What are the eligibility norms for an unlisted company for making a public
issue?
An unlisted company has to satisfy
the following criteria to be eligible to make a public issue
Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out
of last 5 years with minimum networth to be met during immediately preceding 2
years and track record of distributable profits for at least three (3) out of
immediately preceding five (5) years and the issue size (i.e. offer through
offer document + firm allotment + promoters’ contribution through the offer
document) shall not exceed five (5) times its pre-issue networth.
In case an unlisted company does not satisfy any of the above criterion, it can
come out with a public issue only through the Book-Building process. In the Book
Building process the company has to compulsorily allot at least sixty percent
(60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing
which the full subscription monies shall be refunded.
What are the eligibility norms
for a listed company for making a public issue?
A listed company is eligible to make
a public issue if the issue size (i.e. offer through offer document + firm
allotment + promoters’ contribution through the offer document) is less than
five (5) times its pre-issue networth.
If the issue size is more than or equal to 5 times of pre-issue networth, then
the listed company has to take the book building route and allot sixty percent
(60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing
which the full subscription monies shall be refunded.
For details refer Chapter II of SEBI (DIP) Guidelines and relevant
clarifications issued subsequently.
Are there any restrictions on
pricing by companies?
The companies can freely price their
equity shares. However they have to give justification of the price in the offer
document / letter of offer.
What are the requirements
regarding promoters contribution and lock-in?
In case of an Initial Public Offer
(IPO) i.e. public issue by unlisted company, the promoters has to necessarily
offer at least 20% of the post issue capital.
In case of public issues by listed companies, the promoters shall participate
either to the extent of 20% of the proposed issue or ensure post-issue share
holding to the extent of 20% of the post-issue capital.
In case of any issue of capital to the public the minimum contribution of
promoters shall be locked in for a period of 3 years, both for an IPO and Public
Issue by listed companies.
In case of an IPO, if the promoters contribution in the proposed issue exceeds
the required minimum contribution, such excess contribution shall also be locked
in for a period of one year.
In case of a public issue by a listed company, participation by promoters in the
proposed public issue in excess of the required minimum percentage shall also be
locked-in for a period of one year as per the lock-in provisions as specified in
Guidelines on Preferential
issue.
Beside the above, in case of IPO the entire pre-issue share capital i.e. paid up
share capital prior to IPO and shares issued on a firm allotment basis along
with issue shall be locked-in for a period of one year from the date of
allotment in public issue.
What is the basis of allotment?
In case of over-subscription in a
fixed price issue the allotment is done in marketable lots, on a proportionate
basis (for details refer to clause 7.6.1 of DIP Guidelines).
In case of a book building issue, allotment to Qualified Institutional Buyers
and Non-Institutional buyers are done on a discretionary basis. Allotment to
retail investors is done on a proportionate basis as per provisions of Clause
No. 7.6.1 of Guidelines.
How does one come to know of
issues on offer and from where can one get copies of the draft offer document?
Every week SEBI issues press releases
for information of the public, details of offer documents filed with SEBI and
observations issued. Details can be obtained from the "Primary Market ' page of
the SEBI website. The draft offer document can also be purchased from the SEBI
office where the document is filed on payment of Rs.100/- by way of DD drawn in
favor of SEBI. The draft offer document/letter of offer remains posted on SEBI
website for a period of 21days from the date of filing the same to SEBI and can
also be downloaded from there.
From where does one get the
application forms and the prospectus?
Application form can be obtained from
the lead manager and brokers to the issue. The application forms are also
generally available at collecting bankers. Name and addresses of the Lead
Manager are available in the prospectus/letter of offer.
Can the public give their
comments/complaints on the Issuer company or others connected with the issue?
Yes, the objective of making offer
document public is to invite public comments. The comments should be given
within 21 days of the filing of the Draft offer document with SEBI.
Where does one complain in case
of wrong/ non-disclosures/ mis-statement in the offer document?
The Primary Market Division in SEBI.
Within how many days an investor
should receive the refund order/ allotment advise?
Despatch of refund orders / allotment
advice is to be within 2 working days of finalisation of the basis of allotment.
Companies are required to finalise the basis of allotment within 30 days from
the closure of the issue in case of a fixed price issue and within 15 days from
the closure of the issue in case of a book building issue or else they are
liable to pay interest @ 15% p.a.
In case of non-receipt of the refund order / share certificate/ allotment advise
what is the course of action available to the investor?
The investor should give his
complaint in writing to the lead manger/ registrar/ Investor Grievance Cell of
SEBI.
Within how many days should the
company get its securities listed after the issue?
The post issue lead manager ensures
that all steps for completion of the necessary formalities for listing and
commencement of trading at all stock exchanges where the securities are to be
listed are taken within 7 working days of finalisation of basis of allotment.
Is it mandatory
to have a Demat Account for applying in public issue?
An investor has the option to apply
for and receive the shares in physical form. However, it is advisable to get the
allotment in Demat form as the shares in IPO shall be compulsorily tradable in
Demat segment in Stock Exchanges. Dealing of physical shares (allocated in IPO)
will not be accepted. In case of an IPO of any security of issue size of Rs. 10
crore or more, security shall be issued only in dematerialised form. In book
built issues, for QIBs and large investors (applying for more than 1000 shares)
allotment shall be only in Demat form and hence they should have a Demat
account.
From where can I get the
addresses of the companies and details of change of names etc.?
From the stock exchanges and
Registrar of Companies
What is Book Building?
SEBI Guidelines define Book Building
as a process undertaken by which a demand for the securities proposed to be
issued by a corporate body is elicited and built up and the price for such
securities is assessed for the determination of the quantum of such securities
to be issued by means of a notice, circular, advertisement, document or
information memoranda or offer document.
What is the main difference
between offer of shares through book building and offer of shares through normal
public issue?
Price at which securities will be
allotted is not known in case of offer of shares through book building while in
case of offer of shares through normal public issue, price is known in advance
to investor. In case of Book Building, the demand can be known everyday as the
book is built. But in case of the public issue the demand is known at the close
of the issue.
What is minimum number of days
for which bid should remain open in book building?
Book should remain open for minimum
of 5 days.
Can open outcry system be used
for book building?
No. As per SEBI, only electronically
linked transparent facility is allowed to be used in case of book building.
Is the issue price for placement
portion and net offer to public the same?
Yes.
What is the floor price in case
of book building?
Floor price is the minimum price at
which bids can be made.
Can the Individual Investor use
book building facility for making an application?
Yes.
Can the bidder revise his bids?
Yes.
What proof can bidder request
from trading member for entering bids?
A bidder can request for a
transaction registration slip as the proof of his/ her having entered the bid.
Whenever a bid is entered by trading members in to the system, a unique
transaction registration slip is automatically generated. Transaction
registration slip gives details regarding number of shares bided for, price, the
client name etc.
Is
it possible to enter bids less than floor price?
No. The system automatically rejects
the bids if price is less than floor price.
Users may note to go through the Guidelines in detail for a thorough
understanding of the provisions. Queries seeking information of an advisory
nature would not be responded to by SEBI. Users are also advised to refer to
"Quick Guide for Investors" for jurisdictions of relevant authorities for
various matters. Queries pertaining to other authorities would not be responded
to by SEBI.
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