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ISSUE MANAGEMENT

ACTIVITIES AND
PROCEDURES
ELIGIBILITY NORMS
PRICING OF ISSUES
CONTENTS OF OFFER DOCUMENT
ISSUE ADVERTISEMENT
ISSUE OF DEBT INSTRUMENTS
BOOK BUILDING
GREEN SHOE OPTION
E-IPO
ISSUE OF CAPITAL BY DESIGNATED FINANCIAL INSTITUTION

A.S.SADHAM
14PBA155

FILING OF OFFER DOCUMENT:

For issue amount exceeding Rs.50 lakhs, draft prospectus, to be filed with SEBI,

through registered Merchant Banker, 21 days prior to filing with the ROC.
Not allowed for cost prohibited by SEBI from accessing capital markets.
The eligibility norms for issue of equity shares and convertible securities relate to (I)
Unlisted Companies (2) Listed companies.

IPOS/OFFER FOR SALE BY UNLISTED COMPANIES:

It has net tangible assets of at least Rs.3 core each for preceding 3 full years, of which

not more than 50% should be monetary assets.


Distributable profits for at least 3 out of 5 preceding years.
Net worth of Re. 1 core at least in past 3 full years.
In case of change of name, at least 50% of revenue under new name.
Or at least 15% participation of banks/FIs, of which 10% from appraisers. In addition
at least 10% of the issue size should be allotted to the QIBs, failing which

subscription to be refunded.
The minimum post issue face value of the capital would be Rs.10 core .
An unlisted company complying all of the above, can allot equity shares/ convertible
securities only if the no. of the prospective allotted is not less than 1000.

PUBLIC ISSUE BY LISTED COMPANIES:

All listed cos. Allowed to make public issue of equity/convertible securities if issue
size of aggregate of the proposed issue and all previous issues in the same financial
year , does not exceed 5 times its pre-issue net worth, as per last audited balance

sheet.
In case of change of name, the revenue under new name/activity should not be less

than 50^% of its total revenue in the preceding full year.


If above conditions not complied with, listed cos. allowed to make public issue
through book building process. (Same conditions as unlisted co.)

PRICING OF ISSUES:

Listed co. and unlisted cos. can freely price the equity shares/convertible securities

through a public /rights issues. EXCEPT:


infrastructure cost, which are subject to disclosure norms as per SEBI, and
Banks which require prior approval of RBI.

DIFFERENTIAL PRICING:

Listed /Unlisted cos. May issue shares/securities in the firm allotment category at

prices different from the price at which the net offer to the public , provided
The price at the firm allotment is done, is higher than the price at which securities are

offered to the public.


(Firm allotment: allotment on firm basis to Indian /multilateral development Inst.,
Indian mutual funds, FIIs, regular/permanent employees of the Co.)

ISSUE ADVERTISEMENT:

Advertisement includes notices, brochures, pamphlets, circulars, hoardings,

newspapers ads, films, cover pages etc.


The merchant banker has to follow the guidelines while issuing the advt. On the

issue:
Ad should be true, fair, and not be misleading.
It should reproduce information contained in the offer document in full and disclose

relevant facts.
Extensive use of technical, legal terminology, and excessive details to distract

investors to be avoided.
No models , celebrities , fictional characters, should be displayed
Ads containing financial data should contain past three yrs. Data.
All ads to contain risk factors.

ISSUE OF DEBT INSTRUMENTS:

Public issue can be made only if credit rating of a minimum investment obtained from

at least 2 registered Credit rating agencies.


Debenture Trustee to be appointed by the Issuer before issuing offer document to the

public. Names of Debenture Trustees in the offer document.


Trust Deed should be executed by the co. in favor of debenture Trustees.
Merchant banker to file with debenture trustee a certificate, that the asset for creation
of charge are free from encumbrances.

DRR - Debenture redemption reserve to be created for the life of debentures.


The co. should create DRR equivalent to 50% of the amount of debenture issue

before the commencement of debenture redemption.


Not applicable to infrastructure companies.
Disclosure: details regarding the assets with charge, the valuation methods for the

assets, the rankings of the charge etc., to be disclosed.


For creation of charge for debentures due in less than 18 months, the issuing co.
should file these details with ROC. Where no charge is created, to be treated as a
Deposit.

BOOK BUILDING:

A process where the demand for the securities under Proposed issue ,is elicited and
built up and the price for such securities is assessed for the determination of the

quantum of securities to be issued by means of notice/ad/offer document etc.


Available to all body corporates eligible to make public issue, as an alternative to firm

allotment.
Prospectus to contain name of the book runner (merchant banker), and copy of the

same circulated to the institutional buyers eligible for the firm allotment.
Book runners to maintain record of the securities being ordered and price at which the

institutional buyer is willing to subscribe, under the placement portion.


On receipt of the orders the book runners and the issuing co. determine the price at
which the securities would be offered to the public. The issue price of the placement

portion and offer to the public should be the same.


Within two days of the price determination, the prospectus to be filed with ROC, and
the issuing co.to open two separate A/c for collection of the application monies.

GREEN SHOE OPTION:

GSO means an option of allocating shares in excess of the shares included in the
public issue and operating a post listing price stabilizing mechanism through a

stabilizing agent (SA).


Making and IPO of equity shares through the book building mechanism, can avail of
the green shoe option.

Generally the lead book runner, appointed as the SA (stabilizing agent). An agreement

is signed with the SA, prior to the filing of the offer document with SEBI.
Also an agreement with the promoters who would lend their shares, specifying max.
No. of shares, but in no case exceeding 15% of the total issue.

E IPO

Initial public offer through stock exchange online system.


Stock exchange registered stock brokers to accept application and place orders with

the issuing company.


The co. before filing offer document with the ROC, to issue advertisement about the
IPO in English and Hindi newspapers, which should containing the process of

application, the names and addresses of the brokers .


All applicants approach the broker for making an online application to the issue.
Application money paid through cheques/demand drafts, directly to the Registrar or

through the broker, who opens a separate bank a/c. for the same.
On allotment, the computer file of the allotted is sent to the respective brokers, by the
issuing co.

PRE ISSUE OBLIGATIONS

Underwriting: merchant bankers to ensure, that the underwriters are capable of


discharging their underwriting obligations, and must include a statement in the offer

document to that effect.


Dispatch of Issue Material: dispatched to all stock exchanges, brokers, underwriters,

bankers and so on.


NO complaints certificate: MB to file with SEBI, giving list of complaints received

by it and stating whether it is going to amend the draft.


Authorized Collection Agents
Advertisement for Rights Post Issues, appointment of compliance officer (for SEBI
guidelines), Abridged Prospectus (along with every application form), and Agreement
with Depositories (completed), Branding of securities.

POST ISSUE OBLIGATIONS:

Underwriters: lead merchant banker to ensure that issue closes on earliest date only
if it is fully subscribed, or it should continue for the required no. of days to take care

of the Underwriters interests.


Bankers to an Issue : post issue lead merchant banker to ensure, that the applications
monies maintained in separate bank A/c. are released only after the listing permission

has been obtained from all stock exchanges.


Post Issue Advertisements: post issue advertisements containing details of date of
refund order dispatch, date of filing of listing application, dispatch date of certificates,

should be released within 10 days from date of completion of such activities.


Ad for closure of the issue to be issued only after actual closure.

OTHER ISSUE REQUIREMENTS:

Disclosures required under listing agreement to be complied with.


No partly paid up shares at the time of filing draft of offer document with SEBI.
The equity held by promoters can be listed only after IPO of equity/securities

convertible to equity has been made.


Capital Structure : for presentation of capital structure in the specified format,

merchant banker to take into account the following :


Proposed issue amount = Promoters contribution + Firm allotment

+ offer through

offer document. Offer through offer document should include net offer to the Indian
public and the reservations to the permitted reserved categories.

TERMS OF ISSUE:
Minimum no. of share applications and Application Money in Public:

Public issue at par : min. application is fixed at 200 shares with face value of Rs.10
Public issue at premium/issue of convertible or non-convertible securities: min.

application not less than Rs.2000.


Minimum application money paid by an applicant should not be less than 25% of the

issue price.
Full payment of securities: entire subscription money if collected through calls,

should be collected within 12 months of date of allotment.


If issue size is above Rs.500 core subject to monitoring, then 12 MThs does not apply.

Period of Subscriptions: for public issues should be kept open for latest 3 working
days and not more than 10 days. For infrastructure cost max period is 21 working

days.
Rights Issue: between 30 - 60 days.
Other terms relating to Price band, retention of oversubscriptions, underwriting,
updating of offer document etc.,