sebi act.ppt
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Transcript of sebi act.ppt
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Guidelines for issuing commercial
paper
Commercial paper is one of the NON Bank
source of working capital finance.
The raising of funds through commercial
paper is regulated by the direction of reserve
bank of India.
The issue of commercial paper is regulated by
non- banking companies directions, 1989
which came into force on 1 January 1990.
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Issue of commercial paper
Tangible net worth is not less than 4 crore.
Fund based working capital is not less than rs.4crore.
Specified credit rating of P2-crisil
A2-icra
Pr2-care
Borrower health is classified under health codeno. 1 and
Current ratio is 1.33:1.
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Usance
Commercial paper can be issued for a
minimum period of three months and
maximum of one year.
No grace period is allowed for payment. If the
maturity date falls on a holiday it should be
paid on the previous working day.
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Denomination:
Commercial paper is issued in denomination
of 5 lakh. but the minimum lot is rs. 25 lakh.
The total amount proposed to be issued
should be raised within 2 weeks from the date
of the proposal is taken on record by the bank.
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Ceiling:
The aggregate amount that can be raised bycommercial paper should not exceed 75 percent
of the companys fund based working capital. Mode of issue and discount rate:
Commercial paper is issued should be in the formof promissory note and negotiable byendorsement and delivery.
It can be issued at discount rate.
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Issue expenses:
Issue expenses like dealers fees rating agency
fees and other relevant expenses should be
born by the company.
Investor:
Commercial paper can be issued to anyperson, banks, company, or other registered
corporate body and incorporated body.
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Procedure for the issue:
Company submit the proposal in the formprescribed by the RBI to the bank. The bank
scrutinize the application and on being satisfiedthat eligibility criteria has met place the issuewithin 2 weeks. The initial investor pay thediscounted value of the paper.
The company must advise RBI, through the bank,of the amount of commercial paper issued within3 days.
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Guidelines for issue of shares
I.First issue by a new company:
A. Manufacturing company:
1) Should be dividend company: a companyshould have a track record of distributable
profits for at least 3 out of 5 preceding year
and pre-issue net worth of not less than 1
crore in 3 out of preceding 5 years.
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2) IPO size and Pre-issue Net worth: if the
company had a record of profitability and net
worth as specified in guidelines then the
company would allowed to issue an IPO up to
5 times of the pre-issue Net worth.
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3) Minimum public offer by the IT, Media,
Entertainment and telecom companies:
IT- public offer should be at least of s. 50 crore
and offer at least 20 lakh securities.
Media, entertainment, telecom companies- the
size of public offer should not be less than rs.
5 crore.
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4) Infrastructure companies:
Infrastructure companies were exempted
from making a minimum public offer of 25 %
of its security, 5 shareholders per rs 1 lakh of
offer and a minimum subscription of 90%.
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B) Finance company:
Those who have a track record of 2 years of
operation or registered as a non-banking
finance company by the RBI are eligible to
issue the securities as per the guidelines.
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II First issue by new company set up by an
existing company:
New company set up by an existing company
with 5 years track record of consistent
profitability provided the participation of the
promoting company is not less than 50 % of
the equity of the new company.
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III Public issue by Existing Listed companies:
Existing listed companies can raise fresh capitalin the capital market. These companies are free
to price their new shares. if the banks are raising fresh capital at premium
then they have to satisfy the criteria of any 2years profitability for such issue.
Company have to indicate the high and low priceof its shares for the last two years in the offercontent.
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IV public issue by existing unlisted Public
company:
Existing unlisted company can enter in the
capital market only when it has to pay the
regular dividend in the immediately preceding
3 years out of 5 years.
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V. first issue by existing private company:
Companies without track record can price the
issue at par only. An unlisted company can
freely price its securities provided it earned
net profits in the immediately preceding 3
year.
Not less than 20 % of equity should be offered
to public.
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Draft prospectus will be vetted by SEBI toensure adequacy of disclosure.
Companies with track record of 3 year but
promoted by the company with 5 years trackrecord are free to price the issue.
Price would be determined by the issuer and
lead manager to the issue and have to disclosethe net asset value of the company as per thelatest audited balance sheet.
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Guidelines for Right issue
The company have to submit a draft letter of
offer to SEBI for vetting to obtain an
acknowledgement card to raise the capital on
right basis.
The company are not allowed to raise the
capital not more than 50 lakh on right basis
unless the category-1 merchant bankers hassubmitted the offer document to the SEBI.
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If the company does not receive the amount
of minimum subscription within 42 days from
the date of closure of the issue, the entire
amount of subscription has to be refunded
within next 8 days.
If company fails to refund within such period it
will pay interest for the delayed period.
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The merchant banker have to submit the draft
letter at least 6 weeks before its issue.
incorporate comments received from the SEBI
within 3 weeks of the receipt of the draft and
submit a copy of the letter of offer to the SEBI
within 2 week of issue.
Any statement of offer should not contravene
any provision of the company act.
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Guidelines for issue of Bonus Shares
The bonus shares should be out of freereserve built out of genuine profits.
No bonus share shall be made which will
dilute the value of right of the holders ofdebentures, convertible fully or partly.
A company which announce its bonus issue
after the approval of the board of directorsmust implement the proposal within a periodof 6 months from the date of such approval.
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All contingent liabilities disclosed in the
audited accounts which have bearing on the
net profits, shall be taken into account in the
calculation of the residual reserve.
The declaration of bonus in lieu of dividend is
not made.
The bonus is not made unless the partly paid
shares is not made fully paid up.
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Reservations and firm allotment:
The reservation should not exceed 75 % of the
total issue amount.
Reservation in issue of shares:
Permanent employees including directors of
the company and in case of new company the
permanent employees of the promoting
company- MPA is 10 %.
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Shareholders of the promoting companies in
case of new companies and in case of existing
company the shareholders of group company-
MPA is 10%.
Indian mutual funds on a competitive basis-
MPA is 20%.
Foreign institutional investors including NRIs
and OCB MPA is 30%.
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Firm allotment:
FII-30%
Fis-20%
Indian Mutual Funds-20%
Permanent regular employees-10%
Lead merchant banker- 5%
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Guidelines for preferential allotment
The guidelines laid down by the SEBI permit
the issuing company to make preferential
allotment by complying with the provision of
the companies act.
The allotment should be made at the market
value of shares.
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The market price shall be determined by the
average value of weekly high and low of the
closing prices during the preceding 6 months
or weekly high and low of the closing pricesduring the preceding 2 weeks whichever is
higher.
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SEBI allowed to listed companies to make
preferential allotment to FIIs.
SEBI has imposed a 5 year lock in period for
shares, warrants and debentures issued on
preferential basis.
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Employee stock option
ESOP is a voluntary scheme which encourageemployee participation in the company.
Guidelines:
The issue size under ESOP should not exceed5% of the paid up capital of the company inone year.
The company cant allot securities topromoters and the part-time director underESOP.
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A company introducing ESOP has to submit a
certificate to the concerned stock exchange
that the securities have been issued as per the
scheme to permanent regular employees.
The companies are free to devise the ESOP
including the terms of payment.
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Guidelines for book building
Book building is a method of issue of sharesbased on floor price which is indicated beforethe opening of bidding process.
Book building involves firm allotment of theinstrument to a syndicate or a merchantbanker.
The lead merchant banker or the syndicatemember of the issue will nominate as a bookrunner by the issuer company.
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The book runner has to circulate the copy of
the draft prospectus to be filed with SEBI and
among the instructional buyers who are
eligible for firm allotment.