SEBI Guidelines for IPOs
1. IPOs of
small companies
Public
issue of less than five crores has to be through OTCEI and separate guidelines
apply for floating and
listing of these issues.
(Public Offer By Small Unlisted Companies)
2. Size of the Public Issue
Issue
of shares to general public cannot be less than 25% of the total issue,
incase of information technology,
media
and telecommunication sectors this stipulation is reduced subject to the
conditions that:
-
Offer to the public
is not less than 10% of the securities issued.
-
A minimum number
of 20 lakh securities is offered to the public and
-
Size of the net
offer to the public is not less than Rs. 30 crores.
3.
Promoter Contribution
-
Promoters should
bring in their contribution including premium fully before the issue
-
Minimum Promoters
contribution is 20-25% of the public issue.
-
Minimum Lock in
period for promoters contribution is five years
-
Minimum lock in
period for firm allotments is three years.
4.
Collection centers for receiving applications
-
There should be
at least 30 mandatory collection centers, which should include invariably
the places where stock exchanges have been established.
-
For issues not
exceeding Rs.10 crores (including premium, if any), the collection centres
shall be situated at:-
o the four metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; and
o at all such centres where stock exchanges are located in the region in
which the registered office of
the company is situated.
5. Regarding allotment of shares
-
Net Offer to the
General Public has to be at least 25% of the Total Issue Size for listing
on a Stock exchange.
-
It is mandatory
for a company to get its shares listed at the regional stock exchange where
the registered office of the issuer is located.
-
In an Issue of
more than Rs. 25 crores the issuer is allowed to place the whole issue
by book-building
-
Minimum of 50%
of the Net offer to the Public has to be reserved for Investors applying
for less than 1000 shares.
-
There should be
atleast 5 investors for every 1 lakh of equity offered (not applicable
to infrastructure companies).
-
Quoting of Permanent
Account Number or GIR No. in application for allotment of securities is
compulsory where monetary value of Investment is Rs.50,000/- or above.
-
Indian development
financial institutions and Mutual Fund can be allotted securities upto
75% of the Issue Amount.
-
A Venture Capital
Fund shall not be entitled to get its securities listed on any stock exchange
till the expiry of 3 years from the date of issuance of securities.
-
Allotment to categories
of FIIs and NRIs/OCBs is upto a maximum of 24%, which can be further extended
to 30% by an application to the RBI - supported by a resolution passed
in the General Meeting.
6. Timeframes for the Issue and Post- Issue formalities
-
The minimum period
for which a public issue has to be kept open is 3 working days and the
maximum for which it can be kept open is 10 working days. The minimum period
for a rights issue is 15 working days and the maximum is 60 working days.
-
A public issue
is effected if the issue is able to procure 90% of the Total issue size
within 60 days from the date of earliest closure of the Public Issue. In
case of over-subscription the company may have the right to retain the
excess application money and allot shares more than the proposed issue,
which is referred to as the ‘green-shoe’ option.
-
A rights issue
has to procure 90% subscription in 60 days of the opening of the issue.
-
Allotment has
to be made within 30 days of the closure of the Public Issue and 42 days
in case of a Rights issue.
-
All the listing
formalities for a public Issue has to be completed within 70 days from
the date of closure of the subscription list.
7. Despatch of Refund Orders
-
Refund orders
have to be dispatched within 30 days of the closure of the Public Issue.
-
Refunds of excess
application money i.e. for un-allotted shares have to be made within 30
days of the closure of the Public Issue.
8. Other regulations pertaining to IPO
-
Underwriting is
not mandatory but 90% subscription is mandatory for each issue of capital
to public unless it is disinvestment in which case it is not applicable.
-
If the issue is
undersubscribed then the collected amount should be returned back (not
valid for disinvestment issues).
-
If the issue size
is more than Rs. 500 crores voluntary disclosures should be made regarding
the deployment of the funds and an adequate monitoring mechanism to be
put in place to ensure compliance.
-
There should not
be any outstanding warrants or financial instruments of any other nature,
at the time of initial public offer.
-
In the event of
the initial public offer being at a premium, and if the rights under warrants
or other instruments have been exercised within the twelve months prior
to such offer, the resultant shares will not be taken into account for
reckoning the minimum promoter's contribution and further, the same will
also be subject to lock-in.
-
Code of advertisement
specified by SEBI should be adhered to.
-
Draft prospectus
submitted to SEBI should also be submitted simultaneously to all stock
exchanges where it is proposed to be listed.
9. Restrictions on other allotments
-
Firm allotments
to mutual funds, FIIs and employees not subject to any lock-in period.
-
Within twelve
months of the public/rights issue no bonus issue should be made.
-
Maximum percentage
of shares, which can be distributed to employees cannot be more than 5%
and maximum shares to be allotted to each employee cannot be more than
200.
10. Relaxations to public issues by infrastructure companies.
These relaxations would be applicable to Infrastructure Companies as
defined under Section 10(23G)
of the Income Tax Act, 1961, provided their projects are appraised by any
Developmental Financial
Institution (DFI) or IDFC or IL&FS. The projects must also have a participation
of at least 5% of the
project cost (in debt and/or equity) by the appraising institution.
-
The infrastructure
companies will be exempted from the requirement of making a minimum public
offer of 25 per cent of its securities.
-
The requirement
of 5 shareholders per Rs. 1 lakh of offer is also waived in case of offerings
by infrastructure companies.
-
For public issues
by infrastructure companies, minimum subscription of 90% would no longer
be mandatory provided disclosure is made about the alternate source of
funding which the company has considered, in the event of under subscription
in the public issue.
-
Infrastructure
companies are permitted to freely price the offerings in the domestic market
provided that the promoter companies along with Equipment Suppliers and
other strategic investors subscribe to 50% of the equity at the same or
a higher price than what is being offered to the public. Adequate disclosures
about the justification for the pricing will be required to be made in
the offer documents.
-
The Infrastructure
Companies would be allowed to keep their issues open for 21 days. The relaxation
would give infrastructure companies sufficient time to mobilise funds for
their issues.
-
Infrastructure
Companies would not be required to create and maintain a Debenture Redemption
Reserve (DRR) in case of Debenture Issues.
Requirements
with respect to the listing of securities on a recognised stock exchange
Back to
Initial Public Offer
SEBI Guidelines
for IPOs
Public Issue of
existing limited companies
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