ROLE OF SEBI IN ISSUE OF SHARES

M. AMUDHA & P.SRIJA

Introduction

The Securities and Exchange Board of India (SEBI) is the regulatory

authority in India established under Section 3 of SEBI Act, 1992 which

provides for establishment of Securities and Exchange Board of India

(SEBI) with statutory powers for

(a) protecting the interests of investors in securities

(b) promoting the development of the securities market

(c) regulating the securities market.

Different kinds of share issues

TYPES OF OFFER DOCUMENTS

Requirements in Issue of Shares

Entry requirements for an issuer to make an issue / offer to public

• An unlisted issuer making a public issue i.e (making an IPO) is required to

satisfy the following provisions:

• Entry Norm I (Profitability Route)

• Entry Norm II (QIB Route)

• Entry Norm III (Appraisal Route)

• A listed issuer making a public issue (FPO)

• Certain category of entities which are exempted

OTHER PROVISIONS

Minimum Promoter’s

contribution and lock‐in

IPO Grading

SEBI’s ROLE IN AN ISSUE

Draft observation to be filed

SEBI – Value more than Rs.

50 lakhs

Observation letter validity –

3 months

no requirement of filing any offer

document / notice to SEBI

In case of preferential

allotment and Qualified

Institution Placement

(QIP).

In QIP,

Merchant Banker handling the issue• Has to file the

placement document with Stock exchanges for making the same available on their websites.

‘DIP’ GUIDELINES

How does SEBI ensure compliance with DIP?

Eligibility Norms for issuing Securities:Conditions for

issue of securities

Filing of offer document

Companies barred not to issue security

Exemption from the eligibility

norms

Sahara v/s SEBI

• Whether the issue of OFCDS to millions of

persons is a private placement and not covered

by SEBI regulations ?

• Whether listing provisions is mandatory for public

issues or depends on ‘intention of the company’ ?

Issues to be discussed:

LOCK-IN REQURIMENTS

20% of stake from IPO

AIF’s (PE, SMR, Infrastructure, VCF)

AIF’s contribution is only 10%

Proposal approved by SEBI

Recommendation is given by (PMAC)

PRICING IN ISSUE

ISSUER MERCHANT BANKER

SEBI APPROVAL

Book building

Price band

Working of BB

Cut-off option

Revise my bid

Cancelling my bid

Firm allotment

• “Allotment on firm basis”

• Allotment is for investors

• Price fixed in allotment is different from

public offer

Intitutional investing

Institutional Investing.mp4 Institutional Investing.mp4

Classification of investors

Retail individual investors

• Bid’s not more than Rs 1,00,000

• Purchase securities for his or her personal account

Qualified institutional investors

• Bid’s more than 1,00,000

• Purchased for large institutions like bank, insurance companies, etc

Non-institutional investors

• Bids more than 1,00,000

• Purchase securities for NRI’s, trusts etc

Allotment to various investors

In case of book built

issue

In case of fixed price

issue

Intermediaries involved in the issue process

Merchant banker

Banker to the issue

Registrars to the issue

Underwiters