Vadodara-based 20 Microns Ltd is set to become the first company to come out

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with an initial public offer as per the new guidelines formulated by Securities and Exchange Board of India on Applications Supported by Blocked Amount (ASBA).

"We are offering 20 Microns Ltd's IPO under the new Sebi guidelines through applications supported by blocked amount' (ASBA).

The investors will have to fill up an application form with their name, PAN number and DPID details to any of the five designated banks -- State Bank of India (SBI), HDFC Bank, ICICI Bank, Corporation Bank and Union Bank -- to block the application money in a bank account," Keynote Corporate Services' Vice-Chairman B Madhuprasad told PTI here today.

The new system allows investors to apply for an IPO, keeping the application money in their bank accounts till the finalisation of the allotment.

The new system would help retail investors whose IPO application money is often blocked for weeks even when they are not allotted shares, Madhuprasad said.

The investors would benefit because they won't have to pay anything upfront. So the cash won't be required to be paid immediately.

The funds would be blocked with the bank. The time and costs involved in waiting to get the refunds and then crediting them to the account would be eliminated altogether.

This process would also do away with the refund process. This would also shorten the time between a public issue and its listing, since listing happens only after refunds are done. ASBA will co-exist with the current process of IPO subscription with cheques. Investors opting for ASBA will have to agree to block funds in a bank account. The scheme will only be applicable to individual investors. Investors subscribing to ASBA cannot revise bids, but can withdraw applications during the IPO period.

For making the IPO process more convenient and swift, SEBI had amended the SEBI (Disclosure and Investor Protection) Guidelines, 2000), which protects the interests of investors.

In the new amendment, SEBI added a supplementary process, which allows investors to apply for IPOs by using Application Supported by Blocked Amount (ASBA) system in which the investors bidding amount would be frozen by the banks through which investors are applying.

If the investor succeeds in his IPO bid, the frozen amount would be transacted to the bidding company but if the investor does not, then the amount would be immediately released by the bank.

The ASBA process will be applicable to all book-built public issues, which provide for not more than one payment option to individual investors.

The issuer will be treating these applications just like non-ASBA applications while finalising the basis of the allotment. The ASBA process will be offered by 'self certified syndicate banks' (SCSB).