SEBI (Issue of Capital and Disclosure Requirements), 2009

SEBI (ICDR), 2009 can be discussed under the following heads:

1. Public Issue by the Companies
2. Rights Issue by existing Listed Companies
3. Bonus Issue by existing Listed Companies
4. Preferential Allotments
5. Issue of Indian Depository Receipts
6. Qualified Institutional Placements and Institutional Placement Programme
7. Issue Of Specified Securities By Small And Medium Enterprises
1. PUBLIC ISSUES
A. Past Track Record of the Company:
Companies with No Past Track Record
Fulfillment of two conditions are required:
1. Pricing shall be based upon Book Building Process
AND
2. Atleast 75% of the Issue size must be allotted to
Qualified Institutional Buyers (QIBs).

Companies having Past Track Record

The issuer can adopt any of the following two methods for
pricing of its issue:
1. Book Building Route
OR
2. Fixed Price Route

A company shall be deemed to have a past track record if ALL of the following conditions are fulfilled:
Net Tangible Assets after providing for depreciation and impairment > Rs. 3 crores in preceding 3 years of 12 months
each.
Monetary Assets < 50% of Net Tangible Assets. However, if monetary assets > 50% of Net Tangible Assets, then the
issuer company shall make a firm declaration to utilize such excess for its projects or business, after realization
thereof.
o Monetary Assets These are those assets whose value is fixed by contractual terms. For Example: Trade
Receivables, Accounts Receivables etc.
Net operating Profit after Tax (NOPAT) > Rs. 15 crores in 3 preceding years out of total of 5 preceding years of 12
months each.
Net Worth > Rs. 1 crore in preceding 3 full years each.
o Net Worth = Paid Up Share Capital (+) Reserves [excluding Revaluation Reserve] (+) Securities Premium
A/c () Miscellaneous Expenditure () Profit and Loss Account [Debit Balance]
[Proposed Issue (+) Previous Issue] in the same Financial Year < 5 (x) Net Worth on Last Balance Sheet Date
In case of change of name of the company in the last one year, then at least 50% of the revenue of the previous
financial year should be from the activity indicated by the new name.
B. No. of prospective allottees > 1000. [SEBI may relax this condition]
C. Credit Rating from recognized agencies is required.
D. No pendency with respect to conversion of debt instruments be existing. [However, if similar benefits are reserved for persons
holding such convertible debt instruments, then public issue is permissible.]
PRICING OF THE ISSUE
Face Value Per Share
Issue Price Per Share
> Rs. 500
Can be kept between Rs. 1/- share to Rs. 10/- share
< Rs. 500
SHALL be Rs. 10/- share

The Issuer shall mandatorily disclose the following in the offer document: The Issue Price per share is Rs. X times of Face
Value per share.
SEBI has clarified that the requirement of fixing Face Value per share shall not be applicable to the following;
Government Company
An statutory authority or corporation
Any special purpose vehicle which is engaged in Infrastructure sector.

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GUIDELINES FOR PRICE BAND

The price of the issue is determined subsequent to receiving of price bids from the public. Whenever offer document is
drafted, instead of quoting an absolute amount of Issue Price, a range of price is given, and such range is known as PRICE
BAND. Whenever pricing of IPO is done by Book Building Process, the companies are required to disclose the price band in
the offer document and other filings made by the company.
The Price Band would be having two prices namely; (a) Floor Price and (b) Cap Price. The lower range of such Price Band is
known as Floor Price and the upper range is known as Cap Price.
PRICE BAND - As per SEBI Regulations, the Cap on Price Band shall not be more than 120% of the Floor Price, i,e. Cap
Price < 120% of Floor Price
SEBI has further mandated that the floor price cannot be less than the face value of specified securities.
ANNOUNCEMENT ABOUT PRICES
Either
In the Prospectus or Offer Document.

Or
The Price shall be physically announced in the following manner:
(a) In case of IPO, at least 5 working days before the opening of the offer.
(b) In case of FPO, at least 1 working day before the opening of the offer.

DIFFERENTIAL PRICING
It is permissible to price the issue for different categories of investors differentially.
Retail Individual Investors
Anchor Investors
Types of Investors
Description
Those Individual Investors who are investing These are the investors who are investing > Rs. 10
upto Rs. 2 lakhs in a company.
crores in a company.
They include High Net worth individuals (HNIs),
QIBs etc.
The price of shares can be lower than the The issue price shall not be lower than the price
Pricing
price offered to others. However, such being offered to others
difference cannot be more than 10% of the
price under allotment.
In case of composite issue (i.e. public issue with rights issue), the issue price of rights issue can be lower than the issue price
being offered to others.
CONDITIONS FOR PROMOTERS CONTRIBUTION
Minimum 20% contribution in total Post Issue capital of the company.
Lock-in-period of 3 years for promoters contribution from the date of allotment.
Lock-in-period of 1 year for excess of promoters contribution over minimum contribution.
No restriction about the following:
o Pledging of promoters shares
o Transfer of shares towards promoters contribution within promoters themselves.
In case the securities are acquired by the promoters in the preceding year at a price lower than the pricing of IPO,
then the promoter shall be required to bring in differential amount at the time of IPO towards its contribution in the
company.
2. Rights Issue By Existing Listed Companies (Right of Pre-emption)
Time Period for keeping the Issue Open
Maximum Period 30 days
Minimum Period 15 days
No right issue can be made, pending conversion of debt instruments unless same benefit is reserved for them.
Letter of offer for right issue shall be dispatched to each and every existing shareholder with the necessary details.
If the Letter of offer is not received by any existing shareholder, then he/ she can apply on a plain paper for such
shares, by providing all the necessary details.
Advertisement by mode of Public Notice shall have to be given: (i) In English newspaper having nationwide
circulation, (ii) In Hindi newspaper having nationwide circulation, and (iii) In Regional newspaper having wide
circulation

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3. Bonus Issue By Existing Listed Companies

A. All of the following conditions need to be complied with:
AOA must permit bonus issue. If the articles are silent, then shareholders approval through SR will be required.
Only Revenue reserves can be utilized for making bonus issues. However, realized capital reserves can be utilized
for bonus issues.
Securities Premium can be used as per provisions of Section 52 of the Companies Act, 2013 (Earlier Section 78 of
the Companies Act, 1956)
No partly paid-up shares should exist.
No bonus issue can be made, pending conversion of debt instruments unless same benefit is reserved for them.
There should have been no default in repayment of statutory dues, employee dues and repayment of principal and
interest on fixed deposits and debt securities.
B. Bonus issue once declared cannot be withdrawn without the consent of shareholders.
C. Decision for Bonus Issue SHALL be implemented in the following manner:
Within 15 days from the passing of Board Resolution, if shareholders approval is not required;
Within 2 months from the passing of Board Resolution, if shareholders approval is required;
Further, as per SEBI mandate, bonus shares shall be issued within 6 months from the date of passing of Board Resolution.
4. Guidelines for Preferential Issue
A. Meaning Allotment of shares and securities to certain categories of investors on preferential basis.
B. Conditions to be complied with by Listed Companies
Special Resolution must be passed by the Shareholders
Securities must be held in Dematerialized mode.
PAN of prospective allottees must be available
C. Pricing for Preferential Allotment
Companies Listed for > 2 weeks but < Companies actually completes Companies Listed for > 26 weeks
26 weeks
listing period for = 26 weeks
Pricing shall not be less than higher Price per share shall be Pricing shall not be less than higher of
of the following:
recomputed and the difference, if the following:
a. The average of weekly high any, shall be brought in by
a. The average of weekly high and
and low prices of the actual concerned shareholder.
low prices of the preceding 26
period of listing; OR
weeks; OR
b. The average of weekly high If the difference is on a lower side,
b. The average of weekly high and
and low prices of the then the company shall not refund
low prices of the preceding 2
to the concerned shareholder.
preceding 2 weeks
weeks
D. Lock-in Period
Lock-in period
Case
If shares are allotted on preferential basis, 1 year from the date of allotment as per SEBI Mandate.
because of Corporate Debt Restructuring
Framework, prescribed by RBI
If shares are partly paid-up and are allotted to 1 year from the date of allotment and shall expire on the date, ending
other than promoters
on 1 year from the date on which they become fully paid-up.
3 years from the date of allotment
If shares are allotted to promoters
E. Non-applicability of Pricing Guidelines
Preferential Allotment made pursuant to Section 391 to 394 of the Companies Act, 1956.
Preferential Allotment made pursuant to scheme ordered by BIFR.

5. Issue of Indian Depository Receipts (IDRs)

A. Section 390 of the Companies Act, 2013 (Section 605A of Co. Act, 1956), states that a company incorporated outside
India or to be incorporated outside India, can issue Indian Depository Receipts after fulfilling prescribed conditions.
B. The prescribed conditions are:
Issue size > Rs. 50 crores
Track Record of having divisible profits in at least 3 preceding years out of 5 preceding years.
Market capitalization > USD 100 million in its home country.
Net worth > USD 15 million in its home country
No prohibition in the country to access capital markets.
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6. Qualified Institutional Placements and Institutional Placement Programme

Institutional Placement Programme
Qualified Institutional Placements
Issue Size < Rs. 250 crores: at least 2 QIB Allottees
Minimum Allottees 10
Issue Size > Rs. 250 crores: at least 5 QIB Allottees
Special Resolution needs to be passed
Approval from Stock Exchange is required
Special Resolution needs to be passed
Institutions belonging to same group or under same
Approval from Stock Exchange is required
control, shall not be counted as multiple allottees.
Institutions belonging to same group or under same
control, shall not be counted as multiple allottees.
Special Points
Partly paid up shares cannot be issued under these programmes.
In case of over subscription, allotment of not more than 10% of the offer size shall be made by the seller.
Pricing SHALL be made on the basis of average of weekly high and low prices of preceding 2 weeks.
Lock-in period shall be one year from the date of allotment.
7. Issue Of Specified Securities By Small And Medium Enterprises (SME) [Chapter XB of SEBI (ICDR) Regulations, 2009]
Applicability for Issuer:
If, Post-Issue Face Value of Capital
Then,
< Rs. 10 Crores
Issuer SHALL issue its specified securities in accordance with provisions of this Chapter
> Rs. 10 Crores and < Rs. 25 Crores
Issuer MAY also issue its specified securities in accordance with provisions of this Chapter
The specified securities shall be listed on SME Exchange AND
Where any listed issuer issues specified securities in accordance with provisions of this Chapter it shall migrate the specified
securities already listed on any recognized stock exchange/s to the SME exchange.
"SME exchange" means a trading platform of a recognized stock exchange having nationwide trading terminals permitted by the Board
to list the specified securities issued in accordance with this Chapter and includes a stock exchange granted recognition for this
purpose but does not include the Main Board.
Mandatory Minimums Prescribed:
Application Value
Allottees
> Rs. 1 Lakh per application
> 50

Underwriting by merchant bankers and underwriters

The issuer in consultation with merchant banker may appoint underwriters/ other nominated investors.
The issue shall be 100% underwritten, out of which the merchant banker(s) itself shall underwrite > 15% of the issue size
If other underwriters fail to fulfil their underwriting obligations or other nominated investors fail to subscribe to unsubscribed
portion, the merchant banker shall fulfil the underwriting obligations.
The underwriters other than the merchant banker and the nominated investors, who have entered into an agreement for
subscribing to the issue in case of under-subscription, shall not subscribe to the issue made under this Chapter in any
manner except for fulfilling their obligations under their respective agreements with the merchant banker in this regard.
All the underwriting and subscription arrangements made by the merchant banker shall be disclosed in the offer document.
The merchant banker shall file an undertaking to the Board that the issue has been 100% underwritten along with the list of
underwriters and nominated investors indicating the extent of underwriting or subscriptions commitment made by them, one
day before the opening of issue.
Migration to Main Board
"Main Board" means a recognized stock exchange having nationwide trading terminals, other than SME exchange;
If specified securities are listed on a SME Issuer, MAY migrate its BY passing Special Resolution through Postal Ballot
Exchange and post issue face value specified securities to Main
capital is > Rs. 10 Crores and < Rs. 25 Board
Shareholders other than promoters shall be counted.
Crores
Votes in Favour > 2 (x) Votes Against
If specified securities are listed on a SME Issuer, SHALL migrate its No Further Issue unless:
Exchange and post issue face value specified securities to Main 1. Shareholders other than promoters shall be counted.
capital is likely to increase beyond Rs. 25 Board subject to fulfillment 2. Votes in Favour > 2 (x) Votes Against
3. In-Principle Approval has been obtained
Crores DUE TO rights issue, preferential of Main Board criteria
issue, bonus issue, etc.

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