Capital Market Related
Topics, Regulatory
Insights and Exchange
Related issues
PSRAO
&
ASSOCIATES
LEGAL FRAMEWORK
Companies Act,
1956
Securities
Contract
(Regulation)
Act, 1956
Securities
And Exchange
Board of
India Act,
1992
Legal
Framework
Listing
Agreements
The
Depositories
Act, 1996
All the Rules &
Regulations
IMPORTANT SEBI REGULATIONS
•
•
•
•
•
•
•
•
•
SEBI ( ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) Regulations, 2009
SEBI ( ISSUE AND LISTING OF DEBT SECURITIES) Regulations, 2008.
SEBI ( PROHIBITION OF INSIDER TRADING ) Regulations, 1992
SEBI ( MERCHANT BANKERS ) Regulations, 1992
SEBI ( UNDERWRITERS ) Regulations, 1993
SEBI ( REGISTRARS TO AN ISSUE AND SHARE TRANSFER AGENTS ) Regulations,
1993
SEBI ( BANKERS TO AN ISSUE ) Regulations, 1994
SEBI ( SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS ) Regulations
1997 (Takeover Code)
SEBI ( PROHIBITION OF FRADULENT AND UNFAIR TRADE PRACTICES RELATING
TO SECURITIES MARKET ) Regulations, 2003
Fund Raising in a Company at Different Stages
Depository Receipts with
the underlying being
Shares, Foreign
Currency Bond
convertible into shares,
Depository receipts with
the underlying being
shares.
GDR, FCCB & ADR
Shares
Shares /
PCD / FCD
Shares
Shares /
Warrants / Follow-on
Public
FCD / PCD
Issue
Rights
Issue
QIP
Existing
Shareholders
Private
Placement
Shares
Seed
Capital
Venture
Capitalist
Personal
Contribution,
Family, Friends,
Angel Investors
Customer,
Supplier,
Competitor
QIB
FIIs, FI, Banks, Insurance
Cos, MF, HNI, Individuals
including NR
Promoters, Financial
IPO
Shares
Investor, Strategic
Warrants /
Investor
Private
FIIs, FI, Banks, Insurance
Shares
Equity
Cos, MF, HNI, Individuals
including NR
Venture
Private
Equity
investors
Capital
Shares
FII, Hedge funds
and FII, US QIB
Strategic
Investmen
t
IPO: Initial Public Offer
QIP: Qualified Institutions Placement
GDR: Global Depository Receipts
FCCB: Foreign Currency Convertible Bond
ADR: American Depository Receipts
Economy of the Country
Money Supply
Interest Rate
Corporate Results
Global Capital Market Scenario
Foreign Funds Inflow
Strength/Weakness of the Local Currency
FUND RAISING OPTIONS
Initial Public
Offer
An Offer of SPECIFIED
SECURITIES by an unlisted
issuer to the public for
subscription and includes offer
for sale of specified securities to
the public by any existing
holders of such securities in an
unlisted issuer.
Applicability: SEBI ( ICDR)
Regulations, 09.
QIP
A designation of a securities
issue given by the Securities and
Exchange Board of India (SEBI)
that allows an Indian-listed
company to raise capital from its
domestic markets without the
need to submit any pre-issue
filings to market regulators. (
Circular issued on May 8, 2006).
Applicability: SEBI ( ICDR)
Regulations, 09.
RIGHTS ISSUE FPO
An offer of SPECIFIED
SECURITIES by a listed issuer
to the shareholders of the issuer
as on the record date fixed for
the said purpose.
Applicability: SEBI ( ICDR)
Regulations, 09.
An offer of SPECIFIED
SECURITIES by a listed
issuer to the public for
subscription and includes an
offer for sale of specified
securities to the public by
any existing holders of such
securities in a listed issuer.
BONUS
ISSUES.
A premium or gift, usually of
stock, by a corporation to
shareholders’ or “an extra
dividend paid to shareholders in
a joint stock company from
surplus profit.”
APPLICABILITY: SEBI (ICDR)
regulations,’09
Applicability: SEBI ( ICDR)
Regulations, 09.
Preferential
Allotment
An issue of SPECIFIED
SECURITIES by a listed issuer to
any select person or group of persons
on a private placement basis and does
not include an offer of specified
securities made through a public
issue, rights & bonus issue, ESOP,
ESPS or QIP or sweat equity or
Depository receipts.
Applicability: SEBI ( ICDR)
Regulations, 09.
Debt Securities IDR
A non-convertible debt
securities (NCD) which creates
or acknowledges indebtedness,
and include debenture, bonds
and such other securities of a
body corporate or any statutory
body, security receipts and
securitized debt instruments.
Applicability: SEBI ( Issue
and Listing of Debt Securities)
Regulations, 08.
An Indian Depository Receipt
is an instrument denominated in
Indian Rupees in the form of a
depository receipt created by a
Domestic Depository (custodian
of securities registered with the
SEBI) against the underlying
equity of issuing company to
enable foreign companies to
raise funds from the Indian
securities Markets.
APPLICABILITY: SEBI (ICDR)
regulations,’09
Note: Specified securities means Equity, convertible Securities. ( Partly Convertible Debentures PCD & Fully Convertible Debentures FCD
Investor Categories
QIB means;
•A MF, VCF, FVCF
•Foreign Institutional investor
•Public Financial Institution
•Scheduled commercial bank
•Multilateral and bilateral
development financial institution
•State Industrial development
corporation
•Insurance Company
•Provident Fund ( Min Corpus 25 Cr
)
•Pension fund ( R 25 Cr )
•National Investment Fund
•Insurance funds setup and managed
by the Dept of Posts, India” as per
the amendment of SEBI (ICDR) Reg, 09
on 12th November,2010)
Retail Investor
means an investor
who applies or bids
for specified
securities for a value
of not more than
Rs. 2 Lakh (as per
the amendment of
SEBI (ICDR) Reg, 09
on 12th
November,2010)
Non Institutional
investor means an
investor other than
a retail individual
investor and
qualified
institutional buyer
SEBI ( ICDR) REGULATIONS, 2009
COMMON CONDITIONS FOR PUBLIC ISSUES AND RIGHTS ISSUES
Applicability of
ICDR Regulations
Public Issue
Rights Issue of a listed company
Preferential Allotment of a listed company
Issue of a bonus shares by a listed company
QIP & IDR
General Conditions
Promoter, director etc., not debarred from accessing the capital market by SEBI.
The issuer of Convertible Debt Securities Shall not be in the willful defaulters list of RBI & shall not
have defaulter in payment of principal or interest amount for 6m.
Company shall make a listing application to SE for listing and should choose a Designated SE.
Company Shall enter into an agreement with Depositories ( NSDL / CDSIL)
Company shall not have any partly paid up shares.
Company shall make firm arrangements of finance towards 75 %.
Record date must be announced well in advance mentioning the purpose.
Appointment of MB
and Other
Intermediaries
The issuer shall appoint one or more merchant bankers and shall also appoint other intermediaries in
consultation with the lead MB.
Filing of Offer
Document
The issuer shall submit the draft prospectus / RHP enclosing certain documents. The MB give due
diligence certificates.
In – principle
approval from
Stock exchange
The issuer must obtain the in-principle approval at least from one of the recognised SE having nation
wide trading platform
SEBI ( ICDR ) Regulations, 2009
COMMON CONDITIONS FOR PUBLIC ISSUES AND RIGHTS ISSUES
Issue Opening date
Within 12 months from the date of issuance of OBSERVATIONS from SEBI
Underwriting &
Minimum
Subscription
The issuer may appoint Syndicate Members to the extent of the minimum subscription. The
Minimum subscription shall not be less than 90% of the offer through offer document.
Appoint of Syndicate Member mandatory in case of Issue through Book Building Mechanism.
Call money
The issue shall be made fully paid up within 12 months from the date of allotment.
This 12 months not applicable where the size of the issue is more than Rs. 500 Cr, wherein the call
money shall be at least 25%.
Filing of Offer
Document
The issuer shall submit the draft prospectus / RHP enclosing certain documents. The MB give due
diligence certificates.
In – principle
approval from
Stock exchange
The issuer must obtain the in-principle approval at least from one of the recognised SE having nation
wide trading platform
INITIAL PUBLIC OFFER ( IPO) – ICDR REG, ‘09
Eligibility criteria for Unlisted Companies for I P O
Option I: Net
tangible assets,
profitability and
net worth track
record
Net tangible assets of at least
Rs.3 Crores in the preceding 3
full years, not more than 50%
held in monetary assets
Option II: No net
tangible assets,
profitability and
net worth track
record
Issue through book building
route with at least 50% allotted
to QIBs
Or
‘Project’ has at least 15%
participation by Financial
institutions/banks of which 10%
comes from appraiser and at
least 10% of issue size allotted
to QIBs
+
+
Track record of distributable
profits in terms of Section 205
of Companies Act, 1956 (excl
extra ordinary items) for 3 out of
preceding 5 years
+
Net worth of at least Rs.
1 Crore in each of the
preceding 3 full years
Minimum post issue face value
capital of the Company shall be
Rs 10 Crores
or
Compulsory market making for
at least 2 years
• Book building route mandatory with 50% QIB participation if all issues during the same
financial year (including proposed IPO) > 5X pre-issue net worth
Exemptions from SEBI Eligibility Norms
 Banking company
 Correspondent new bank (“public sector banks”)
 Infrastructure company
 Whose project is appraised by a FI/ IDFC/ IL&FS or bank
which was earlier an FI
 5% of the project cost is financed by the appraiser(s)/
institutions jointly or severally
 Rights issues
Listing criteria of Bombay Stock Exchange Limited
For large cap companies:
 Post Issue paid up equity capital - Rs. 3 Crores
 Issue size - Rs. 10 Crores
 Post Issue market capitalization – Rs. 25 Crores
Initial Public Offer ( IPO) – ICDR Reg, ‘09
Pricing
Pricing
There exists free pricing. The issuer may determine the price in consultation with the lead merchant
banker or through book building process.
Specified securities may be offered at different prices, subject to the following:
Differential
Pricing
Price and
price band
Face Value
of Equity
Shares
Retail individual investors or retail individual shareholders may be offered specified
securities at a price lower than the price at which net offer is made to other categories of
applicants. difference shall not be more than ten per cent of the price offered to other
categories
In Book built issue, the price of the specified securities offered to an anchor investor
shall not be lower than the price offered to other applicants.
In composite issue, the price of specified securities offered in public issue may be
different from the price offered in rights issue and justification for such price difference
shall be given in the offer document.
The issuer may mention a price or price band and floor price or price band in the red herring
prospectus and determine the price at a later date before registering the prospectus with the ROC.
If floor price or price band is not mentioned in the RHP, the same shall be announced at least two
working days before the opening of the bid in IPO and one working day bin FPO.
Such announcement shall contain relevant financial ratios and a statement titled “BASIS OF
ISSUE PRICE” in the prospectus.
The cap on the price band shall be less than or equal to 120% of the floor price. ( Cap includes cap
on the coupon rate in case of convertible debt instruments ).
Floor price shall not be less than the face value.
Issuer company free to fix the face value of the shares offered, subject to :
 If price of share is Rs. 500 or more, then face value can be less than Rs. 10 but should be more than
Re. 1
If price of share is less than Rs. 500, then the face value must be Rs. 10.
Initial Public Offer ( IPO) – ICDR Reg, ‘09
Reservation on a competitive basis
Employees
Shareholders
Business
Associates
New Company
Permanent employees of the
Issuer and promoting
companies
Shareholders of the
promoting companies
Persons who have business
association with the Issuer,
as depositors, bondholders
and subscribers to services
Existing Company
Permanent employees of the
issuer company
Shareholders of group
companies
Limit as a % of Issue size
10%*
10%
5%
Available for bidding in net
Public issue
Yes
Yes
No
* Firm allotment + Reservation
• No reservation can be made for the issue management team, syndicate
members, their promoters, directors and employees and for the
group/associate companies of issue management team
• Net Public Offer” i.e. the size of the offer, net of reservations and firm
allotments, if any, has to be greater than 10% of post issue capital
Initial Public Offer ( IPO) – ICDR Reg, ‘09
Promoters’ Contribution and Lock-in Requirements
 At least 20% of post-IPO capital of the company to be held by the Promoters, which is
referred to as Promoters’ contribution
 The Promoters’ can comply with the Promoters’ contribution condition by bringing in
the full amount of promoters contribution, including premium, at least one day prior
to the issue opening date
 Securities ineligible for computation of promoters’ contribution are those that are
 Acquired for consideration other than cash and revaluation of assets or
capitalization of intangible assets is involved
Promoters’
contribution
 A result of bonus issues out of revaluation reserves or reserves without
accrual of cash resources or against shares which are ineligible for
computation of promoter contribution
 Acquired by the promoters at a price lower than the IPO price during the
preceding 1 year from the date of filing the DRHP with SEBI, unless the
difference in price is brought in. However, this is not valid if these acquired
shares result from an inter-se promoter transfer and (i) such shares were
acquired by the transferor promoter during the past 1 year at or more than
the IPO price; or (ii) such shares were acquired by the transferor promoter
prior to the past 1 year
 Ineligible shares acquired in pursuance to a scheme of merger or
amalgamation approved by a High Court shall be eligible for computation of
promoter’s contribution
 Compliance with norms for Promoters’ contribution shall be required at the time of
filing the DRHP with SEBI
Initial Public Offer ( IPO) – ICDR Reg, ‘09
Promoters’ Contribution and Lock-in Requirements
Lock-in Requirements
(Unlisted companies)
 Entire pre-IPO capital locked in for 1 year from date of allotment in IPO (exempt for (a) Venture
Capital Funds which have held shares for a minimum of 1 year; (b) pre-IPO shares held by
employees which were issued under ESOP or ESPS before the IPO). Transfer of locked-in shares
among pre-IPO shareholders allowed, provided lock-in continues with transferee
 Promoter’s holding up to 20% of post-IPO capital locked-in for 3 years from the date of allotment in
IPO and excess promoter’s holding locked-in for 1 year
 Pledged securities held by promoters shall not be eligible for computation of Promoters’
contribution
Pledge
 Other locked-in securities may be pledged only with Banks/ FIs as collateral provided the pledge is a
term of sanction
 If securities are locked-in as Promoters’ contribution, the same may be pledged if the loan has been
granted by such Banks/ FIs for the purpose of financing one or more objects of the Issue
Continuous Listing and Offer for Sale Requirements
Continuous Listing
Offer for Sale
 Minimum post–IPO market cap of Rs. 10 bn and total number of shares issued 20 million, where the IPO is
in terms of Rule 19(2)(b)
 Only securities held for more than one year can be offered for sale
 Bonus shares issued during last one year may not be eligible for offer for sale
Corporate Governance Requirements
Composition of Board of Directors

Reconstitution of the Board of Directors

At least one-half non executive Directors

One-third independent Directors in case of a non-executive Chairman

One-half independent Directors in case of an executive Chairman

One-half independent Directors in case non-executive Chairman being a promoter or related to the promoters or persons
occupying management positions at the Board level or at one level below the Board
Committees of the Board




Audit Committee

Should comprise at least three members

Two-thirds of the members shall be independent Directors

At least one Director should have financial and accounting knowledge

Committee Chairman to be an independent Director
Shareholder’s/Investor Grievance Committee

A board committee under the chairmanship of a non-executive director

Redressal of shareholder and investors complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared
dividends etc.
Remuneration Committee (optional)

Should comprise at least three members

Have all non-executive Directors

Committee Chairman to be an independent Director
A report on Corporate Governance to be included in the Annual Report of the Company
 Clause 49 requirements of the Listing Agreement of the Stock Exchanges to be met at the time of filing the DRHP with SEBI
 Instances in the past where DRHP filed with SEBI by certain PSUs without Clause 49 compliance, with an undertaking to comply with the
same prior to opening of the Issue
Key Parties and Responsibilities for an IPO
Intermediary Structure
Book Runners’
Legal Counsel
Legal
Counsels
IPO
Grading
Agency
Broker /
Syndicate
BRLM
Registrars
Escrow
Bankers
Issuer Company
/ Selling
Shareholder
Printers
Advertisin
g Agency
Arrangement
Coordination
Rights Issue
SEBI approval of prospectus not required if:
• Issuer company is listed for last three years
• Average market cap is greater than Rs 5,000
Crores
• 95% of investor grievances redressed (till last
quarter)
• No SEBI proceedings pending
• Entire shareholding in dematerialized form
Rights Issue – ICDR Reg, ‘09
Rights issue, Record Date and Restriction
 Rights issue means an offer of specified securities by a listed issuer to the shareholders
of the issuer company as on the record fixed for the said purpose.
Rights issue and
Record Date
Restriction
Letter of offer,
Pricing & Period
 The issuer company shall announce a record date for determining the shareholders
eligible to apply for securities.
 The company shall not withdraw the rights issue after announcement of record date. If
done so, it shall not make an application for listing any securities on RSE for 12
months from RD. (Exception - Convertible securities )
If the issuer company has outstanding fully or partly convertible debt instruments at
the time of making the rights issue.
The equity shares reserved for Fully or partially convertible debt instrument holders
shall be issued at the time of conversion of such instruments on the same terms on which
the equity shares offered in the rights issue were issued.
The letter of offer and the application shall be despatched through RP or SP 3 days
before opening of issue. Shareholder who has not received the application form may apply
in writing on a plain paper along with application money.
The issue price needs to be decided before the record with and shall be determined in
consultation with the designated stock exchange.
Rights issue shall be open for a minimum period of 15 days and maximum period of 30
days.
Bonus Issue – ICDR Reg, ‘09
Conditions, Restrictions, Completion
 It is authosized by its articles of association for issue of bonus shares, capitalisation of reserves,
etc.:
•
Conditions
Provided that if there is no such provision in the articles of association, the issuer shall pass a resolution
at its general body meeting making provisions in the articles of associations for capitalisation of reserve;
 It has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities
issued by it;
 It has sufficient reason to believe that it has not defaulted in respect of the payment of statutory
dues of the employees such as contribution to provident fund, gratuity and bonus;
 The partly paid shares, if any outstanding on the date of allotment, are made fully paid up.
Restrictions
 No issuer shall make a bonus issue of equity shares if it has outstanding fully or partly convertible
debt instruments at the time of making the bonus issue, unless it has made reservation of equity shares of
the same class in favour of the holders of such outstanding convertible debt instruments in proportion
to the convertible part thereof.
 The equity shares reserved for the holders of fully or partly convertible debt instruments shall be issued at
the time of conversion of such convertible debt instruments on the same terms or same proportion on
which the bonus shares were issued.
Bonus shares only against
reserves, etc. if capitalised
in cash
 The bonus issue shall be made out of free reserves built out of the genuine profits or securities
premium collected in cash only and reserves created by revaluation of fixed assets shall not be capitalised
for the purpose of issuing bonus shares.
 Without prejudice to the provisions of sub-regulation (1), the bonus share shall not be issued in lieu of
dividend.
 An issuer, announcing a bonus issue after the approval of its board of directors and not requiring
shareholders’ approval for capitalisation of profits or reserves for making the bonus issue, shall implement
the bonus issue within fifteen days from the date of approval of the issue by its board of directors:
Completion
•
Provided that where the issuer is required to seek shareholders’ approval for capitalisation of profits
or reserves for making the bonus issue, the bonus issue shall be implemented within two months from the
date of the meeting of its board of directors wherein the decision to announce the bonus issue was taken
subject to shareholders’ approval.
 Once the decision to make a bonus issue is announced, the issue can not be withdrawn.
PREFERENTIAL ALLOTMENT – ICDR REG, ‘09
Preferential Allotment, Pricing , relevant date & SE
 Preferential issue means an issue of specified securities by a listed issuer to any
select person or group of persons on a private placement basis and does not
include an offer of specified securities made through a public issue, rights issue,
bonus issue, ESOP, ESPS, QIP, Sweat equity or depository receipts.
Pricing
 Price not less than the higher of the following:
The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the six months preceding the
relevant date; OR
The average of the weekly high and low of the closing prices of the related
shares quoted on a stock exchange during the two weeks preceding the
relevant date.
 “relevant date" means the date thirty days prior to the date on which the
meeting of general body of shareholders is held
Stock Exchange means a stock exchange in which the highest trading volume in
respect of the shares of the company has been recorded.
Preferential Allotment – ICDR Regulations, 09
Lock-in Requirements & Eligibility for Preferential Allotment
Lock in (78)
Eligibility for
Preferential Issue
(72 (2))
Lock-in Requirements
Lock-in of 1 year from the date of allotment shall be applicable for all preferential
allotments made to all categories of Allottee including promoters
Shares allotted on preferential basis to promoters/promoter group shall be locked in for
3 years from the date of allotment
Overall lock-in for promoter holding shall not exceed 20% of the post issue capital
Lock-in already complied shall be reduced while calculating lock-in on shares arising
upon conversion, etc.
Pre-preferential allotment holding of the allottee shall also be kept under lock-in from
the relevant date up to 6 months from the date of making preferential allotment
Locked in securities can be transferred inter se amongst Promoters/Promoter Group or
to a new promoter or person in control of the Company subject to SAST and subject to
continuation of lock-in the hands of the transferees for the remaining period
•Conditions for continuous listing must be complied with
•Should be fully paid-up securities
•Pre-allotment Shareholding of the allottee to be in demat form
•The shareholders should not have sold their shares during 6 months prior to the relevant
date.
Preferential Allotment – Other Regulatory Provisions
SEBI ( SUBSTANTIAL ACQUISITION OF SHARES AND
TAKEOVERS ) REGULATIONS
Shares cannot be allotted to a person, who together with persons
acting in concert with him, would be entitled to exercise more than
55% of the voting rights of the Company post-allotment of the
share capital
COMPANIES ACT, 1956
Return of allotment of Shares in Form 2 to be filed with ROC
Further listing of securities issued under Preferential allotment
with the Stock Exchanges
STAMP ACT
Requisite stamp duty as per State Stamp Act should be paid on the
securities issued under preferential allotment
Preferential Allotment – Listing Agreement
Clause 24(a): In-principle approval
Issuer to obtain ‘in-principle’
approval for listing before issuing
further shares or securities.
Clause 43: Quarterly statement
Issuer to furnish a statement on a
quarterly basis indicating the
variations between projected
utilisation of funds and/ or projected
profitability statement made by it or
object/s stated in the explanatory
statement to the notice for the
general meeting for considering
preferential issue of securities and
the actual utilisation of funds and/
or actual profitability.
Clause 40A (iii)
No preferential allotment can be
made, if such allotment or offer
result in reducing the non-promoter
holding below the limit of public
shareholding specified under DIP
Guidelines
Clause 43: Quarterly statement
The statement shall be given for
each of the years for which
projections are provided in the
explanatory statement & shall be
published in newspapers
simultaneously with the quarterly
financial results as required under
clause 41.
If there are material variations
between the projections and the
actual utilisation/ profitability, the
company shall furnish an
explanation therefor in the
advertisement and shall also
provide the same in the Directors’
Report.
CLAUSE 49
Quarterly disclosure of
uses/application of funds
raised by Preferential
Allotment
Annual Statement of funds
utilised for purposes other
than stated purposes –
certified by statutory
auditors
to the Audit Committee till
such time, money raised is
fully spent
QIP – ICDR REG, 09.
Definition, conditions, Placement Document & Min. Number
Definition
QIP means allotment of eligible securities by a listed issuer to QIBs on private placement basis
in terms of Chapter VIII of ICDR Regulations, 2009.
Conditions
A special resolution
The equity shares which are proposed to be allotted through QIP have been listed on a RSE
(having nationwide trading terminal ) for atleast 1 year prior to passing of SR.
Minimum public shareholding as specified in the listing agreement has to be complied with.
Relevant date to be mentioned in the special resolution.
Placement
Document
QIP shall be made on the basis of placement document as specified in Schedule XVIII.
The placement document shall be furnished while seeking in-principle approval.
Minimum No. of
allottees
Not to be less than;
Two, where the issue size is less than or equal to Rs. 250 crores.
Five, where the issue size is greater than Rs. 250 crores.
Where, no single Allottee shall be allotted more than 50% of the issue size.
QIP – ICDR REG, 09.
Pricing, Restrictions on Allotment, Validity of SR
Pricing
The QIP shall be made at a price not less than the average of weekly high and low of the
closing prices of the equity shares of the same class quoted on the stock exchange during
the two weeks preceding the relevant date.
Restriction on
Allotment
Min. of 10 % of eligible securities to be allotted to MFs. ( If not subscribed, can be
allotted to other QIBs)
No allotment to be made to a QIB who is a promoter or any person related to the
promoter.
The applicants in QIP shall not withdraw the bid after the closure of the issue
Validity of
Special resolution
Allotment to be completed within a period of 12 months from the date of passing of SR.
A subsequent QIP shall not be made until expiry of six months from the date of prior
QIP.
IDR – INDIAN DEPOSITORY RECIEPT
The issuing company is listed in its home country.
Eligibility for issuing
IDR
The issuing company is not prohibited to issue securities by any regulatory body.
The issuing company has track record of compliance with securities market
regulations in its home country.
Conditions
Issue size shall not be less than Fifty Crore Rupees.
Procedures to be followed by each applicant shall be mentioned in the prospectus.
Minimum application money shall be Twenty Thousand Rupees.
At least Fifty percent of the IDR issued shall be allotted to QIB’s on proportionate
basis.
At any given time there shall be only one denomination of IDR of the issuing
company.
The balance fifty percent be allotted among the categories of non-institutional
investors and retail individual investors including employees at the discretion of the
issuer and the manner of allocation shall be disclosed in the prospectus. Allotment to
investors within a category shall be on proportionate basis.
For non-underwriting issues:
Minimum
subscription
There should be a minimum subscription of 90% of the offer through offer document
on the date of closure of the issue, or if the subscription falls below 90%, company
have to refund all the amount received. If the company fails to repay within 15 days
from the date of closure, the company is liable to pay the amount with an interest of
15% per annum for the period of delay.
For underwritten issue:
If the company does not receive the minimum subscription of 90% with in 60 days
from the date of closure of the issue, the company shall refund the entire subscription
amount along with 15% interest per annum for the period of delay beyond 60 days to
the subscribers.

Fungibility, Prospectus, Bid Data, Post issue reports & Finalisation
Fungibility
The IDR’s shall not be automatically fungible into underlying equity shares of issuing company.
Filling of prospectus
Due deligence certificate
Payment of fees &
Issue of advertisement.
Display of bid data.
The stock exchanges offering online bidding system for the book building process shall display on
their website, the data pertaining to book built IDR issue, in the format specified, from the date of
opening of the bid till at least three days after closure.
Disclosure in
prospectus and
abridged prospectus
The prospectus shall contain all material disclosures which are true, correct and adequate so as
to enable the applicants to take an informed investment decision.
The abridged prospectus shall contain the disclosures as specified in Part B of schedule XIX.
Post issue reports
The merchant banker shall submit post-issue reports to the board in accordance with subregulation (2)
Initial Post issue report shall be submitted within 3 days of post closure of the issue;
Final Post issue report shall be submitted within fifteen days of the date of finalization of basis of
allotment or within fifteen days of refund of money in case of failure of issue.
Undersubscribed
issue
The merchant banker shall furnish information in respect of underwriters who have failed to meet
their underwriting development to the Board on the lines of the specified format.
Finalisation of basis
of allotment
The executive director or managing director of the stock exchange where the IDR are proposed to
be listed , along with the post issue lead merchant bankers and registrars to the issue shall ensure
that the basis of allotment is finalised in a fair and proper manner.
Issue of Specified Securities by Small and
Medium Enterprises- SME
Applicability and filing of Offer document
Applicability
An issuer whose post-issue face value capital does not exceed 20 crore rupees.
Filing of Offer
document and
Due diligence
Certificate
The issuer making a public issue or rights issue of specified securities shall not file
the draft offer document with the board provided the issuer company shall file a copy of
the offer document with the Board through a merchant banker, simultaneously with
the filing of the prospects with the SME exchange and the RoC or letter of exchange
with the SME Exchange provided further that the Board shall not issue any observation
on the offer document.
The merchant banker shall submit a due-diligence certificate as per Form A of
Schedule VI including additional confirmations as provided in Form H of Schedule VI
along with the offer document to the Board.
The offer document shall be displayed from the date of filing of terms of subregulation (1) on the websites of the board, the issuer, the merchant banker and the
SME exchange where the specified securities offered through the offer document are
proposed to be listed.
Issue of Specified Securities by small and
medium enterprises
Underwriting & Minimum Number of Allottees
Underwriting
Minimum
Number of
Allottees
The issue shall be 100% underwritten and not restricted to the minimum
subscription level.
The merchant banker shall underwrite at least 15% of the issue size on his/ their
own account/s.
The issuer in consultation with SEBI(Underwriters) Regulations, 1993 and the
Merchant Banker may enter into an agreement with the nominated investor indicating
therein the number of specified securities which they agree to subscribe at issue price
in case of under-subscription.
 If other underwriters fail to fulfill their underwriting obligations or other
nominated investors fail to subscribe to unsubscribed portion, the merchant banker
shall fulfill the underwriting obligations.
All the underwriting and subscription arrangements made by the merchant banker
shall be disclosed in the offer document.
The merchant banker shall file an undertaking to the Board that the issue has been
hundred per cent. underwritten along with the list of underwriters and nominated
investors indicating the extent of underwriting or subscription commitment made by
them, one day before the opening of issue.
No allotment shall be made pursuant to any initial public offer made under this
Chapter, if the number of prospective allottees is less than fifty.
Issue of Specified Securities by small and
medium enterprises
Migration to SME exchange / Main Board,
Migration to
SME exchange/
Main Board
A listed issuer whose post-issue face value capital is less than 25 crore rupees may
migrate its specified securities to SME exchange if its shareholders approve such
migration by passing a special resolution through postal ballot to this effect and if such
issuer fulfils the eligibility criteria for listing laid down by the SME exchange Provided
that the special resolution shall be acted upon if and only if the votes cast by
shareholders other than promoters in favour of the proposal amount to at least two
times the number of votes cast by shareholders other than promoter shareholders
against the proposal.
Migration to
Main Board
Where the post issue face value capital of an issuer listed on SME exchange is likely to
increase beyond twenty five crore rupees by virtue of any further issue of capital by the
issuer by way of rights issue, preferential issue, bonus issue, etc. the issuer shall
migrate its specified securities listed on SME exchange to Main Board and seek listing
of specified securities proposed to be issued on the Main Board subject to the fulfilment
of the eligibility criteria for listing of specified securities laid down by the Main Board:
Provided that no further issue of capital by the issuer shall be made unless –
(a) the shareholders of the issuer have approved the migration by passing a special
resolution through postal ballot wherein the votes cast by shareholders other than
promoters in favour of the proposal amount to at least two times the number of votes
cast by shareholders other than promoter shareholders against the proposal;
(b) the issuer has obtained in- principle approval from the Main Board for listing of
its entire specified securities on it.
Issue of Specified Securities by small and
medium enterprises
Market Making
Market
Making
 The merchant banker shall ensure compulsory market making through the stock
brokers of SME exchange in the manner specified by the Board for a minimum period
of three years from the date of listing of specified securities issued under this Chapter
on SME exchange or from the date of migration from Main Board in terms of
regulation 106H.
The merchant banker may enter into agreement with nominated investors for
receiving or delivering the specified securities in the market making subject to the
prior approval by the SME exchange where the specified securities are proposed to be
listed and r shall disclose the details of arrangement of market making in the offer
document.
 The specified securities being bought or sold in the process of market making may be
transferred to or from the nominated investor with whom the merchant banker has
entered into an agreement for the market making provided that the inventory of the
market maker, as on the date of allotment of the specified securities, shall be at least
5% of the specified securities proposed to be listed on SME exchange.
The promoters’ holding shall not be eligible for offering to the market maker under
this Chapter during the period specified in sub-regulation (1).
Subject to the agreement between the issuer and the merchant banker/s, the merchant
banker/s who have the responsibility of market making may be represented on the
board of the issuer.
DELISTING OF SECURITIES – SEBI ( DELISTING
OF EQUITY SHARES ) REGULATIONS, 2009
Applicability, Kinds & Voluntary Delisting
Applicability
The SEBI ( Delisting of Equity shares ) Regulations, 2009 are applicable to delisting of
equity shares of a company from all or any of the stock exchanges where such shares are
listed.
Kinds
Voluntary Delisting : Delisting of equity shares of the company voluntarily on the
application of the company.
Compulsory Delisting: Delisting of equity shares of the company by the stock exchange
of the company.
Voluntary
Delisting
FROM ALL STOCK EXCHANGES
A company may delist its equity shares from all the stock exchanges, provided an exit
opportunity is given to the public shareholders.
FROM ONE OR MORE STOCK EXCHANGES
A company may delist its equity shares from one or more Recognized stock exchange and
continue listing in other RSE.
If the shares are delisted from one or more RSE but continues to stay listed in a RSE
having nation wide trading terminal, EXIT OPPORTUNITY need NOT be given.
If the shares are delisted from one or more RSE but continues to stay listed in a RSE
not having nation wide trading terminal, EXIT OPPORTUNITY NEEDS to be given.
DELISTING OF SECURITIES – SEBI ( DELISTING
OF EQUITY SHARES ) REGULATIONS, 2009
Conditions and Procedure – Voluntary Delisting
No Exit
Opportunity to
be given
Exit opportunity
to be given
A board resolution needs to be passed.
A public notice shall be published in two news papers. ( mentioning the SE from where
the shares are delisted, reason for delisting & fact of continuation of listing on other RSE)
An application to be given to the concerned recognized stock exchange. ( The
application shall be disposed off by the SE within 30 working days ).
The fact of delisting to be disclosed in the first annual report after delisting.
Obtain prior approval of the board.
Obtain prior approval of the share holders by a special resolution passed through postal
ballot.
The number of votes cast by public shareholders in favour of the resolution should be at
least two times the votes cast against.
Application to the concerned recognized stock exchange for in-principle approval.
(Audit report as required under regulation 55 A of SEBI (Depositories and participants )
regulations, 1996 covering a period of 6 months prior to delisting )
Make a final application to the concerned RSE within one year of passing of special
resolution. ( A proof that an exit opportunity had been given needs to be given )
Application to be disposed off by the RSE within 30 working days.
DELISTING OF SECURITIES – SEBI ( DELISTING
OF EQUITY SHARES ) REGULATIONS, 2009
Compulsory Delisting, Rights of Public shareholders & consequences.
Compulsory
Delisting
The stock exchange, by order, may delist the equity shares of a company.
The decision of delisting shall be taken by a panel to be constituted by the RSE.
Before Passing an order, the RSE shall give a notice in at least two news papers, giving a
time of 15 working days within which representations may be made by any person
aggrieved by the proposed delisting.
Before passing of order, The company shall be given a reasonable opportunity of being
heard.
The RSE shall consider the representations made before passing the order.
Provisions relating to EXIT OPPORTUNITY are not applicable.
After passing an order, the RSE shall give a notice in two newspapers stating the fact of
delisting, name and address of the company, fair value of the equity delisted etc.
Rights of Public
shareholders
The RSE shall appoint an independent fair valuer (s) to determine the value of the
equity delisted.
The promoters shall acquire the shares from the public at the fair value determined by
the valuer.
Consequences
The whole time directors, promoters and the companies promoted by them shall not
directly or indirectly access the securities market or seek listing for a period of 10 years.
LISTING / STOCK EXCHANGE
DEFINITIONS
LISTING
STOCK
EXCHANGE
Listing means admission of securities of an issuer to trading privileges
(dealings) on a stock exchange through a formal agreement. The prime
objective of admission to dealings on the exchange is to provide liquidity and
marketability to securities, as also to provide a mechanism for effective
control and supervision of trading.
Stock exchanges represent the market place for buying and selling of
securities and ensuring liquidity to them in the interest of the investors. The
stock exchanges are virtually the nerve centre of the capital market and
reflect the health of the country’s economy as a whole.
LISTING AGREEMENT – Important Clauses
Clause 16, 19, 20, 22 & 28.
CLAUSE 16: Book
Closure/ Record Date
Books to be closed at least once in year.
At least 30 days gap between two book closures.
Intimate SE atleast 15 days ( 7 days for demat) before book closure / RD.
Intimate to SE atleast 30 days before corporate actions.
CLAUSE 19: Convening of
board meeting for
declaration / decision
regarding:
Dividend, issue of Rights
shares, convertible
debentures, buy back etc.
Intimate atleast 7 days in advance about convening of the board meeting.
Undertake to recommend to declare all dividend and / or cash bonuses at least
5 days before the commencement of the closure of its transfer books or the
record date fixed for that purpose.
CLAUSE 20 & 22: Decision
regarding declaration of
dividend, bonus, interest
payment, buyback of
securities, reissue of
forfeited shares, etc.
Furnish information to the stock exchanges within 15 minutes of the closure of
the board meeting.
CLAUSE 28: Change in
form or the nature of the
listed securities or change in
the rights / privileges
thereof.
21 days prior notice to be given to the stock exchange.
Apply to the stock exchange for listing of the securities as changed, if
exchange requires so.
LISTING AGREEMENT – Important Clauses
Clause 29, 30, 31, 23, 32 and 35
CLAUSE 29 & 30:
Important Changes
Change in general character or nature of the company’s business;
Change in the company’s directors;
Change of MD;
Change of Auditors;
to be promptly notified to the stock exchange.
CLAUSE 31 & 23: Further
issue of securities and other
documents to be forwarded.
To forward six copies of the annual reports, notices, resolutions and circulars
relating to new issue of capital, three copies of all the notices, call letters, etc.,
including notices of meetings convened under section 391 or 394 R/w. section 391
of Companies Act.
CLAUSE 32: CFS in the
annual report, consolidate
Financial statement and
related party disclosures
Cash flow statement to be prepared in accordance with AS 3 of ICAI and
present it under the indirect method.
Unabridged annual report to be sent to the member of the listed exchange on
his request.
Consolidated financial statement duly audited by the statutory auditors and
file the same with the SE.
Company will also make related party disclosures in its annual reports.
CLAUSE 35: Shareholding
pattern containing details of
the promoters holding and
non-promoters holding
File with the exchange the shareholding pattern in the prescribed form within
21 days from the end of the quarter on a quarterly basis. (Amendment to Clause
35 has taken palce)
LISTING AGREEMENT – Important Clauses
Clause 40 A, 40 B and 41
CLAUSE 40 A AND 40 B:
Conditions for continuous
listing and takeover offer
CLAUSE 41: Preparation
and submission of financial
results ( unaudited financial
results )
To maintain on a continuous basis the public shareholding of atleast 25% of
the total number of issued shares.
The holding of the promoters should be reduced to less than 75% in a
transparent manner acceptable to SEBI either through FPO or selling of the
shares in secondary market or through a preferential allotment or through
amalgamation or merger.
The BOD of every listed company must submit to the stock exchange where
the company’s shares are listed the unaudited financial or audited financial
results once in every quarter before the expiry of 45 days, i.e., 30 April, 31 July,
31 October and 31 January.
For the last quarter of the financial year the company can submit either
unaudited results before 15 May or give an undertaking to the stock exchange
that the audited results will be submitted before 30 May.
These financial results must be approved by the audit committee in their
meeting and recommend the same to the BOD.
Within 15 mins of the approval by the BOD these results are to be submitted
to the stock exchange.
Within 48 hours a publication has to be given in two newspapers.
Results are to be reviewed by the statutory auditors before approval by the
audit committee and BOD.
Limited review report given by the Statutory auditors on the unaudited
financial results must be submitted to the SE within 45 days of the Board
meeting.
LISTING AGREEMENT – Important Clauses
Clause 43 A, 47, 49 50 and 52
CLAUSE 43 A: Filing of
deviations in the use of
public issue proceeds
Filing of deviations in the use of public issue proceeds and to appoint
monitoring agency to monitor utilization of proceeds etc.
CLAUSE 47: Appointment
of Company Secretary as
Compliance Officer
A CS to be appointed to act as compliance officer responsible for monitoring
the share transfer process and report to the company’s board in each board
meeting.
CLAUSE 49 : Corporate
governance
Board of directors and composition of board
Code of conduct of the directors to be published on the website.
Audit committee and its composition and frequency of its meeting.
Disclosures
CEO/CFO Certification
Report on CG, quarterly compliance report.
Compliance certificate from PCS or Company’s auditor.
CLAUSE 50: Accounting
Standard
Company should comply with all the accounting standards issued by ICAI.
CLAUSE 52: CFDS
All the listed companies are required to file information with SE only through
CFDS which is put in place jointly by BSE and NSE at www.corpfiling.co.in
REPORT ON CORPORATE GOVERNANCE
General Overview & General contents
General Overview
Contents
The companies shall submit a quarterly compliance report to the SE within 15 days
from the close of quarter as per the format prescribed in the clause. The report is required
to be signed either by the Compliance officer or the CEO of the company
Philosophy on Corporate Governance
Composition of Board of Directors
Board Meetings
Audit Committee
Remuneration Committee
Investor Grievance Committee
General Body Meetings
Disclosures
Means of Communication
General Shareholder information
Code of Business conduct
Ethics for Directors and Management personnel, etc.
TYPES OF LISTING
Initial, public issue, rights issue, bonus & merger / amalgamation
Initial Listing
Listing for public issue
Listing for Rights issue
If the shares or securities are to be listed for the first time by a
company on a stock exchange it is called initial listing.
When a company whose shares are listed on a stock exchange comes
out with a public issue of securities, it has to list such issue with the
stock exchange.
When companies whose securities are listed on the stock exchange
` issue securities to existing shareholders on rights basis, it has to list
such rights issue on the concerned stock exchange.
Listing of Bonus
Shares
Shares issued as a result of capitalisation of profit through bonus
issue shall list such issues also on the concerned stock exchange.
Listing for merger or
amalgamation
When new shares are issued by an amalgamated company to the
shareholders of the amalgamating company, such shares are also
required to be listed on the concerned stock exchange.
Benefits of Listing
Benefits
Description
High Liquidity and
Depth
 Indian Stock Exchanges have a high number of listed companies and provide
significant liquidity
 Additional recognition in case of presence in Sensex/ Nifty/ A group
Flexibility for future
capital raising
opportunities
 Multiple choice: QIP, Rights, Follow-on public issue, GDR, ADR, FCCB
Establishes profile
 Sharing history, business operations, strategy and growth plans helps develop
franchise value
 Enables branding and customer awareness; provides access to retail investors;
lenders have higher comfort with listed entities
Positive impact on
valuation
 Greater awareness amongst research analysts, fund managers, investment advisors
 Creates greater liquidity and market if part of the derivatives segment
Wealth creation
 Ability to create wealth for promoters and shareholders
 Provides a benchmark for Company valuation
Creation of currency
 Ability to create currency for strategic initiatives
 Leverage as currency for M&A, alliance etc.
Employee
incentivization
 Ability to serve HR initiatives; serves as an incentive mechanism for management
and employees e.g.: ESOS/ ESPS
 Mechanism for tracking management performance
Questions?
Thank you !