Brokers deny ASBA facility to IPO investors
Tuesday, 23 March 2010
MUMBAI, Mar 22 (PTI): The implementation of Application Supported by Blocked Amount (ASBA), an ambitious project by market regulator Securities and Exchange Board of India (Sebi), could suffer due to a lack of initiatives from brokers.
According to industry sources and from inferences drawn by calling customer service hubs of broking firms, brokers are denying ASBA facilities to investors in public issues without reservations.
Poor incentives and the fact that ASBA will kill their IPO-funding business are prompting brokers to dissuade or prevent investors from adopting this route, according to sources in broking circles.
Posing as a prospective IPO investor (empanelled with respective broking firms), this reporter dialled a few NBFC-attached broking houses in Mumbai, seeking to invest in upcoming public issues through the ASBA route.
While most brokers denied the request, a sales executive of 'Jammy Advisory Services' (name changed) said it was "better in the interest of investors" to come through the broker route.
"We don't offer ASBA facilities. But we can part-finance your IPO purchase at a low cost if you invest through us. The lumpsum money you have now can be invested in other stocks," the sales executive said, promising to return the call after checking with the credit team.
In IPO funding, the broking firm (through its NBFC) lends a sum of money (on margin kept) to the investor to invest in public issues. The investor is charged a 15-18 per cent interest on the loaned amount, which could be about 65-75 per cent of the margin kept with the broker.
The broker, to secure his loan, accepts a power of attorney (PoA) from the investor to operate demat account of the investor.
According to industry sources and from inferences drawn by calling customer service hubs of broking firms, brokers are denying ASBA facilities to investors in public issues without reservations.
Poor incentives and the fact that ASBA will kill their IPO-funding business are prompting brokers to dissuade or prevent investors from adopting this route, according to sources in broking circles.
Posing as a prospective IPO investor (empanelled with respective broking firms), this reporter dialled a few NBFC-attached broking houses in Mumbai, seeking to invest in upcoming public issues through the ASBA route.
While most brokers denied the request, a sales executive of 'Jammy Advisory Services' (name changed) said it was "better in the interest of investors" to come through the broker route.
"We don't offer ASBA facilities. But we can part-finance your IPO purchase at a low cost if you invest through us. The lumpsum money you have now can be invested in other stocks," the sales executive said, promising to return the call after checking with the credit team.
In IPO funding, the broking firm (through its NBFC) lends a sum of money (on margin kept) to the investor to invest in public issues. The investor is charged a 15-18 per cent interest on the loaned amount, which could be about 65-75 per cent of the margin kept with the broker.
The broker, to secure his loan, accepts a power of attorney (PoA) from the investor to operate demat account of the investor.