Subsection

7/22/2019 Subsection

1/22

1

SubSection I

IssuesbyIndianCompaniesinIndia

This subsection attempts to cover the basic concepts and questions related to issuance of

securities by unlisted Indian companies1 offering the shares to public and by listed Indian

companies2. For full particulars of laws governing primary markets, please refer to the

Acts/Regulations/GuidelinesappearingintheLegalFrameworkSection.

FAQsare

presented

under

following

12

broad

headings.

1. Differentkindsofissues2. Typesofofferdocuments3. Issuerequirements4. Pricingoftheissue5. Understandingbookbuilding6. InvestmentinPublic/Rightsissues7. CategoriesofInvestors8. Intermediariesinvolvedintheissueprocess9. Guidetounderstandanofferdocument10.SEBIsroleinanissue11.Newterms12.Additionalinformation

1UnlistedCompanymeansacompanywhichisnotalistedcompany.2ListedCompanymeansacompanywhichhasanyofitssecuritiesofferedthroughanofferdocumentlistedona

recognized stock exchange and also includes Public sector Undertakings whose securities are listed on a

recognizedstockexchange.


2/22

2

1. DifferentkindsofissuesWhatarethedifferentkindsofissueswhichcanbemadebyanIndiancompanyinIndia?

Primarily, issuesmadebyan IndiancompanycanbeclassifiedasPublic,Rights,Bonusand

PrivatePlacement.Whilerightissuesbyalistedcompanyandpublicissuesinvolveadetailed

procedure,bonus issuesandprivateplacementsarerelativelysimpler.Theclassificationof

issuesis

as

illustrated

below:

(a)Publicissue(i) InitialPublicoffer(IPO)(ii) Furtherpublicoffer(FPO)

(b)Rightsissue(c) Bonusissue(d)Privateplacement

(i) Preferentialissue(ii) Qualifiedinstitutionalplacement

(a)Public issue:Whenan issue/offerofsecurities ismadetonew investors forbecomingpartof shareholders familyof the issuer

3 it iscalledapublic issue.Public issuecanbe

further classified into Initial public offer (IPO) and Further public offer (FPO). The

significantfeaturesofeachtypeofpublicissueareillustratedbelow:

3EntitymakinganissueisreferredasIssuer

Issues

PublicIssue RightsIssue BonusIssue PrivatePlacement

IPO FPO

FreshIssue

Offerforsale

FreshIssue

OfferforSale

PreferentialIssue

QualifiedInstitutionalPlacement


3/22

3

(i) Initialpublicoffer (IPO):Whenanunlistedcompanymakeseithera fresh issueofsecurities or offers its existing securities for sale or both for the first time to the

public, it is called an IPO. This paves way for listing and trading of the issuers

securitiesintheStockExchanges.

(ii) Further public offer (FPO) or Follow on offer: When an already listed companymakeseitherafreshissueofsecuritiestothepublicoranofferforsaletothepublic,

itiscalledaFPO.

(b)Rights issue (RI):When an issueof securities ismadeby an issuer to its shareholdersexistingasonaparticulardatefixedbythe issuer(i.e.recorddate), it iscalledanrights

issue.Therightsareofferedinaparticularratiotothenumberofsecuritiesheldasonthe

recorddate.

(c) Bonusissue:Whenanissuermakesanissueofsecuritiestoitsexistingshareholdersasonarecorddate,withoutanyconsiderationfromthem,itiscalledabonusissue.Theshares

are issuedoutof theCompanys free reserveorsharepremiumaccount inaparticular

ratiotothenumberofsecuritiesheldonarecorddate.

(d)Private placement:When an issuer makes an issue of securities to a select group ofpersonsnotexceeding49,andwhichisneitherarightsissuenorapublicissue,itiscalledaprivateplacement.Privateplacementofsharesorconvertiblesecuritiesbylistedissuer

canbeoftwotypes:

(i) Preferentialallotment:Whenalistedissuerissuessharesorconvertiblesecurities,toa select group of persons in terms of provisions of Chapter XIII of SEBI (DIP)

guidelines,itiscalledapreferentialallotment.Theissuer isrequiredtocomplywith

variousprovisionswhich interalia includepricing,disclosures in thenotice, lockin

etc,inadditiontotherequirementsspecifiedintheCompaniesAct.

(ii)Qualified

institutions

placement

(QIP):

When

a

listed

issuer

issues

equity

shares

or

securitiesconvertibleintoequitysharestoQualifiedInstitutionsBuyersonlyinterms

ofprovisionsofChapterXIIIAofSEBI(DIP)guidelines,itiscalledaQIP.


4/22

4

2. TypesofOfferDocuments(ODs)(a)Whatisanofferdocument?

Offer document is a documentwhich contains all the relevant information about the

company,promoters,projects,financialdetails,objectsofraisingthemoney,termsofthe

issueetcandisusedforinvitingsubscriptiontotheissuebeingmadebytheissuer.

Offer Document is called Prospectus in case of a public issue or offer for sale and

LetterofOfferincaseofarightsissue.

(b)Ihearvarioustermslikedraftofferdocument,RedHerringprospectusetc,whataretheyandhowtheyaredifferentfromeachother?

Termsusedforofferdocumentsvarydependinguponthestageortypeoftheissuewhere

thedocumentisused.Thetermsusedforofferdocumentsaredefinedbelow:

(i) Draftofferdocument:isanofferdocumentfiledwithSEBIforspecifyingchanges,ifany,

in

it,

before

it

is

filed

with

the

Registrar

of

companies

(ROCs).

Draft

offer

document ismadeavailable inpublicdomain includingSEBIwebsite, forenabling

publictogivecomments,ifany,onthedraftofferdocument.

(ii) Redherringprospectus is anofferdocumentused in caseof abookbuiltpublicissue. Itcontainsall the relevantdetailsexcept thatofpriceornumberofshares

beingoffered.ItisfiledwithRoCbeforetheissueopens.

(iii) Prospectus is anofferdocument in caseof apublic issue,whichhas all relevantdetails including price and number of shares being offered. This document is

registeredwithRoC beforetheissueopensincaseofafixedpriceissueandafter

the

closure

of

the

issue

in

case

of

a

book

built

issue.

(iv) Letterofofferisanofferdocument incaseofaRightsissueandisfiledwithStockexchangesbeforetheissueopens.

(v) Abridgedprospectusisanabridgedversionofofferdocumentinpublicissueandisissuedalongwith theapplication formofapublic issue. Itcontainsall thesalient

featuresofaprospectus.

(vi) Abridgedletterofofferisanabridgedversionoftheletterofoffer.Itissenttoalltheshareholdersalongwiththeapplicationform.

(vii) Shelfprospectusisaprospectuswhichenablesanissuertomakeaseriesofissueswithinaperiodof1yearwithouttheneedoffilingafreshprospectuseverytime.

Thisfacilityisavailabletopublicsectorbanks/PublicFinancialInstitutions.

(viii) PlacementdocumentisanofferdocumentforthepurposeofQualifiedInstitutionalPlacementandcontainsalltherelevantandmaterialdisclosures.


5/22


6/22

6

(ii) A listed issuermaking a public issue (FPO) is required to satisfy the followingrequirements:

(a) If the company has changed its name within the last one year, atleast 50%

revenue forthepreceding1yearshouldbefromtheactivitysuggestedbythenew

name.

(b)Theissuesizedoesnotexceed5timesthepre issuenetworthaspertheaudited

balancesheet

of

the

last

financial

year

Any listedcompanynot fulfilling theseconditionsshallbeeligible tomakeapublic

issuebycomplyingwithQIBRouteorAppraisalRouteasspecifiedforIPOs.

(iii) Certaincategoryofentitieswhichareexemptedfromtheaforesaidentrynorms,areasunder:

(a)PrivateSectorBanks

(b)Publicsectorbanks

(c)AninfrastructurecompanywhoseprojecthasbeenappraisedbyaPublicFinancial

Institutionor

IDFC

or

IL&FS

or

abank

which

was

earlier

aPFI

and

not

less

than

5%

oftheprojectcostisfinancedbyanyoftheseinstitutions.

(b)Isalistedcompanymakingarightsissuerequiredtosatisfyanyentrynorm?No,thereisnoentrynormforalistedcompanymakingarightsissue

(c) Besidesentrynorms,arethereanymandatoryprovisionswhichanissuerisexpectedtocomplybeforemakinganissue?

An issuer making a public issue is required to interalia comply with the following

provisions

mentioned

in

the

guidelines:

MinimumPromoterscontributionandlockin:Inapublicissuebyanunlistedissuer,the

promoters shall contributenot less than20%of thepost issue capitalwhich shouldbe

lockedinforaperiodof3years.Lockinindicatesafreezeontheshares.Theremaining

preissuecapitalshouldalsobelockedinforaperiodof1yearfromthedateoflisting.In

caseofpublic issuebya listed issuer [i.e. FPO], thepromoters shall contributenot less

than20%of thepost issue capitalor20%of the issue size.Thisprovisionensures that

promoters of the company have someminimum stake in the company for aminimum

periodaftertheissueoraftertheprojectforwhichfundshavebeenraisedfromthepublic

iscommenced.

IPOGrading: IPOgradingisthegradeassignedbyaCreditRatingAgencyregisteredwith

SEBI,totheinitialpublicoffering(IPO)ofequitysharesorotherconvertiblesecurities.The

graderepresentsarelativeassessmentofthe fundamentalsofthe IPO inrelationtothe

other listed equity securities.Disclosureof IPOGrades, so obtained ismandatory for

companiescomingoutwithan IPO. Formoredetailson IPOGradingpleaserefertothe

subsectiononIPOGrading.


7/22

7

4. PricingofanIssue(a)Whofixesthepriceofsecuritiesinanissue?

Indianprimarymarketusheredinaneraoffreepricingin1992.SEBIdoesnotplayanyrole

in price fixation. The issuer in consultation with themerchant banker on the basis of

market demand decides the price. The offer document contains full disclosures of the

parameterswhich

are

taken

in

to

account

by

merchant

Banker

and

the

issuer

for

deciding

theprice.TheParametersincludeEPS,PEmultiple,returnonnetworthandcomparisonof

theseparameterswithpeergroupcompanies.

(b)WhatisthedifferencebetweenFixedpriceissueandBookBuiltissue?OnthebasisofPricing,anissuecanbefurtherclassifiedintoFixedPriceissueorBookBuilt

issue.

FixedPriceIssue:Whentheissuerattheoutsetdecidestheissuepriceandmentionsitin

theOfferDocument,itiscommonlyknownasFixedpriceissue.

BookbuiltIssue:Whenthepriceofanissueisdiscoveredonthebasisofdemandreceived

from theprospective investorsatvariousprice levels, it is calledBookBuilt issue.For

moreexplanationonBookBuilt Issuesplease refer to thesection titledUnderstanding

BookBuilding


8/22

8

5. UnderstandingBookBuilding:(a)WhatisbookBuilding?

Bookbuilding isaprocessofpricediscovery.The issuerdisclosesapricebandor floor

pricebeforeopeningofthe issueofthesecuritiesoffered.Onthebasisofthedemands

receivedatvariouspricelevelswithinthepricebandspecifiedbytheissuer,BookRunning

LeadManager

(BRLM)

in

close

consultation

with

the

issuer

arrives

at

aprice

at

which

the

securityofferedbytheissuer,canbeissued.

(b)Whatisapriceband?Thepricebandisabandofpricewithinwhichinvestorscanbid. Thespreadbetweenthe

floorandthecapofthepricebandshallnotbemorethan20%.Thepricebandcanbe

revised.Ifrevised,thebiddingperiodshallbeextendedforafurtherperiodofthreedays,

subjecttothetotalbiddingperiodnotexceedingthirteendays.

(c)HowdoesBookBuildingwork?Bookbuildingisaprocessofpricediscovery.Afloorpriceorpricebandwithinwhichthe

bidscanmoveisdisclosedatleasttwoworkingdaysbeforeopeningoftheissueincaseof

anIPOandatleastonedaybeforeopeningoftheissueincaseofanFPO.Theapplicants

bidforthesharesquotingthepriceandthequantitythattheywouldliketobidat.

After the bidding process is complete, the cutoff price is arrived at based on the

demand of securities. The basis of Allotment is then finalized and allotment/refund is

undertaken.Thefinalprospectuswithallthedetailsincludingthefinalissuepriceandthe

issuesize is filedwithROC, thuscompleting the issueprocess.Only the retail investors

havetheoptionofbiddingatcutoff.

(d)Howdoescutoffoptionworksforinvestors?Cutoff option is available for only retail individual investors i.e investors who are

applyingforsecuritiesworthuptoRs1,00,000/ only.Suchinvestorsarerequiredtotick

the cutoffoptionwhich indicates theirwillingness to subscribe to shares at any price

discoveredwithin thepriceband.Unlikepricebids (wherea specificprice is indicated)

whichcanbeinvalid,ifpriceindicatedbyapplicantislowerthanthepricediscovered,the

cutoffbidsalwaysremainvalidforthepurposeofallotment

(e)Can

I

change/revise

my

bid?

Yes, you can change or revise the quantity or price in the bid using the form for

changing/revisingthebidthat isavailablealongwiththeapplicationform.However,the

entire process of changing or revising the bids shall be completedwithin the date of

closureoftheissue.


9/22

9

(f) CanIcancelmyBid?Yes,youcancancelyourbidanytimebeforethefinalizationofthebasisofallotmentby

approaching/writing/makinganapplicationtotheregistrartotheissue.

(g)Whatproof can I request froma tradingmemberora syndicatemember forenteringbids?

Thesyndicate

member

returns

the

counterfoil

with

the

signature,

date

and

stamp

of

the

syndicate member. You can retain this as a sufficient proof that the bids have been

acceptedbythetrading/syndicatememberforuploadingontheterminal.

6. CategoriesofInvestors(a)Whether the investorsarecategorized? Ifyes,how theallotment ismade todifferent

categories?

Investorsarebroadlyclassifiedunderfollowingcategories:

(i) RetailindividualInvestor(RIIs)(ii) NonInstitutionalInvestors(NIIs)(iii) QualifiedInstitutionalBuyers(QIBs)Retail individual investormeans an investorwho applies or bids for securities for avalueofnotmorethanRs.1,00,000.

QualifiedInstitutionalBuyershallmean:

a)apublicfinancialinstitutionasdefinedinsection4AoftheCompaniesAct,1956;

b)ascheduledcommercialbank;

c)amutualfundregisteredwiththeBoard;

d)aforeigninstitutionalinvestorandsubaccountregisteredwithSEBI,otherthanasub

accountwhichisaforeigncorporateorforeignindividual;

e)amultilateralandbilateraldevelopmentfinancialinstitution;

f)aventurecapitalfundregisteredwithSEBI;

g)aforeignventurecapitalinvestorregisteredwithSEBI;

h)astateindustrialdevelopmentcorporation;

i)aninsurancecompanyregisteredwiththeInsuranceRegulatory

andDevelopmentAuthority(IRDA);

j)aprovidentfundwithminimumcorpusofRs.25crores;

k)apensionfundwithminimumcorpusofRs.25crores);

l) National Investment Fund set up by resolution no. F. No. 2/3/2005DDII dated

November23,2005ofGovernmentofIndiapublishedintheGazetteofIndia.

Investorswhodonotfallwithinthedefinitionoftheabovetwocategoriesarecategorized

asNonInstitutionalInvestors

Allotmenttovariousinvestorcategoriesisprovidedintheguidelinesandisdetailedbelow:

IncaseofBookBuiltissue

1. Incaseanissuercompanymakesanissueof100%ofthenetoffertopublicthrough100%bookbuildingprocess


10/22

10

(a)Notlessthan35%ofthenetoffertothepublicshallbeavailableforallocationto

retailindividualinvestors;

(b)Notlessthan15%ofthenetoffertothepublicshallbeavailableforallocationto

noninstitutional investors i.e. investorsother than retail individual investors and

QualifiedInstitutionalBuyers;

(c)Notmorethan50%ofthenetoffertothepublicshallbeavailableforallocation

toQualifiedInstitutionalBuyers:

2.In caseof compulsory BookBuilt Issues at least50%ofnetoffer to publicbeingallotted to the Qualified Institutional Buyers (QIBs), failing which the full

subscriptionmoniesshallberefunded.

3.Incasethebookbuilt issuesaremadepursuant totherequirementofmandatoryallocation of 60% to QIBs in terms of Rule 19(2)(b) of Securities Contract

(Regulation)Rules,1957,therespectivefiguresare30%forRIIsand10%forNIIs.

Incaseoffixedpriceissue

Theproportionateallotmentofsecuritiestothedifferent investorcategories inanfixed

priceissue

is

as

described

below:

1.Aminimum50%of thenetofferofsecurities to thepublic shall initiallybemadeavailableforallotmenttoretailindividualinvestors,asthecasemaybe.

2.The balance net offer of securities to the public shall be made available forallotmentto:

a. Individualapplicantsotherthanretailindividualinvestors,andb. Other investors including corporate bodies/ institutions irrespective of the

numberofsecuritiesappliedfor.

(b) Whatarefirmallotmentinvestorcategories?SEBI(DIP)guidelinesprovidethatan issuermakingan issuetopubliccanallotshareson

firmbasistosomecategoriesasspecifiedbelow:(i) IndianandMultilateralDevelopmentFinancialInstitutions,(ii) IndianMutualFunds,(iii) Foreign Institutional Investors including NonResident Indians and Overseas

CorporateBodiesand

(iv) Permanent/regularemployeesoftheissuercompany.(v) ScheduledBanksIt

may

be

noted

that

OCBs

are

prohibited

by

RBI

to

make

investment.

(c)Whicharetheinvestorcategoriestowhomreservationscanbemadeinapublicissueoncompetitivebasis?

ReservationonCompetitiveBasisiswhenallotmentofsharesismadeinproportiontothe

shares applied for by the concerned reserved categories. Reservation on competitive

basiscanbemadeinapublicissuetothefollowingcategories:


11/22

11

(i) Employeesofthecompany(ii) Shareholders of the promoting companies in the case of a new company and

shareholdersofgroupcompaniesinthecaseofanexistingcompany

(iii) IndianMutualFunds(iv) ForeignInstitutionalInvestors(includingnonresidentIndiansandoverseascorporate

bodies)

(v) IndianandMultilateraldevelopmentInstitutions(vi) ScheduledBanksInapublic issuebya listedcompany,thereservationoncompetitivebasiscanbemade

for retail individual shareholders and in such cases the allotment to such shareholders

shallbeonproportionatebasis

(d)Isthereanydiscretionwhiledoingtheallotmentamongstvariousinvestorcategoriesasperthepermissibleallocations?

No,there isnodiscretion intheallotmentprocess.Allallotteesareallottedsharesona

proportionatebasiswithintheirrespectiveinvestorcategories.


12/22

12

7. InvestmentinpublicIssues/rightsissues:(a)WherecanIgetapplicationformsforapplying/biddingfortheshares?

Application forms for applying/bidding for shares are available with all syndicate

members,collectioncenters,thebrokerstotheissueandthebankerstotheissue.Incase

you intend to apply through new process introduced by SEBI i.e APPLICATIONS

SUPPORTEDBY

BLOCKED

AMOOUNT

(ASBA),

you

may

get

the

ASBA

application

forms

formtheSelfCertifiedSyndicateBanks.FormoredetailsonASBAprocesspleaserefer

to the subsection titled Understanding Applications Supported by Blocked Amount

(ASBA)Process

(b)WhomshouldIapproachiftheinformationdisclosedintheofferdocumentappearstobefactuallyincorrect?

ThedocumentispreparedbyMerchantBanker(s),registeredwithSEBI.Theyarerequired

to do the duediligencewhilepreparing anofferdocument. Thedraftoffer document

submittedtoSEBIisputonwebsiteforpubliccomments.Incase,youfindanyinstanceof

misinformation/lack

of

information,

you

may

send

your

complaint

to

Lead

Manager

to

the issueand/ortoSEBI,atthisaddress:Securities&ExchangeBoardof India,C4A,G

Block,BandraKurlaComplex,Bandra(E),Mumbai 400051.

(c) IsitcompulsoryformetohaveaDematAccount?Aspertherequirement,allthepublicissuesofsizeinexcessofRs.10crore,aretomade

compulsorilyindematmode.Thus,ifyouintendtoapplyforanissuethatisbeingmade

inacompulsorydematmode,youarerequiredtohaveademataccountandalsohave

the responsibility to put the correctDP ID and Client ID details in the bid/application

forms.

You can also refer to FAQs relating to demat available in the URL

http://investor.sebi.gov.in/faq/dematfaq.html in the Investor Education section of the

SEBIwebsite.

(d)IsitcompulsorytohavePAN?Yes, it iscompulsory tohavePAN.Any investorwhowants to invest inan issueshould

haveaPANwhichisrequiredtobementionedintheapplicationform.Itistobedistinctly

understoodthatthephotocopyofthePANisnotrequiredtobeattachedalongwiththe

applicationformatthetimeofmakinganapplication.

(e)Forhowmanydaysanissueisrequiredtobekeptopen?Theperiodforwhichanissueisrequiredtobekeptopenis:

ForFixedpricepublicissues:310workingdays

ForBookbuiltpublicissues:37workingdaysextendableby3daysincaseofarevisionin

thepriceband

ForRightsissues :1530days.


13/22

13

(f) WhendoIgettheallotment/refundofshares?ForFixedpricepublicissues:30daysoftheclosureoftheissue

ForBookbuiltpublicissues: 15daysoftheclosureoftheissue

ForRightsissues :15daysoftheclosureoftheissue

(g)HowcanIknowaboutthedemandforanissueatanypointoftime?The statusofbidding inabookbuilt issue isavailableon thewebsiteofBSE/NSEona

consolidatedbasis.Thedataregardingbidsisalsoavailableinvestorcategorywise.

After thepricehasbeendeterminedon thebasisofbidding, thepublic advertisement

containing,interalia,thepriceaswellasatableshowingthenumberofsecuritiesandthe

amountpayablebyaninvestor,basedonthepricedetermined,isissued.

However, incaseofa fixedprice issue, information isavailableonlyaftertheclosureof

the issue through a public advertisement, issued within 10 days of dispatch of the

certificatesofallotment/refundorders.

(h)HowwillIgetmyrefundinanissue?You can get refunds in an issue through various modes viz. registered/ordinary post,

DirectCredit,RTGS (Real TimeGross Settlement),ECS (ElectronicClearing Service) and

NEFT(NationalElectronicFundsTransfer).

Asstatedabove,ifyouareresidinginoneofthe68centersasspecifiedbyReserveBank

of India, then youwill get refunds through ECS only exceptwhere you are otherwise

disclosedeligibleunderDirectCreditandRTGS. Ifyouare residingatanyothercenter,

thenyouwillcontinuetogetrefundsthroughregistered/ordinarypost.Youaretherefore

advisedtoreadtheinstructionsgivenintheprospectus/abridgedprospectus/application

form

about

centers.

For

more

details,

you

may

read

subsection

on

Electronic

Clearing

SchemeforRefunds.

(i) Whenwillthesharesallottedtomegetlisted?Inbookbuiltpublicissuethelistingofshareswillbedonewithin3weeksaftertheclosure

oftheissue.Incaseoffixedpricepublicissue,itwillbedonewithin37daysafterclosure

oftheissue.

(j) HowwillIknowwhichissuesarecomingtothemarket?The

information

about

the

forthcoming

issues

may

be

obtained

from

the

websites

of

Stock Exchanges. Further the issuer coming with an issue is required to give issue

advertisements in an English national Daily with wide circulation, one Hindi national

newspaperandaregional languagenewspaperwithwidecirculationattheplacewhere

theregisteredofficeoftheissuerissituated.

(k) WheretoIgetthecopiesoftheofferdocument?ThesoftcopiesoftheofferdocumentsareputuponthewebsiteofMerchantbankerand

on the website of SEBI under Reports/Documents section


14/22

14

[http://www.sebi.gov.in/Index.jsp?contentDisp=Section&sec_id=5 ]. Copiesof theoffer

documents inhard formmaybeobtained from themerchantbankerorofficeofSEBI,

SEBIBhawan,PlotNo.C4AGBlock,BKC,Bandra(E),Mumbai 400051onapaymentof

Rs100throughDemandDraftmadeinfavorofSecurities&ExchangeBoardofIndia.

(l) HowdoIfindthestatusofofferdocumentsfiledbyissuerswithSEBI?SEBIupdatestheprocessingstatusofofferdocumentson itswebsiteeveryweekunder

the

section

http://www.sebi.gov.in/Index.jsp?contentDisp=PrimaryMarket

in

SEBIwebsite.ThedraftofferdocumentsareputuponthewebsiteunderReports/Documents

section. The final offer documents that are filed with SEBI/ROC are also put up for

informationunderthesamesection.

(m)Whomdo Iapproach if Ihavegrievances in respectofnon receiptof shares,delay inrefundetc.?

Youcanapproachthecomplianceofficeroftheissue,whosenameandcontactnumberis

mentioned on the cover page of the Offer Document. You can also address your

complaints toSEBIat the followingaddress: Officeof InvestorAssistance&Education,

Securities&

Exchange

Board

of

India,

C4A,

G

Block,

Bandra

Kurla

Complex,

Bandra

(E),

Mumbai 400051.


15/22

15

8. IntermediariesinvolvedintheIssueProcess(a)Whicharetheintermediariesinvolvedinanissue?

IntermediarieswhichareregisteredwithSEBIareMerchantBankerstothe issue(known

asBookRunningLeadManagers(BRLM) incaseofbookbuiltpublic issues),Registrarsto

the issue,Bankers to the issue&Underwriters to the issuewhoareassociatedwith the

issuefor

different

activities.

Their

addresses,

telephone/fax

numbers,

registration

number,

andcontactpersonandemailaddressesaredisclosedintheofferdocuments.

(i) MerchantBanker:Merchant banker does the due diligence to prepare theofferdocument which contains all the details about the company. They are also

responsible for ensuring compliancewith the legal formalities in the entire issue

processandformarketingoftheissue.

(ii) Registrarstothe Issue:Theyare involved in finalizingthebasisofallotment inanissueandforsendingrefunds,allotmentetc.

(iii) BankerstotheIssue:TheBankerstotheIssueenablethemovementoffundsintheissueprocessandthereforeenabletheregistrarsto finalizethebasisofallotmentbymakingclearfundsstatusavailabletotheRegistrars.

(iv) Underwriters:Underwritersare intermediarieswhoundertake tosubscribetothesecurities offered by the company in case these are not fully subscribed by the

public,incaseofanunderwrittenissue.


16/22

16

9. GuidetounderstandanOfferDocumentThissubsectionattemptstoinformthestructureofpresentationofthecontentinanoffer

document.Thebasicobjective istohelp thereader tonavigate throughthecontentofan

offerdocument.

(a)CoverPageUnderthisheadfullcontactdetailsoftheIssuerCompany,leadmanagersandregistrars,

thenature,number,price and amountof instrumentsoffered and issue size, and the

particulars regarding listing.Other details such as Credit Rating, IPO Grading, risks in

relationtothefirstissue,etcarealsodisclosedifapplicable.

(b)RiskFactorsUnder thishead themanagementof the issuercompanygives itsviewon the Internal

andexternalrisksenvisagedbythecompanyandtheproposals, ifany,toaddresssuch

risks. The company also makes a note on the forward looking statements. This

informationis

disclosed

in

the

initial

pages

of

the

document

and

also

in

the

abridged

prospectus.Itisgenerallyadvisedthattheinvestorsshouldgothroughalltheriskfactors

ofthecompanybeforemakinganinvestmentdecision.

(c) IntroductionUnder thisheadasummaryof the industry inwhichthe issuercompanyoperates, the

business of the Issuer Company, offering details in brief, summary of consolidated

financialstatementsandotherdatarelatingtogeneral informationaboutthecompany,

the merchant bankers and their responsibilities, the details of brokers/syndicate

memberstotheIssue,creditrating(incaseofdebtissue),debenturetrustees(incaseof

debt

issue),

monitoring

agency,

book

building

process

in

brief,

IPO

Grading

in

case

of

First

Issue of Equity capital and details of underwriting Agreements are given. Important

details of capital structure, objects of the offering, funds requirement, funding plan,

schedule of implementation, funds deployed, sources of financing of funds already

deployed, sourcesof financing for thebalance fund requirement, interimuseof funds,

basictermsofissue,basisforissueprice,taxbenefitsarealsocovered.

(d)AboutusUnder thisheada reviewof thedetailsofbusinessof thecompany,businessstrategy,

competitive strengths, insurance, industryregulation (if applicable), history and

corporate

structure,

main

objects,

subsidiary

details,

management

and

board

of

directors, compensation, corporate governance, related party transactions, exchange

rates,currencyofpresentationanddividendpolicyaregiven.

(e)FinancialStatementsUnder this head financial statement and restatement as per the requirement of the

Guidelines and differences between any other accounting policies and the Indian


17/22

17

AccountingPolicies (if theCompanyhaspresented itsFinancialStatementsalsoasper

eitherUSGAAP/IFRS)arepresented.

(f) LegalandotherinformationUnder thisheadoutstanding litigationsandmaterialdevelopments, litigations involving

thecompany,thepromotersofthecompany, itssubsidiaries,andgroupcompaniesare

disclosed. Alsomaterial developments since the last balance sheet date, government

approvals/licensingarrangements,

investment

approvals

(FIPB/RBI

etc.),

technical

approvals,andindebtedness,etc.aredisclosed.

(g)OtherregulatoryandstatutorydisclosuresUnderthishead,authorityfortheIssue,prohibitionbySEBI,eligibilityofthecompanyto

enter the capital market, disclaimer statement by the issuer and the lead manager,

disclaimer in respectofjurisdiction,distributionof information to investors,disclaimer

clauseof the stockexchanges, listing, impersonation,minimum subscription, lettersof

allotmentorrefundorders,consents,expertopinion,changesintheauditorsinthelast3

years, expenses of the issue, fees payable to the intermediaries involved in the issue

process,details

of

all

the

previous

issues,

all

outstanding

instruments,

commission

and

brokerageon,previousissues,capitalizationofreservesorprofits,optiontosubscribein

the issue,purchase ofproperty, revaluationof assets, classesof shares, stockmarket

dataforequitysharesofthecompany,promisevisvisperformance inthepast issues

andmechanismforredressalofinvestorgrievancesisdisclosed.

(h)OfferinginformationUnder this head Terms of the Issue, ranking of equity shares, mode of payment of

dividend, face value and issue price, rights of the equity shareholder, market lot,

nominationfacilitytoinvestor,issueprocedure,bookbuildingprocedureindetailsalong

with

the

process

of

making

an

application,

signing

of

underwriting

agreement

and

filing

of prospectus with SEBI/ROC, announcement of statutory advertisement, issuance of

confirmation of allocation note("can") and allotment in the issue, designated date,

general instructions, instructions for completing the bid form, payment instructions,

submission of bid form, other instructions, disposal of application and application

moneys, , interest on refund of excess bid amount, basis of allotment or allocation,

method of proportionate allotment, dispatch of refund orders, communications,

undertaking by the company, utilization of issue proceeds, restrictions on foreign

ownershipofIndiansecurities,aredisclosed.

(i) OtherInformationThiscoversdescriptionofequitysharesandtermsoftheArticlesofAssociation,material

contractsanddocumentsforinspection,declaration,definitionsandabbreviations,etc.


18/22

18

10.SEBIsRoleinanIssueWhatisSEBIsroleinanissue?

Anycompanymakingapublic issueorarights issueofsecuritiesofvaluemorethanRs50

lakhs is required to fileadraftofferdocumentwithSEBI for itsobservations.Thevalidity

periodofSEBIsobservation letter is twelve monthsonly i.e thecompanyhas toopen its

issuewithin

the

period

of

twelve

months

starting

from

the

date

of

issuing

the

observation

letter.

There isnorequirementoffilinganyofferdocument/noticetoSEBIincaseofpreferential

allotmentandQualified InstitutionPlacement (QIP). InQIP,MerchantBankerhandling the

issue has to file the placement document with Stock Exchanges for making the same

availableontheirwebsites.

GivenbelowarefewclarificationsregardingtheroleplayedbySEBI:

(a)Tilltheearlynineties,ControllerofCapitalIssuesusedtodecideaboutentryofcompanyinthe

market

and

also

about

the

price

at

which

securities

should

be

offered

to

public.

However, following the introductionofdisclosurebasedregimeunder theaegisofSEBI,

companies can now determine issue price of securities freely without any regulatory

interference,withtheflexibilitytotakeadvantageofmarketforces.

(b)The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investorprotection)guidelines.SEBIframeditsDIPguidelinesin1992.TheSEBIDIPGuidelinesover

theyearshavegonethroughmanyamendmentsinkeepingpacewiththedynamicmarket

scenario. It provides a comprehensive framework for issuing of securities by the

companies.

(c) BeforeacompanyapproachestheprimarymarkettoraisemoneybythefreshissuanceofsecuritiesithastomakesurethatitisincompliancewithalltherequirementsofSEBI(DIP)

Guidelines,

2000.

The

Merchant

Banker

are

those

specialised

intermediaries

registered

with SEBI,who perform the due diligence and ensures compliancewithDIPGuidelines

beforethedocumentisfiledwithSEBI.

(d)OfficialsofSEBIatvarious levelsexaminethecompliancewithDIPguidelinesandensurethatallnecessarymaterialinformationisdisclosedinthedraftofferdocuments.

Still therearecertainmisconceptionsprevailing in themindof investorsabout the roleof

SEBIwhichareclarifiedhereinunder:

(a)DoesSEBIrecommendanyIssue?It

should

be

distinctly

understood

that

SEBI

does

not

recommend

any

issue

nor

does

it

takeanyresponsibilityeitherforthefinancialsoundnessofanyschemeortheprojectfor

whichtheissueisproposedtobemade.

(b)DoesSEBIapprovethecontentsofanissue?Submissionofofferdocument toSEBI shouldnot inanywaybedeemedorconstrued

thatthesamehasbeenclearedorapprovedbySEBI.TheLeadmanagercertifiesthatthe

disclosuresmade in theofferdocument are generallyadequate and are in conformity


19/22

19

withSEBIguidelinesfordisclosuresand investorprotection in force forthetimebeing.

This requirement is to facilitate investors to take an informed decision for making

investmentintheproposedissue.

(c) IfSEBIhasissuedobservationsontheofferdocument,doesitmeanthatmyinvestmentissafe?

The investors should make an informed decision purely by themselves based on the

contentsdisclosed

in

the

offer

documents.

SEBI

does

not

associate

itself

with

any

issue/issuer and should innowaybe construed as a guarantee for the funds that the

investor proposes to invest through the issue. However, the investors are generally

advised to study all thematerial factspertaining to the issue including the risk factors

beforeconsideringanyinvestment.


20/22

20

11.NewTerms(a)GreenshoeOption

GreenShoeOptionisapricestabilizingmechanisminwhichsharesareissuedinexcessof

theissuesize,byamaximumof15%.Fromaninvestorsperspective,anissuewithgreen

shoeoptionprovidesmoreprobabilityofgetting sharesandalso thatpost listingprice

mayshow

relatively

more

stability

as

compared

to

market

volatility.

(b)SafetyNetIn a safetynet schemeorabuybackarrangement the issuer company in consultation

withthe leadmerchantbankerdiscloses intheRHPthat ifthepriceofthesharesofthe

companypost listinggoesbelow a certain level the issuerwillpurchasebacka limited

numberofsharesataprespecifiedpricefromeachallottee.

(c)Openbook/closedbookIn

an

open

book

building

system

the

merchant

banker

along

with

the

issuer

ensures

that

thedemandforthesecuritiesisdisplayedonlineonthewebsiteoftheStockExchanges.

Here,theinvestorcanbeguidedbythemovementsofthebidsduringtheperiodinwhich

thebidiskeptopen.IndianBookbuildingprocessprovidesforanopenbooksystem.

Intheclosedbookbuildingsystem,thebookisnotmadepublicandthebidderswillhave

to take a call on the price at which they intend to make a bid without having any

informationonthebidssubmittedbyotherbidders.

(d)HardunderwritingHard

underwriting

is

when

an

underwriter

agrees

to

buy

his

commitment

before

the

issue

opens.Theunderwriterguaranteesafixedamounttothe issuerfromthe issue.Thus, in

casethesharesarenotsubscribedbyinvestors,theissueisdevolvedonunderwritersand

theyhavetobring intheamountbysubscribingtotheshares.Theunderwriterbearsa

riskwhichismuchhigherthansoftunderwriting.

(e)SoftunderwritingSoftunderwritingiswhenanunderwriteragreestobuythesharesatstageaftertheissue

theissueisclosed.Theriskfacedbytheunderwriterassuchisreducedtoasmallwindow

oftime.

(f) DifferentialpricingWhen one category of investors is offered shares at a price different from the other

category it iscalleddifferentialpricing.An issuercompanycanallot theshares toretail

individual investorsatadiscountofmaximum10%tothepriceatwhichthesharesare

offeredtoothercategoriesofpublic.

(g)BasisofAllocation/BasisofAllotment


21/22

21

After the closure of the issue, for eg a book built public issue, the bids received are

aggregatedunderdifferentcategories i.e., firmallotment,Qualified InstitutionalBuyers

(QIBs),NonInstitutionalBuyers (NIBs),Retail,etc.Theoversubscription ratios are then

calculated for each of the categories as against the shares reserved for each of the

categories in the offer document. Within each of these categories, the bids are then

segregated into different buckets based on the number of shares applied for. The

oversubscriptionratioisthenappliedtothenumberofsharesappliedforandthenumber

ofshares

to

be

allotted

for

applicants

in

each

of

the

buckets

is

determined.

Then,

the

number of successful allottees is determined. This process is followed in case of

proportionateallotment. Thusallotmenttoeachinvestorisdonebasedonproportionate

basisinbothbookbuiltandfixedpricepublicissue.

(h)FastTrackIssues(FTI)SEBIhasintroducedFTIinordertoenablewellestablishedandcompliantlistedcompanies

satisfyingcertainspecificentrynorms/conditionstoaccessIndianPrimaryMarketinatime

effectivemanner.SuchcompaniescanproceedwithFPOs/RightIssuesbyfilingacopyof

RHP/ProspectuswiththeRoCortheLetterofOfferwithdesignatedSE,SEBIandStock

Exchanges.Such

companies

are

not

required

to

file

Draft

Offer

Document

for

SEBI

commentsandtoStockExchanges.

Entry Norms for companies seeking to access Primary Market through FTIs in case

aggregatevalueofsecuritiesincludingpremiumexceedsRs.50lacs:

(i) The shares of the company have been listed on any stock exchange havingnationwideterminalsforaperiodofatleastthreeyearsimmediatelyprecedingthe

dateoffilingofofferdocumentwithRoC/SE.

(ii) The averagemarket capitalisation of public shareholding of the company is atleast Rs. 10,000 crores for a period of one year up to the end of the quarter

preceding

the

month

in

which

the

proposed

issue

is

approved

by

the

Board

of

Directors/shareholdersoftheissuer;

(iii) Theannualized tradingturnoverof thesharesof thecompanyduringsixcalendarmonths immediatelypreceding themonthofthereferencedatehasbeenat least

twopercentof theweighted averagenumberof shares listedduring the said six

monthsperiod;

(iv) The company has redressed at least 95% of the total shareholder / investorgrievances or complaints received till the end of the quarter immediately

proceedingthemonthofthedateoffilingofofferdocumentwithRoC/SE.

(v) Thecompanyhascompliedwiththelistingagreementforaperiodofatleastthreeyearsimmediatelyprecedingthereferencedate;

(vi)

The

impact

of

auditors

qualifications,

if

any,

on

the

audited

accounts

of

the

company inrespectofthefinancialyearsforwhichsuchaccountsaredisclosed in

the offer document does not exceed 5% of the net profit/ loss after tax of the

companyfortherespectiveyears.

(vii) NoprosecutionproceedingsorshowcausenoticesissuedbytheBoardarependingagainstthecompanyor itspromotersorwholetimedirectorsasonthereference

date;and

(viii) Theentireshareholdingofthepromotergroupisheldindematerialisedformasonthereferencedate.


22/22

22

12.AdditionalInformation(a)Where do I get data on primary issues? (issuer, total issues, issue size, the

intermediaries,etc.,duringagivenperiod)

SEBIbringsoutamonthlybulletin that isavailableoff theshelfatbookstores.Adigital

version of the same is available on the SEBI website under the News/Publications

section.The

Bulletin

contains

all

the

relevant

historical

figures

of

intermediary

issue

and

intermediaryparticularsduringthegivenperiodplacedagainsthistoricalfigures.

(b)WhataretherelevantregulationsandwheredoIfindthem?TheSEBIManual isSEBIauthorizedpublication that isacomprehensivedatabankofall

relevantActs,Rules,RegulationsandGuidelinesthatarerelatedtothefunctioningofthe

Board.ThedetailspertainingtotheActs,Rules,Regulations,GuidelinesandCircularsare

placedon theSEBIwebsiteunder theLegalFramework section.Theperiodicupdates

areuploadedontotheSEBIwebsiteregularly.

(c)WillSEBIanswermyqueriesonlineincaseofdoubtsandclarifications?The Feedback section on the SEBI website has a provision for the visitors to ask

questionsonclarificationsonsmaller issuespertaining to theavailabilityof information

andafacilityforuserstoprovidefeedbackonthesame.However,ifthequeriesarelegal

innature, they are tobe referred to SEBIunder the SEBI (InformalGuidance)Scheme,

2003.