic and the earning indicator does not justify the current prices of stocks of insurance companies,” said Sebon Spokesperson Niraj Giri. “The price-to-earnings ratio of those companies is hovering over 65 which means the shares are highly overvalued.” (PR)