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 oversubscription 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 lockin. 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.

What are the eligibility norms for an unlisted company for making a public issue? An unlisted company has to satisfy the following criteria to be eligible to make a public issue Pre-issue net worth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years with minimum net worth to be met during immediately preceding 2 years and track record of distributable profits for at least three (3) out of immediately preceding five (5) years and the issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) shall not exceed five (5) times its pre-issue net worth. In case an unlisted company does not satisfy any of the above criterions, it can come out with a public issue only through the Book-Building process. In the Book Building process the company has to compulsorily allot at least sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. What are the eligibility norms for a listed company for making a public issue? A listed company is eligible to make a public issue if the issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) is less than five (5) times its pre-issue networth. If the issue size is more than or equal to 5 times of pre-issue networth, then the listed company has to take the book building route and allot sixty percent (60%) of the issue size to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. For details refer Chapter II of SEBI (DIP) Guidelines and relevant

clarifications issued subsequently. Are there any restrictions on pricing by companies? The companies can freely price their equity shares. However they have to give justification of the price in the offer document / letter of offer.

What are the requirements regarding promoters contribution and lock-in? In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters have to necessarily offer at least 20% of the post issue capital. In case of public issues by listed companies, the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital. In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a period of 3 years, both for an IPO and Public Issue by listed companies. In case of an IPO, if the promoters contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of one year. In case of a public issue by a listed company, participation by promoters in the proposed public issue in excess of the required minimum percentage shall also be locked-in for a period of one year as per the lock-in provisions as specified in Guidelines on Preferential issue. Beside the above, in case of IPO the entire pre-issue share capital i.e. paid up share capital prior to IPO and shares issued on a firm allotment basis along with issue shall be locked-in for a period of one year from the date of allotment in public issue. What is the basis of allotment? In case of over-subscription in a fixed price issue the allotment is done

in marketable lots, on a proportionate basis (for details refer to clause 7.6.1 of DIP Guidelines). In case of a book building issue, allotment to Qualified Institutional Buyers and Non-Institutional buyers are done on a discretionary basis. Allotment to retail investors is done on a proportionate basis as per provisions of Clause No. 7.6.1 of Guidelines. How does one come to know of issues on offer and from where can one get copies of the draft offer document? Every week SEBI issues press releases for information of the public, details of offer documents filed with SEBI and observations issued. Details can be obtained from the "Primary Market ' page of the SEBI website. The draft offer document can also be purchased from the SEBI office where the document is filed on payment of Rs.100/- by way of DD drawn in favor of SEBI. The draft offer document/letter of offer remains posted on SEBI website for a period of 21days from the date of filing the same to SEBI and can also be downloaded from there. From where does one get the application forms and the prospectus? Application form can be obtained from the lead manager and brokers to the issue. The application forms are also generally available at collecting bankers. Name and addresses of the Lead Manager are available in the prospectus/letter of offer. Can the public give their comments/complaints on the Issuer company or others connected with the issue? Yes, the objective of making offer document public is to invite public comments. The comments should be given within 21 days of the filing of the Draft offer document with SEBI. Where does one complain in case of wrong/ non-disclosures/ mis-

statement in the offer document? The Primary Market Division in SEBI. Within how many days an investor should receive the refund order/ allotment advise? Despatch of refund orders / allotment advice is to be within 2 working days of finalisation of the basis of allotment. Companies are required to finalise the basis of allotment within 30 days from the closure of the issue in case of a fixed price issue and within 15 days from the closure of the issue in case of a book building issue or else they are liable to pay interest @ 15% p.a. In case of non-receipt of the refund order / share certificate/ allotment advise what is the course of action available to the investor? The investor should give his complaint in writing to the lead manger/ registrar/ Investor Grievance Cell of SEBI. Within how many days should the company get its securities listed after the issue? The post issue lead manager ensures that all steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment. Is it mandatory to have a Demat Account for applying in public issue? An investor has the option to apply for and receive the shares in physical

form. However, it is advisable to get the allotment in Demat form as the shares in IPO shall be compulsorily tradable in Demat segment in Stock Exchanges. Dealing of physical shares (allocated in IPO) will not be accepted. In case of an IPO of any security of issue size of Rs. 10 crore or more, security shall be issued only in dematerialised form. In book built issues, for QIBs and large investors (applying for more than 1000 shares) allotment shall be only in Demat form and hence they should have a Demat account. From where can I get the addresses of the companies and details of change of names etc.? From the stock exchanges and Registrar of Companies What is Book Building? SEBI Guidelines define Book Building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document. What is the main difference between offer of shares through book building and offer of shares through normal public issue? Price at which securities will be allotted is not known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue. What is minimum number of days for which bid should remain open in book building?

Book should remain open for minimum of 5 days. Can open outcry system be used for book building? No. As per SEBI, only electronically linked transparent facility is allowed to be used in case of book building. Is the issue price for placement portion and net offer to public the same? Yes. What is the floor price in case of book building? Floor price is the minimum price at which bids can be made. Can the Individual Investor use book building facility for making an application? Yes. Can the bidder revise his bids? Yes. What proof can bidder request from trading member for entering bids? A bidder can request for a transaction registration slip as the proof of his/ her having entered the bid. Whenever a bid is entered by trading members in to the system, a unique transaction registration slip is automatically generated. Transaction registration slip gives details regarding number of shares bided for, price, the client name etc.

Is it possible to enter bids less than floor price? No. The system automatically rejects the bids if price is less than floor price. Users may note to go through the Guidelines in detail for a thorough understanding of the provisions. Queries seeking information of an advisory nature would not be responded to by SEBI. Users are also advised to refer to "Quick Guide for Investors" for jurisdictions of relevant authorities for various matters. Queries pertaining to other authorities would not be responded to by SEBI.