What Is ASBA in an IPO? Explained Using Jio as an Example

Friends, I was looking at this Jio IPO ad in the newspaper.

Mukesh bhai has written an interesting thing in it.

He says he will take money from investors through ASBA, not in cash, not by checkbook. So what is this ASBA system? Let's understand. Behind it is a shady woman from Ahmedabad, Rupal Panchal. This fellow pulled off many scams in 2003–05. After that, this reform was introduced. Suppose Jio has only one share and

three people apply, then what are the chances that Rupaben's number will come up? One-third, meaning 33%. But if this fellow cheats by creating three fake IDs and then applies, then what is the probability now? Three-fifths, meaning a 60% chance that she will get that share.

So this is exactly the game she used to play, saying she would give unemployed people jobs and asking them for their biodata. Along with that, she would ask for voter ID, address proof, all that. Then she would create fake IDs in their names and make multiple IPO applications would apply repeatedly.

From 2003 to 2005, she carried out this scam. Then SEBI tightened the system so that from then on, PAN cards would have to be linked to demat accounts, and an ASBA system would be introduced. Look, the principle of ASBA is that if you want to weed out the non-serious public, start asking for money upfront.

Now think, UPSC's IAS exam has a ₹100 fee. One million people apply. Whereas IIM's CAT exam has a ₹2,700 fee, so fewer than 300,000 people apply because fewer non-serious people show up. Similarly, this ASBA system for IPOs is, suppose you have ₹100,000 in your Bank of Baroda account, of which you need to invest ₹10,000

in the IPO, that much money will be locked. It will remain in the bank but it will be locked. The remaining ₹90,000 will remain unlocked, so you can do your shopping, You can order things from Swiggy, Zomato, Amazon, you can do it all. And then these 10,000 that were locked will be transferred to Mukesh Ambani only when

your number is selected in the IPO application. If it isn't selected, the money will be unlocked. Now, see the advantage of this system, if Rupal Panchal wants to apply using fake IDs for ten people, ₹10,000 will have to be deposited in ten accounts. The money will have to be locked in advance.

Then, naturally, these scammers will become a little fewer. So, application supported by blocked amount, meaning ASBA. Your money remains in your bank account.

You continue earning interest on it, but it remains locked, and then, in Jio's IPO, if your number is selected, your money will go to Mukesh Bhai. If it isn't selected, your money will be unlocked. Anyway, friends, that's one concept. Besides this, there are many more It is a concept. Underwriting, red herring prospectus, face value,

price-to-earnings ratio, IPO quota, anchor investor, and much more. Actually, my economics book has everything in it, but I will make a long-format video on this very Mrunal Patel channel, so do subscribe so you don't miss anything May it happen. All the best. Let's crack it.

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