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A. Initial Public Offer
1. First issue by New companies:
    SEBI defines a new company as one which has not completed 12 months of commercial operations
   and  whose audited operative results i.e. Balance Sheet and Profit and Loss Statement are not
   available, and is set up by entrepreneurs without a track record.
  • Can issue capital to public only at par
  • Draft prospectus to be vetted by SEBI before the issue
  • The shares can be listed on OTCEI  or any other exchange
  • A public financial institution or a scheduled commercial bank should appraise the project
  • The appraising agency should participate in the financing of the project to the extent of atleast 10% of the   project cost
2. First issue of new companies promoted by existing companies
  • If the existing companies have a five year track record of consistent profitability, and are ready to hold 50% of the equity of the new company, it is free to price its issue and the price has to be applied to all investors uniformly.
  • In the above case Prospectus and offer documents should contain justification for issue price
  • Draft prospectus to be vetted by SEBI before the issue
  • The shares can be listed on OTCEI or any other exchange
3. First issue by existing private/closely held companies
  • Should have three year track record of consistent profitability for freely pricing the issue.
  • Can be listed on any stock exchange
  • Equity offered should not be less than 20%
  • Draft prospectus to be vetted by SEBI
  • Pricing to be determined by the issuer and the lead manager subject to adequate disclosures as specified by SEBI such as
        o Disclosure of the net asset value of the company as per the last audited balance sheet.
        o Justification for the issue price.

4. Disinvestment

  • Free pricing if the company has a three year track record of consistent profitability
  • Promoters stake after disinvestment should be 25%
  • Lock in period for Promoters contribution is five years
  • Minimum subscription of 90% not applicable
  • Draft prospectus to be vetted by SEBI


Back to Issue Guidelines for raising equity

SEBI Guidelines for IPOs
Public Issues by existing listed companies

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