SEBI Guidelines on Public Issue

PRESENTED BY GROUP-2

SAJALA MAHAJAN

ANKUR GOEL

ADITYA SHRESTHA

GAURAV PRASAD GAUR

ASHISH BHATTA

INTRODUCTION

SEBI(Securities and Exchange Board of India) was constituted on April 12,1988 as a non-statutory body

It is an apex body to develop and regulate the stock market in India

SEBI is the regulator for the securities market in India, originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament.

OBJECTIVES

To protect the interest of investors so that there is a steady flow of savings in to the capital market.

To regulate the securities market

Ensure fair practices by the issuers of securities so that they can raise resources at minimum cost.

To promote efficient services by brokers, merchant bankers and other intermediaries so that they become competitive and professional.

Filing of offer documents

1. Public issue prospectus to be filed with ROC after 21 days of filing draft prospectus with SEBI

2. Changes specified by SEBI to be incorporated

3. Lead Merchant Banker to do the filing

Issue of Securities in Dematerialized form

- agreement with both depositories- option to subscribes / shareholders / investors

Eligibility

- Track record of distribution profits for 3 out of the last 5 preceding 5 years- Pre-issue network of at least Rs.1 lakh in 3 of the last 5 year with the minimum network for the last 2 years

ora) FI/Bank has appraised the projectb) Participates in at least 10% of project last by way of

loan, equity or combination

Exemption to Eligibility Norms

1. Existing banking company2. New Bank3. Infrastructure company whose

a. Project is appraised by a public Financial Institute etc.b. 5% financed by the PFI or equityc. Rights issue of a listed company

If public issue is of a debt instrument irrespective of maturity- Rating from a recognized rating agency- If above Rs.100 cr. – 2 agencies rating

Public issued not allowed - if there are any outstanding financial instrument / right entitling existing promoters / shareholders-if any partly paid up shares are yet to be fully paid or forfeited

PROMOTERS CONTRIBUTION AND LOCK-IN REQUIREMENTS

• Promoters Contribution in a Public Issue by Unlisted Companies shall contribute not less than 20% of the post issue capital.

• Promoters Contribution 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.

Promoters Contribution in Case of Composite Issues

In case of composite issues of a listed company, the promoters contribution shall at the option of the promoter(s) be either 20% of the proposed public issue or 20% of the post-issue capital.

Rights issue component of the composite issue shall be excluded while calculating the post-issue capital.

Lock in of Minimum Specified Promoters Contribution in Public Issues

In case of any issue of capital to the public the minimum promoters contribution shall be locked in for a period of 3 years from the date of commencement of commercial production or the date of allotment in the public issue whichever is later.

Regulatory functions

Regulation of stock exchanges and self regulatory organizations.

registration and regulation of stock brokers , sub-brokers , registrars of all issues, merchant bankers, underwriters, portfolio managers..etc

Prohibition of fraudulent and unfair trade practices relating to securities market.

Prohibiting of insider trading.

Regulating substantial acquisition of shares and takeovers of the company.

Developmental Functions

Promoting investors education. Training of intermediaries. Conducting research and publishing information useful

to all market participants. Promoting of fair practices. Promotion of self regulatory organizations.

Powers of SEBI Power to call periodical returns from recognized stock exchanges .

Power to compel listing of securities by public companies.

Power to levy fees or other changes for carrying out the purposes of regulation.

Power to direct enquiries to be made in relation to affairs of stock exchanges or their members.

Power to grant registration to market intermediaries

Power to grant approval to bye-laws of recognized stock exchanges.

Power to control and regulate stock exchanges.

Pre- Issue Obligations• THE LEAD MERCHANT BANKER SHALL EXERCISE DUE DILIGENCE

• ALL THE ASPECTS OF OFFERING, VERACITY AND ADEQUACY OF DISCLOSURE IN THE OFFER DOCUMENTS SHOULD BE FULLY SATISFIED.

• THE LIABILITY OF THE MERCHANT BANKER SHALL CONTINUE EVEN AFTER THE COMPLETION OF ISSUE PRICE.

• THE LEAD MERCHANT BANKER, SHALL PAY REQUISITE FEE IN ACCORDANCE WITH THE REGULATION 24A OF SECURITIES AND EXCHANGE BOARD OF INDIA RULES AND REGULATION , 1992.ALONG WITH THE OFFER DOCUMENT FILED WITH THE BOARD.

Documents to be Submitted Along With Offer Document

THE LEAD MERCHANT BANKER NEED TO SUBMIT THE FOLLOWING DOCUMENT ALONG WITH OFFER DOCUMENTS

• COPY OF AGREEMENT BETWEEN ISSUER & LEAD MERCHANT BANKER

• COPY OF INTER-SE ALLOCATION OF RESPONSIBILITIES OF EACH MERCHANT BANKER

• A DUE DILIGENCE CERTIFICATE AS PER FORM A OF SCHEDULE VI

• A COPY OF RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE ISSUER FOR ALLOTTING SPECIFIED SECURITIES

• A CERTIFICATE FROM CHARTERED ACCOUNTANTS BEFORE OPENING OF THE ISSUE, CERTIFYING THE PROMOTERS CONTRIBUTION

Rules Regarding the IssueNO ISSUER SHALL MAKE A PUBLIC ISSUE OF SPECIFIED SECURITIES :

• IF THE ISSUER ARE DEBARRED FROM ACCESSING THE CAPITAL MARKET BY THE BOARD

• IF THE ISSUER ARE DEBARRED FROM ACCESSING THE CAPITAL MARKET UNDER ANY ORDER OR CONDITIONS OF BOARD

• ENTERED INTO AN AGREEMENT FOR DEMATERIALISATION OF SECURITIES

• ALL EXISTING PARTLY PAID-UP EQUITY SHARES SHOULD BE EITHER FULLY-PAID UP OR FORFEITED

• IF THE ISSUER OF CONVERTIBLE DEBT INSTRUMENTS IS IN THE LIST OF DEFAULTERS BY RESERVE BANK OF INDIA.

• UNLESS FIRM ARRANGEMENTS OF FINANCE THROUGH VERIFIABLE MEANS TOWARDS SEVENTY FIVE PERCENT OF THE STATED MEANS OF FINANCE EXCLUDING THE AMOUNT TO BE RAISED THROUGH THE PROPOSED PUBLIC ISSUE

Rules Regarding Further Issue of Capital

• NO COMPANY TO MAKE ANY FURTHER ISSUE OF CAPITAL IN ANY FORM,

• TILL THE SECURITIES ISSUED EARLIER HAVE BEEN LISTED OR APPLICATION MONEYS REFUNDED ON ACCOUNT OF NON-LISTING OR UNDER SUBSCRIPTION, ETC.

• NO COMPANY SHALL, PENDING CONVERSION OF FULLY CONVERTIBLE DEBENTURES (FCDS) OR PARTLY CONVERTIBLE DEBENTURES (PCDS), ISSUE ANY SHARES BY WAY OF BONUS OR RIGHTS UNLESS SIMILAR BENEFIT IS EXTENDED TO THE HOLDERS OF SUCH FCDS OR PCDS, THROUGH RESERVATION OF SHARES IN PROPORTION TO SUCH CONVERTIBLE PART OF FCDS/PCDS.

• THE SHARE SO RESERVED MAY BE ISSUED AT THE TIME OF CONVERSION(S) OF SUCH DEBENTURES ON THE SAME TERMS ON WHICH THE BONUS OR RIGHTS ISSUE WAS MADE.

Period of Subscription

• SUBSCRIPTION LIST FOR PUBLIC ISSUES SHALL BE KEPT OPEN FOR AT LEAST 3 WORKING DAYS AND NOT MORE THAN 10 WORKING DAYS.

• THE PUBLIC ISSUE MADE BY AN INFRASTRUCTURE COMPANY, MAY BE KEPT OPEN FOR A MAXIMUM PERIOD OF 21 WORKING DAYS.

• THE PERIOD OF OPERATION OF SUBSCRIPTION LIST OF PUBLIC ISSUE SHALL BE DISCLOSED IN THE PROSPECTUS.

Merchant Banker, Compliance Officer and Monitoring Agency

MERCHANT BANKER

THE MERCHANT BANKER REGULATES THE RAISING OF FUNDS IN THE PRIMARY MARKET , WOULD ASSURE FOR THE ISSUER MARKET FOR RAISING RESOURCES AT LOW COST , EFFECTIVELY AND EASILY ENSURE HIGH DEGREE OF INVESTOR PROTECTION

• TO ENSURE THAT THE PARTICULARS AS PER AUDITED STATEMENTS CONTAINED IN THE OFFER DOCUMENT ARE NOT MORE THAN 6 MONTHS OLD FROM ISSUE OPENING DATE.

• IN RESPECT OF A GOVERNMENT COMPANY MAKING A PUBLIC ISSUE, THE AUDITORS REPORT IN THE PROSPECTUS SHALL NOT BE MORE THAN SIX MONTHS OLD AS ON THE DATE OF FILING OF THE PROSPECTUS WITH THE REGISTRAR OF COMPANIES OR THE STOCK EXCHANGE AS THE CASE MAY BE

COMPLIANCE OFFICER• THE MERCHANT BANKERS SHALL APPOINT A SENIOR OFFICER AS COMPLIANCE OFFICER TO

ENSURE THAT ALL RULES, REGULATIONS, GUIDELINES, NOTIFICATIONS ETC. ISSUED BY THE BOARD, THE GOVERNMENT OF INDIA, AND OTHER REGULATORY ORGANIZATIONS ARE COMPLIED WITH.

• THE COMPLIANCE OFFICER SHALL CO-ORDINATE WITH REGULATORY AUTHORITIES IN VARIOUS MATTERS AND PROVIDE NECESSARY GUIDANCE AS ALSO ENSURE COMPLIANCE INTERNALLY.

• THE COMPLIANCE OFFICER SHALL ALSO ENSURE THAT OBSERVATIONS MADE/ DEFICIENCIES POINTED OUT BY THE BOARD DO NOT RECUR.

MONITORING AGENCY• IN CASE OF ISSUES EXCEEDING RS.500 CRORES, THE ISSUER SHALL MAKE ARRANGEMENTS FOR

THE USE OF PROCEEDS OF THE ISSUE TO BE MONITORED BY ONE OF THE FINANCIAL INSTITUTIONS.

• A COPY OF THE MONITORING REPORT AS PER THE FORMAT SPECIFIED AT SCHEDULE-XIX, SHALL BE FILED WITH THE BOARD BY THE SAID MONITORING AGENCY, ON A HALF YEARLY BASIS, TILL THE COMPLETION OF PROJECT, FOR THE PURPOSES OF RECORD.