Bid-cum-Application form
The completed form an investor submits to a Depository Participant to subscribe to a public issue, which the DP acknowledges and then uploads into the stock exchanges' electronic bidding system.
In plain language
Subscribing to a public issue does not always mean walking into a bank branch. A Depository Participant can take the application too.
An investor wanting to subscribe submits a completed Bid-cum-Application form to a DP, but only to a DP whose name is listed on the stock exchange's website as eligible for this activity — not every DP automatically qualifies.
The DP gives the investor proof that the form was accepted, and then does the real work: uploading the bid details into the stock exchanges' own electronic system.
How it works
On receiving the Bid-cum-Application form, the DP must give the investor a single acknowledgement — a counterfoil if the form is physical, or an application number if it is submitted electronically — as proof of acceptance. The DP then captures and uploads the relevant bid details into the electronic bidding system of the stock exchanges.
This is only one part of a wider IPO process, which runs: the investor submits the application, the depository verifies the BO-ID, the depository sends a verification report to the Issuer or R&T Agent, allotment details flow back to the depository, the depository credits securities to the allottees' accounts, and the Issuer finally sends the investor an intimation of allotment.
For the securities to reach the investor in electronic form, the application must carry 4 demat account details: the Depository's name, the DP's name, the DP-ID, and the Beneficiary Account Number (BO-ID). Allotment in demat form happens only when the client's name and beneficiary account, as filled in the application, match the depository's own records.
A worked example
Mr Sinha wants to subscribe to an IPO worth Rs 50,000 at the cut-off price. He fills in a Bid-cum-Application form and submits it to his DP, whose name appears on the NSE website as an entity eligible to accept public-issue applications.
His DP gives him a counterfoil as an acknowledgement, then uploads his bid details, including his Depository name, DP-ID and BO-ID, into the stock exchanges' electronic bidding system. On the allotment date, the depository verifies that the BO-ID Mr Sinha quoted matches its own records, and — assuming he is allotted shares — credits them directly into his demat account, with the company sending him an intimation of allotment afterwards.
Had Mr Sinha instead quoted a mismatched BO-ID, or approached a DP not listed as eligible on the exchange website, his application would not have been processed the same way, and any allotment could have been held in abeyance until the records were reconciled.
Why NISM asks about it
Chapter 10, section 10.4.1 ("Role of DP in Public Issues"), sets out this specific role for the DP within the wider public-issue process shown in the chapter's Figure 10.1 flowchart.
Expect a question on what the DP must give the investor on accepting the form (an acknowledgement — counterfoil or application number) and on what the DP does with the form afterwards (upload the bid details into the stock exchanges' electronic bidding system).
Common exam traps
- Only DPs listed as eligible on the stock exchange website may accept Bid-cum-Application forms — this is not a role every registered DP automatically has.
- The DP's job is to accept and upload the bid, not to decide allotment — allotment is the Issuer's and R&T Agent's function, based on data the depository verifies.
- Allotment in electronic form depends on the client name and beneficiary account matching the depository's records exactly — a mismatch can hold up allotment even for an otherwise valid application.
- There are no charges for the allotment process itself, and applications with or without the demat option are treated alike for the purpose of deciding allotment.
Check yourself
1.Mrs. Sunita Rao submits a Bid-cum-Application form for an IPO to her depository participant. What must the DP do?
- a)Give her an acknowledgement — the counterfoil for a physical form or the application number for an electronic one — and then capture and upload the bid details in the stock exchange's electronic bidding system
- b)Forward the physical form to the issuer's RTA, which uploads the bid
- c)Credit the shares to her account on the day of application and reverse them if she is not allotted
- d)Accept the form only if she pays by cheque drawn in favour of the issuer
Show the answer
Answer: (a) Give her an acknowledgement — the counterfoil for a physical form or the application number for an electronic one — and then capture and upload the bid details in the stock exchange's electronic bidding system
The workbook: an investor "can submit a completed Bid-cum-Application form to a depository participant (whose name is mentioned on the website of the stock exchange as eligible for this activity)". "The DP will at the time of receipt of application give an acknowledgement to investor, by giving the counterfoil or specifying the application number to the investor, as a proof of having accepted the application form, in physical or electronic mode respectively. After accepting the application form, respective DP shall capture and upload the relevant bid details, in the electronic bidding system of stock exchanges."
- B — the DP uploads the bid itself.
- C — credit happens only after allotment. The Issuer / its R&T agent provides the details of successful allottees to the depository and the execution date, and the depository credits the securities on the execution date.
- D — Application Supported by Blocked Amount (ASBA) is the sole payment mechanism in public issues.
2.The time duration from issue closure to listing in the case of an equity IPO has been reduced to:
- a)1 working day
- b)3 working days
- c)6 working days
- d)12 working days
Show the answer
Answer: (b) 3 working days
The time duration from issue closure to listing in case of equity IPO has been reduced to 3 working days.
And alongside it: Application Supported by Blocked Amount (ASBA) mechanism is the sole payment mechanism in public issues.
Both changes come from SEBI's stated aim — SEBI, in its endeavor to provide an efficient mechanism for raising funds, has been continuously striving to streamline the process and methodologies associated with public issue fund raising process.
What happens in those days: on allotment, the Issuer/its R&T agent provides the details of successful allottees who have opted for receiving securities in demat form, to the depository and the execution date when the securities should be credited to the beneficial owner's accounts. The depository will credit the securities to the allottee accounts on the execution date and the Issuer/its R&T agent inform the investors of the credit of securities in the electronic form by sending the allotment advice.
And the depository's record: the statement of accounts provided by the Depository will indicate balances created in the respective beneficiary owner's account.
Where records do not match: such records will be rejected. The depository then requires the Issuer/its R&T Agent to rectify the records. If it cannot within the stipulated period, the allotment of the rejected records will have to be kept in abeyance and allotted as and when the demat accounts of the allottees are confirmed.
The DP's part in the process: accept the Bid-cum-Application form, give an acknowledgement to investor, by giving the counterfoil or specifying the application number, and capture and upload the relevant bid details, in the electronic bidding system of stock exchanges.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Depository participantThe SEBI-registered agent through whom an investor reaches a depository — NSDL and CDSL cannot open investor accounts themselves, so every demat account is opened and operated through a DP.
- Common Application FormThe single electronic form on NSDL's FPI Monitor portal covering FPI registration with SEBI, PAN allotment and KYC for opening a bank and demat account, replacing three separate applications.
- DP-IDThe unique identification number a depository issues to a Depository Participant once its system connectivity is activated in the live environment, allowing it to start functioning.