MUMBAI: The first public issue after retail investor payment was made mandatory through the Unified Payment Interface (UPI) platform in July-August, saw several thousand applications getting rejected. The second issue, which didn’t have much retail participation also reported difficulties investors faced in applying with UPI method.
SEBI, which had delayed the mandatory UPI – ASBA (Applications Supported by Blocked Amount) payment method for IPOs is now clear that this is the method that would stay in order to hasten the time between Initial public offering (IPO) and listing. The shorter time period would also mean investors get their blocked amount quickly depending on the shares they are allotted or not allotted in an IPO.
“Aimed at reducing the listing time for an IPO from T+6 days to T+3 days, SEBI (Securities and Exchange Board of India) has introduced the use of UPI with ASBA facility as a new payment mechanism. The implementation of this major initiative is happening in a phased manner so that operational issues are eased out over time,” said Ajay Tyagi, chairman, SEBI at a capital markets conference. Investors need to keep this in mind in case they are preparing for Indian Railway Catering and Tourism Corporation issue that is opening on Monday.
The difficulties investors faced in the last two issues have some lessons to offer. One, investors need to download the UPI app on their phones and activate it. Two, they need to authorise the transaction once the forms are uploaded by their brokers on the stock exchange platform.
Before that, they have to create a UPI ID, fill that in their form. After stock exchanges verify the investor details, the sponsor bank will send the request for blocking funds as in the ASBA method and the investor needs to authorise blocking of funds.While those who apply online and already have their bank accounts linked may not have an issue, this is particularly troublesome for those who continue to take the physical application route.
Brokers also pointed out that the UPI based application is a problem for minors, HUFs and families with multiple accounts but use a single phone numbers. “Minors and HUFs whose applications make substantial portion of “retail” category now cannot apply. Without addressing those issues, they have made UPI mandatory,” said one broker.
Minors need to have a debit card, and a mobile phone with UPI app to be able to apply. Two, if the Karta of HUF applies in his or her individual capacity, the HUF then may not be put in an application form if the account is linked to a single mobile number. Family members using the same phone number would also be restricted to one application. IPO applicants have to now plan in advance and prepare for the new regime if they don’t want to lose out.
Issues faced by investors
Investors need to download the UPI app on their phones and activate them. They need to authorise the transaction once the forms are uploaded