Securities Board of Nepal (Sebon) has formally implemented a new system named Applications Supported by Blocked Amount (ASBA), which is expected reduce hassles for people while applying for Initial Public Offerings (IPO) and Further Public Offerings (FPO).

ASBA came into operation on Sunday, with Forward Community Microfinance doing its IPO under the system.

With this, investors do not have to stand in long queues as the new interface allows them to apply for primary shares through banks in which they have accounts. ASBA basically blocks the money deposited in bank accounts of investors who wish to purchase shares issued through IPOs and FPOs. The fund is blocked until the stocks are allotted.

Sebon Spokesperson Niraj Giri said the system benefits both financial institutions and general public. “While banks can hold depositors’ money for a long time, investors do not have wait in long queues and they will also get interest on their money for the period.”

On Sunday, Forward Community Microfinance issued 600,000 primary shares under the system. Of the total shares, 540,000 units have been issued for the general people, 30,000 units for its staffers and the rest of 30,000 shares for institutional investors. Individual investors can apply for a minimum of 50 units while the maximum limit is 3,000 units.

The microfinance, which has received “grade four plus” credit rating from ICRA Nepal, has a paid-up capital of Rs140 million. With the IPO, its paid-up capital will reach Rs200 million. The ratio of promoters to public shares will stand at 70:30.

Sebon issues licences to A and B class financial institutions to operate ASBA system. As of now, it has permitted 34 such financial institutions. Giri said interested investors can now apply through 1,761 branches of these financial institutions located across the country. 

To use ASBA, investors need to apply through their accounts maintained in banks permitted for the platform. The banks then forward the documents to the issue manager on behalf of the investors.