CHAPTER4

REGULATORY FRAMEWORK GOVERNING INITIAL

PUBLIC OFFERINGS IN INDIA
This chapter present the regulatory framework principal the issuance of

IPOs through public offer, book building and online route. The market

design for primary market has been provided in the provisions of:

1. The SEBI Act, 1992 which establishes SEBI to protect investors

and develop and regulate securities market;

2. The CompaniesAct-1956 & 2013,whichsetsout the code of conduct

for the corporate sector in relative to issue, allotment and transfer

of securities, and disclosures to be made in public issues;

3. The Securities Contracts (Regulation) Act, 1956, which provides

for regulation of transactions in securities through control over

stock exchanges; and

4. The Depositories Act, 1996 which provides for electronic

maintenance and transfer of ownership of dematsecurities etc.

A complex system built under the Capital Issues Act, was introduced in

India for the first time in May 1943, by a rule framed under the defence

of India Act 1939. After cessation of the war, it was continued from time

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to time by an act of congress viz., the capital issue Act 1947, established

firm control of the Central government over IPOs and other capital Issues

in the post independence era since 1947 until the abolition of the Act, in

1992. This abolition paved the way for free access to the capital markets

and for free pricing of IPOs and other capital issues.

SEBI has become the focal point for regulating issues of capital by the

corporate sector. It has been entrusted with the duty to look after the

interest of investors in this regard by providing them with adequate and

full disclosures in the offer documents and by regulating the various

disinterested party connected with the issue of capital. In this context,

SEBI issued guidelines in June, 1992 known as Disclosure and Investor

Protection Guidelines (DIP), which govern the issue of capital to public.

SEBI has been issuing clarifications to these guidelines from time to time

aiming at streamlining the public issue process. In order to provide a

comprehensive coverage of the DIP guidelines, SEBI has issued a

compendium series in January,2000, known as SEBI (DIP) Guidelines,

2000.

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These guidelines apply to all public issues, offer for sale and right issues

of listed and unlisted companies, all offer for sale and rights issues by

listed companies, whose equity share capital is listed except in case of

right issues where aggregate value of securities offered does not exceed

Rs.50 lacs. Broadly, there are three methods for issuing securities to the

public. As per SEBI(Issue of Capital and Disclosure Requirements)

Regulations, 2009,thefollowingaresomeoftherequirementsthat need to be

fulfilled in respect of an IPO in India. In Nutshell(SEBI) Guidelines

apply to the following types of companies.

(a) Public issue by listed Companies.

(b) Public issue by unlisted Companies.

(c) Offer for sale by listed and unlisted companies.

(d) Right issues by listed companies of value exceeding 50 lacs.

(e) Preferential issue.

(f) An issue of bonus shares by listed issuer.

(g) A qualified institutions placement.

(h) An issue of Indian depository receipts.

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Eligibility Requirements

First of all, the trader banker of Issues Company should file a draft

prospects with SEBI by at least 30 days prior to the file of the prospectus

with the registrar of companies (ROCs).The company is further required

to provide any information or clarification as needed by SEBI, the issuer

or the lead merchant banker shall carry out such changes in the draft

prospectus before filling the prospectus with ROCs. The company must

make an application for listing of its securities in the stock exchange(s)and

enter into an agreement with a depository for dematerialization of

securities proposed to be issued.

4.1 Conditions for Initial Public Offer

4.1.1 Initial open offering by unlisted organizations: An unlisted

organization should make an IPO, just in the event that it meets all

the accompanying conditions:-

(a) The company has net real assets of at least Rs 3crore in each of the

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 first 3 entire years, of which not more than 50 %are held in fiscal

resources.

(b) The company has a track record of distributable profits in terms of

Sec 205 of the organizations Act, 1956, for no less than three out

of quickly going before five years.

(c) The company has a net worth of atleast Rs 1Croreineach of the

previous 3 entire years.

(d) In case the company has changed its name, with in the last one

year, atleast 50% of the revenue forth preceding 1 entire year is

earned by the organization for the activity suggested by the new

name, and

(e) The aggregate of the proposed issue and every single past issue

made in the same money related year regarding issue size (i.e.

offer through offer document+ firm designation + promoter's

commitment through the offer record ), does not surpass five times
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 its pre – issue total assets according to the examined accounting

report of the procedure monetary year.

4.1.2 An issuer not fulfilling any of the conditions stipulated in sub-

regulations might make an Initial Public Offer if.

(a) The issue is made through the book building process and the

guarantor attempts to distribute no less than 50%of the net offer to

open to skilled in situational purchasers and to discount full

subscription monies in the event that it fails to make allocation to

the qualified institutional purchasers.

(b) At slightest 15 for each penny of the expense of the venture is

contributed by planned commercial banks or open financial

institutions ,of which not less than10% shall come from the

appraiser sand the guarantor under takes to allot at least 10% of the

net offer to open to qualified institutional purchasers, else he needs

to discount.

4.1.2.2(a) The minimum post-issue face value capital of the issuer is

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 Rs 10 crore.

4.1.2.2(b) The issuer under takes to provide market making for at

slightest two years from the date of posting of the predefined

securities subject to the accompanying:-

(i) The market makers offer buy and sell quotes for a minimum

profundity of three hundred determined securities and guarantee

that the bid a skin crease for their quotes does not ,at any

time,exceed10 %.

(ii) The inventory of market makers ,as on the date of allotment of the

specified securities should be at least 5% of the proposed issue.

4.2 IPO Grading:-

No unlisted company shall make an IPO, unless the following situation

are satisfied as on the date of filing of prospectus (in case of fixed price

issue) or Red Herring Prospectus (in case of book built issue) with ROC.

(a) The unlisted company has obtained grading for the IPO format

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 least one credit rating agency.

(b) Disclosures of all the grades obtained, along with the

rationale/description furnished by the credit rating agency for each

of the grades obtained have been made in the prospectus (in case

of fixed price issue) or Red Herring Prospectus (in case of book

built issue) with ROC

(c) The expenses incurred for grading IPO have been borne by the

unlisted company obtaining grading for IPO.

4.3 PRICING BY COMPANIES ISSUINGSECURITIES

4.3.1Anissuermay determine the price of specified securities in

consultation with lead merchant cashier or through the book building

process.

4.4 Price and Price Band

4.4.1 The issuer may mention a price or price band in the draft

prospectus(in case of a fixed price issue) and floor price or price band in

are adhering prospectus (in case of a book built issue )and determine the
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price at a later date before registering the prospectus with the Registrar of

Companies.

4.4.2 If the floor price or price band is not mentioned in the red hearing

prospectus ,the issuer shall announce the floor price or price band at least

two working days before the opening of the bid and at least one working

day before the opening of the bid ,in all the newspapers in which the pre-

issue advertisement was released.

4.5. Promoter’s Contribution and Lock in Requirements

4.5.1 Promoters Contribution

In a public issue by unlisted company, the promoters shall contribute not

less than 20% of the post issue capital. Promoters shall bring in the

full amount of the promoters contribution including premium at least

one day prior to the issue opening date.

4.5.2 Lock in Requirement

In case of any issue of capital to the public the minimum promoter's

contribution shall be locked in for a period of three years from

the date of commencement of commercial production or the date of

allotment in the public issue; whichever is later. In case of an in public

offer, the entire pre-issue capital held by persons other than promoters

shall be locked in for a period of one year .Promoter Contribution shall

be locked in for a period of one year.

4.6 Pre Issue Obligations

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4.6.1 The lead merchant banker shall exercise due diligence. The

standard of due diligence shall be such that the merchant banker shall

satisfy himself about all the aspects of offering, veracity and adequacy of

disclosure in the offer documents as liability shall continue even after the

completion of issue process.

4.6.2 The lead merchant banker shall pay requisite fee in accordance

with regulations 24A of Securities and Exchange Board of India Rules

and Regulations, 1992 along with draft offer document filed with the

Board.

4.6.3 A long with the offer document ,the lead manager is required to

submit the following:-

(i) A Memorandum of Understanding (which has been entered into

between a lead merchant banker and the issuer company

specifying their mutual rights, liabilities and obligations

relating to the issue),

(ii) Inter-se Allocation of Responsibilities (where the issue is

managed by more than one Merchant Banker the rights,

obligations and responsibilities of each merchant banker shall

be demarcated).

(iii) Due Diligence Certificate ,the lead merchant banker, shall

furnish to the Board a due diligence certificate

(iv) An Undertaking (that transactions insecurities by the “promoter"

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 the “advertiser group” and the immediate relatives of the

“promoters during the period between the date of filing the offer

documents with the Registrar of Companies or Stock Exchange

as the case may be and the date of closure of the issue shall be

reported to the Stock exchanges concerned with in 24 hours of

the transaction(s) and

(v) A list of Promoters" Group and other Details (list of the persons

who constitute the Promoters" Group and their individual

shareholding).

4.6.4 Appointment of Intermediaries:

(i) Merchant Bankers will be appointed for the issue. However, a

Merchant Bankers shall not manage the issue if he is a promoter

or a director or associate of the issuer company though it may

be selected as a backer for the issue, if it is involved only in the

marketing of the issue.

(ii) Other Intermediaries: Lead Merchant Banker shall ensure that

the other intermediaries are duly registered with the Board,

wherever applicable. Before advising the issuer on the

appointment of other intermediaries, the Lead Merchant

Banker shall independently assess the capability and the

capacity of the various intermediaries to carry out assignment.

The Lead Merchant Banker shall ensure that issuer companies

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 enter into a Memorandum of Understanding with the

intermediary concerned whenever required. The Lead Merchant

Banker shall ensure that Bankers to the Issue are appointed in

all the mandatory collection centres as specified in clause. The

Lead Merchant Banker shall not act as a Registrar to an issue in

which it is also handling the post issue responsibilities. The

Lead Merchant Bankers shall ensure that:-

(a) The Registrars to Issue registered with the Board are appointed

in all public issues and rights issues.

(b) In pencil case where the issuer company is a registered

Registrar to an Issue, the issuer shall appoint an independent

outside Registrar to method its issue.

(c) Registrar to an issue which is associated with the issuer

company as promoter or a director shall not act as Registrar for

the issuer company.

(d) Where the number of applications in a public issue is expected

to be large, the issuer company in consultation with the lead

merchant banker may associate one or more Registrars

registered with the Board for the limited purpose of collecting

the application forms at different centre and forward the same to

the designated Registrar to the Issue as mentioned in the offer

document. The designated Registrar to the Issue shall be

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 primarily and only responsible for all the activities as assigned

to them for the issue management.

4.6.5 Underwriting: The lead merchant banker shall satisfy

themselves about the ability of the underwriters to discharge their

underwriting obligations. The lead merchant banker shall

incorporate a statement in the offer document to the effect that in

the opinion of the lead merchant banker, the under

writers “assets are adequate to meet their underwriting obligation

and obtain Underwriters" written consent before including their

names as underwriters in the final offer document. Moreover, in

respect of an issue, the lead merchant banker shall ensure that the

relevant details of underwriters are included in the offer document.

In respect of every underwritten issue, the lead merchant banker(s)

shall undertake a minimum underwriting obligation of 5 % of the

total underwriting commitments or Rs. 25 lacs whichever is less.

The outstanding underwriting commitments of a merchant banker

shall not exceed 20 times its net worth at any point of time.

4.7 Offer Document to be Made Public

(i) The draft offer document is filled with SEBI at least 30days prior

to registering a prospectus ,red herring list with ROC or filling the

letter of offer with ROC.

(ii) The draft offer document made open to public for at least 21 days
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 from the date of filing the offer document with the Board.

(iii) The lead merchant banker should likewise record the draft offer

document with the stock relations where the securities are

proposed to be recorded.

(iv) Pre-issue Advertisement The guarantor organization should soon

after getting last perception, if any on the draft prospectus or draft

Red Herring Prospectus from the Board, make an advert in an

English national Daily with wide circulation, one Hindi National

daily paper and a territorial tongue newspaper with wide

circulation at the place where the enlisted office of the backer is

arranged. Moreover, every unlisted organization acquiring

reviewing for IPO might uncover every one of the evaluations got,

alongside the foundation/depiction furnished by the credit rating

agency for each of the grades got, in the prospectus, Abridged

Prospectus, issue advertisements and at allot her places where the

issuer organization is promoting for the IPO.

4.7.2 Dispatch of Issue Material:

The lead merchant banker shall affirm that for open issues offer

records and other issue materials are dispatched to the different

stock trades, brokers, underwriters, bankers to the issue, invest

or links, and so forth ahead of time as concurred driving.

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4.7.3 No Complaints Certificate: After a period of 21days from the date,

the draft offer archive was made open, the Lead Merchant Banker

shall file a statement with the Board giving a list of complaints

received by it ,a statement by it whether it is proposed to alter

the draft offer report or not, and highlight those revision.

4.7.4 Mandatory Collection Centers: The most extreme number of

gathering habitats for an issue of capital might be:

(i) The four metropolitan focuses arranged at Mumbai, Delhi,

Calcutta and Chennai.

(ii) All such centers where the stock exchanges are located in

the region in which the enrolled office of the organization is

arranged.

(iii) The provincial division of gathering focuses is shown in

Schedule VII.

4.7.5 Authorised Collection Agents: The issuer company can also select

approved accumulation operators in counsel with the Lead

Merchant Banker subject to vital revelations including the names

and addresses of such specialists made in the offer record. The lead

Merchant financier might guarantee that the gathering operators so

chose are appropriately up to for the reason, both as far as

foundation and, labour necessities. The accumulation operators

might gather such applications as are joined by instalment of

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 utilization funds paid by checks, drafts and stock puts which

should be kept in the uncommon offer application account with

assigned booked bank either on the same date or most recent by the

following working day.

4.7.6 Appointment of Compliance Officer: A guarantor organization

should select a consistence officer who might straightforwardly

liaise with the board concerning recognition with different laws,

standards, regulations and different orders issued by the board and

investor's complaints related matter. The name of the compliance

officer so delegated should be hinted to the Board.

4.7.7 Abridged Prospectus: The Lead Merchant Banker should guarantee

that each application structure appropriated by the guarantor

organization or any other individual is accompanied by a copy of

the Abridged Prospectus. The Abridged Prospectus might not

contain matters which are superfluous to the substance of the

outline.

4.7.8 Contract with Depositories: The lead manager shall en sure that the

backer organization has entered into assention with all the deposit.

He shall likewise guarantee that an option be given to the financial

specialists to get allotment of securities in dematerialized from

through any of the store houses.

4.8 Contents of Offer Document

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 Prospectus shall contain all material information which shall be

true and adequate so as to enable the investors to make informed

decision on the investments in the issue. It shall include the

information and statements as far as possible in the following

order:

a) Cover Pages

b) Table of Contents

c) Definition and abbreviations

d) Risk Factors

e) Introduction

f) About the issuer company

g) Financial Statements

h) Legal and Other information

i) Other Regulatory and Statutory Disclosure

j) Offering Information

k) Description of Equity Shares and Terms of the Article of

Association

l) Other Information

4.9 Post-Issue Obligation

The Post-issuer equipment shall be as follows:

4.9.1 Post–Issue Monitoring Reports

The post-issue Lead Merchant Banker shall ensure the deference of

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 the post-issue monitoring reports as perform specified in Schedule

XVI. The sere ports shall be submitted within 3 working days from

the due dates. The post issue lead merchant banker shall file a due

diligence certificate in the format given in schedule XVI-A along with

the final post-issue monitoring report.

4.9.2 Redressal of Investor Grievances

The post issue lead merchant banker shall actively associate himself

with post-issue activities, allotment, refund, dispatch and giving

instructions to self certified Syndicate banks and shall regularly

monitor redressal of investor grievances arising there from.

4.9.3 Co-ordination with Intermediaries

The post-issue lead merchant banker shall maintain close coordination

with the registrars to the issue and arrange to depute its officers to the

offices of various peace keeping troops at regular intervals after the

closure of the issue to monitor the flow of applications from collecting

bank branches processing of the applications till the basis of allotment

is finalized, dispatch security certificates and refund orders completed

and securities listed. Any act of omission or commission o n the part o

f the intermediaries noticed during such visits shall be duly reported to

the board.

If the issue is proposed to be closed at the earliest closing date, the

lead merchant banker shall satisfy himself that the issue is fully
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 subscribed before announcing closure of the issue. In case there is no

definite information about subscription figures, the issue shall be kept

open for the required number of days to take care of the underwriters"

interests and to avoid any dispute, at a later date, by the underwriters

in respect of their liability. In case there is a development on

underwriters, the lead merchant banker shall ensure that the

underwriters honour their commitment within 60 days from the date of

the issue. In case of unsubscribed issues, the lead merchant banker

shall furnish information in respect of underwriters who failed to meet

their underwrite developments to the board.

The post-issue Lead Merchant banker shall ensure that moneys

received pursuant to the issue and kept in a separate bank, as per the

provisionofsection73(3)of the companies Act1956 and is released by

the said bank only after the listing permission under the said Section

has been obtained from all the stock exchanges where the securities

was proposed to be listed as per the offer document.

4.9.4 Post-issue Advertisement

Post-issue Lead Merchant Banker shall ensure that in all

advertisements giving details relating to oversubscription, basis of

allotment, number, value and percentage of all applications number,

value and percentage of successful allottees for all applications, date

of completion of dispatch of refund orders/instructions to Self

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 Certified Syndicate Banks by the Registrar, date of Dispatch of

certificates and date of filing of listing applicationisre leased within

10days from the date of completion of the various activities at least in

an English National Daily circulated at the place where registered

office of the issuer company is situated.

4.9.5 Basis of Allotment

In a public issue of securities, the Executive Director/ Managing

Director of the Designated Stock Exchange along with the post issue

Lead Merchant Banker and the Registrars to the issue shall be

responsible to ensure that the basis of allotment is finalized in a fair

and proper manner in accordance with the following guidelines.

4.9.5.1 Proportionate Allotment Procedure

Allotment shall be on proportionate basis within the specified

categories, rounded off to the nearest integer subject to a minimum

allotment being equal to the least amount application size as fixed and

disclosed by the issuer.

4.9.5.2 Reservation for Retail Individual Investor

The proportionate allotments of securities in an issue that is

oversubscribed shall be subject to the reservation for Retail individual

investors as described below:

(a) A minimum 50% of the net offer of securities to the public shall

initially be made available for allotment to retail individual

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 investors, as the case may be.

(b) The balance net offer of securities to the public shall be made

available for allotment to.

(i) Individual applicants other that retail individual investors, and;

(ii) Other investors including corporate bodies/institution

irrespective of the number of shares, debentures, etc. applied

for.

4.9.5.3 The unsubscribed portion of the net offer to any one of the

categories specified in (a) or (b) shall/may be made available for

allotment to applicants in other category, if so required.

4.9.5.4The drawl of lots to finalise the basis of allotment, shall be

done in the presence of a public representative on the governing

board of the designated stock exchange.

4.9.5.5 The basis of allotment shall be signed as correct by the executive

director/managing director of the designated stock exchange and

the public representative in addition to the lead merchant banker

responsible for post issue activities and the registrar to the issue.

The designated stock exchange shall invite the public

representative on a rotation basis from out of the various public

representatives on its governing board.

4.10 Other obligations

(a) The lead vendor broker might guarantee that the dispatch of
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 offer testaments/discount orders/and demat credit is finished

and the distribution and posting reports submitted to the stock

trades inside of 2 working days of the date of apportioning.

(b) The post issue lead manager shall ensure that all steps for

completion of the important customs for posting and beginning

of exchanging at all stock trades where the securities are to be

listed are to be listed within 7 working days of conclusion of

premise of portion.

(c) Lead merchant banker shall ensure payment of interest to the

candidates for deferred dispatch of distribution letters, discount

orders, and so on as recommended in the offer record.

(d) The post-issue lead merchant banker shall ensure that the

dispatch of discount requests/designation letters/offer

declarations is done by way of registered post/certificate of

posting as might be material.

(e) In instance of all issues, notice giving points of interest

identifying with oversubscription, basis of assignment,

number, esteem and extent of all applications got including

applications bolstered by blocked sum, number, quality and rate

of successful allottees for all applications including applications

upheld by blocked sum 2500, date of consummation of discount

requests/guidelines to self guaranteed syndicate banks by the

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 enlistment centre, date of dispatch of certificates and date of

recording of posting application.

(f) Such advertisement shall be released within 10 days from the

date of consummation of the different exercises.

(g) Post-issue lead vendor investor should keep on being in charge

of post issue exercises till the endorser have received the shares

certificates or refund of application moneys and the posting

assention is gone into by the backer company with the stock

trade and posting/exchanging authorization is acquired.

4.11 OTHER ISSUE REQUIREMENTS

In the event of an open issue by an unlisted organization, the net offer to

public shall be at least 10%as the case may be, of the post-issue capital.

However, in case of a public issue by a listed organization, then et offer

to public shall be at least10%or 15%,as the case might be, of the issue

size. These procurements are not applicable to an infrastructure company,

a government company, statutory authority or corporation or special

purpose vehicle setup by any of them, which is occupied with base

division.

The backer allowed to reserve a spot and/or firm designations to

different classes of persons for the staying of the issue size subject to

other significant procurements of these rules. Category of persons include

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employees of the company, share holders of the advancing organizations

on account of another organization, Indian mutual funds, foreign

institutional investors, Indian and multilateral improvement

establishments and booked banks. Indicated classes for "firm allocation"

in public issue can be made to Indian and multilateral improvement

establishments, Indian common assets, remote institutional financial

specialists (counting non occupant Indians and abroad corporate bodies,

perpetual/regular employees of the issuer company and scheduled banks.

It is further stated that the lead shipper banker(s) can be incorporated into

the class of persons qualified for firm allotments subjects, to a total

greatest roof of 5% of the propose disuse of securities. The aggregate of

reservations and firm assignments of workers in an issue shall not surpass

10 % of absolute proposed issue sum. For shareholders, there servation

shall not exceed 10% of the total proposed issue amount.

In case the promoting companies are designated money related

foundations/state and focal monetary establishments, the representatives

and the shareholders of such promoting organizations, should not be

eligible for the said reservations.

The allotment of securities of to the specified categories for firm

allotment/reservation shall be subject to such conditions as might be

determined by Government and regulatory powers.

Capital Structure:
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For the reasons of presentation of the capital structure in the specified

position, the lead merchant banker might consider as taking after:

(a) Proposed issue amount= (Promoter's commitment in the proposed

issue) + firm portion) + (offer through the offer report).

(b) Offer through the offer document shall include net offer to the

public and reservations to the permitted reserved categories and

should exclude the promoter's contribution in the proposed issue

and firm apportioning.

(c) Net offer to the public shall mean the offer made toIndian open and

does not include reservations/firm allocation/promoters

commitment.

4.12 Firm Allotments and Reservations

(a) ( i) If any firm allotment has been made to any person(s)inthe

specified categories, no further application for subscription to the

public issue from such person(s)shall be entertained.

(ii) Where reservation has been made to specified category,

person(s)belonging to category shall not make an application in the

"Net open offer" class.

(b) (i)An candidate in the net open class can't make an application for

that number of securities exceeding the quantity of securities offer

to general society.

(ii) In the case of reserved categories, a single applicant in the

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 held class can make an application for various securities which

surpasses the reservation.

(c) (i) Any un subscribed portion in any reserved category may be

added to whatever other saved class.

(ii) The un subscribed segment, if any, after such entomb se

modification amongst the saved classes should be added back to

the net offer to people in general.

(d) In case of under subscription in the net offer to the public portion,

spill over to the extent of under subscription shall be permitted

from there served category to the net public offer segment.

(e) If any person withdraws partially with the enlistment center of

organizations, thee ten to, shall be taken up by the promoters and

the membership sum might be acquired no less than one day before

the issue opening date.

(f) The shares so acquired by promoter sunder sub clause

(e) Above might likewise be liable to a lock–in for a time of 3 years.

(g) No buy back or stand by or similar arrangements shall be with the

persons for whom securities are reserved for distribution on a firm

premise.

(h) No payment in the nature of discount, commission, allowance or

generally might be made by the guarantor or promoters, straight

forwardly or indirectly, to any person who receives securities by

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 way of firm designation in an issue.

4.13 Terms of the Issue

(a) Minimum Application Value

The minimum application value shall be within the range of Rs. 5,000

to Rs.7,000. The issuer company, in consultation with the merchant

banker, shall stipulate the minimum application size (in terms of

number of shares) falling within the a fore said range of minimum

application value and make up front disclosures in this regard, in the

offer document.

(b) Securities Issued to be made fully paid up

(i) If the subscription money is proposed to be received in calls, the

calls shall be structured in such a manner that the entire

subscription money is called within 12months from the date of

allotment.

(ii) If the investor fails to pay call money within 12 months the

subscription money already paid may be forfeited.

(iii) If the issue size is above Rs.500 crores and is subject to

monitoring requirements as per Clause 8.17.1 of this chapter, it

shall not be necessary to call the entire subscription money

within 12 months.

4.14. Limitation on further capital issues

No organization shall make any further issue of capital in any way

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whether by method for issue of bonus offers, special allotment, rights

issue or public issue or otherwise, during the period beginning from

the accommodation of offer record to the Board for the benefit of

organization for open or right issues, till the securities referred to in

the offer document have been listed or application money s refunded

on account of non-listing or under subscription, and so forth.

4.15 Period of Subscription

Subscription list for public issues shall be kept open for at least 3

working days and not more than 10 working days.

4.16 Price Band

On the off chance that in a draft offer document submitted to the

Board, a value Band is said, suitable informative notes demonstrating

the budgetary ramifications, if the cost were to be settled at various

extents within the price band approved by the company Board/General

Body might be revealed in the offer archive

4.18 Underwriting

The issuers have the option to have a public issue underwritten by the

underwriter. In respect of every underwritten issue, the lead merchant

banker(s) shall accept a minimum underwriting obligation of 5 % of

the total underwriting commitment or Rs.25 lacs whichever is less.

4.19 Updation of Offer Document

The lead Merchant Banker shall ensure that the particulars as per
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 audited statements contained in the offer documents are not more than

6 months old from issue opening date. In respect of a Government

company constructing a public concern, the auditor's report in the

prospectus shall not be more than six months old as on the date of

filing of the prospectus with the Registrar of Companies or the Stock

Exchange as the case may well be.

4.20 Compliance Officer to be appointed by Lead Merchant Banker

The merchant bankers shall appoint senior officer as Compliance

Officer to ensure that all Rules, Regulations, Guidelines, Notification

etc. issued by the Board, the Government of India, and other

regulatory organizations are complied with. He shall co- ordinate with

regulatory authorities in various matters and provide necessary

guidance as also ensure compliance internally. He shall also ensure

that observation made/ deficiencies pointed out by the Board do not

recur.

4.21 Incentives to Prospective Shareholders

The issuer shall not offer any incentives to the prospective investors

by way of medical insurance scheme, lucky draw, prizes etc.

4.22 New Financial Instrument

The lead manager shall ensure adequate disclosures in the offer

document, more particularly relating to the terms and conditions,

redemption, security, conversation and any other relevant features of

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 any new financial instruments such as Deep Discount Bonds,

Debentures with Warrants, Secured Premium Notes etc.

4.23 Requirement of Monitoring Agency

In case of issues exceeding Rs. 500 crores, the issuer shall make

arrangements for the use of proceeds of the issue to be monitored by

one of the financial institutions. A monitoring report shall be filed by

the monitoring agency with the issuer company, on a half yearly basis,

till the proceeds of the issue have been entirely utilized.

4.24 Safety Net or Buy Back Arrangement

Any safety net scheme or buy-back arrangements of the shares

proposed in any public issue shall be finalized by Issuer Company

with the lead merchant banker in advance and disclosed in the

brochure.

4.25 Option to Receive Securities in Dematerialized Form

The Lead Merchant Banker shall add in a statement in the offer

document and in the application form to the effect that the investors

have an option to either receive securities in the form of physical

certificates or hold them in a dematerialized form.

4.26 Issue Opening Date

An issue shall open within 3 months from the date of issuance of the

observation letter by the Board, if any or within 3 months from the

31st day from the day of filing of the draft offer document with the
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 Board, if no observation letter is issued.

4.27 Presentation of financials if there should be an occurrence of

progress of category

If there should be an occurrence of progress in standard category of

value shares, the compliance with the following shall be ensured while

making divulgence in the offer report.

(a) All the financial data affected by the change in Denomination of

shares should be plainly and unambiguously displayed in the

offer report.

(b) Comparison of financial ratios representing value per share and

correlation of stock exchange information in appreciation of cost

and volume of securities might be obviously and unambiguously

displayed in the offer archive.

(c) The capital structure incorporated in the offer document shall be

clearly presented giving all the relevant details pertaining to the

adjustment in group of the shares.

4.28 ROLE OF COMPANY SECRETARY IN AN IPO

The Securities Exchange Board of India Act,1992 (SEBI Act) was

formed, interalia, to provide for the establishment of a Board (SEBI)

to ensure the enthusiasm of investors in securities and to promote the

advancement of and to direct the securities market. SEBI directs the

securities market by recommending measures to enroll and manage

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the working of Capital Market Intermediaries connected with

Securities market. Such go-betweens embrace taking after significant

exercises identifying with securities notwithstanding different

exercises:

a. Management of an Issue of Capital

b. Manager of Co-supervisor

c. Advisor to issue

d. Corporate Advisory Services

e. Underwriting

f. Registrar to an Issue and Share Transfer Agent

g. Private Placement

h. Public announcement and offer documents for acquisition of offers

under takeover code

i. Portfolio Manager

j. Brokers, Sub-dealers.

The main role of these Capital Market Intermediaries is to give most

extreme data to the financial specialists by means of exposures

conveying basic data. The intermediaries are necessarily compelled to

associate with other professionals to advise the compliance of the Act,

rules and regulations, notifications, rules, guidelines, and so forth.,

specifically by the Board or the Central Government to bring up the

rebelliousness and guarantee the complete compliance. In a capital

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market issue, the major role in synchronizing these activities of

intermediaries lies with a qualified Company Secretary. Section2(2) of

the Company Secretaries Act, 1980 indicates the various areas of

practice which are open to a Company Secretary holding certificate of

practice issued by the Institute. The target of approving individuals to

practice is to make available professional services of a Company

Secretary to the corporate division. The instructive foundation,

information, preparing and presentation that an organization secretary

procures makes him an adaptable expert equipped for rendering an

extensive variety of administrations to organizations of all sizes, other

business and modern associations; including little and medium

measured organizations which are not required by law, to employ

compulsorily a Whole-Time Company Secretary.

The plenty of administrations, which a Practicing Company Secretary

can render in IPOs, can be recorded as under:

1. Arranging Stage

a. Deciding the course of events

b. Compliance related issues

c. Importance of Corporate Governance

d. Structure of Board

e. Promoters assent

f. Method of issuance of shares (Demat/Physical/Both)

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 Compliance

2. Due tirelessness

a. Company Contract and Leases

b. Legal and Tax Issues

c. Corporate issues

d. Financial Assets

e. Financial Statement

f. Creditors and Debtors

g. Legal Cases against the organization

3. Delegating Advisors and different middle people, for example,

a. Investment Bankers

b. Book Running Lead Managers

c. Issues with Depository

d. Legal Advisor

e. Bankers

4. Offer Document

a. Drafting the offer report

b. Filing with SEBI

c. In-rule approval of Stock Exchange

d. Filing with Designated Stock Exchanges

e. Complying with Comments got from SEBI

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 f. Filing with ROC

5. Issue Period

a. Adhering to Issue Opening/Closing Date

b. Compiling Field Reports on membership status

c. Coordinating with Registrar/Bankers to the issue

6. Distribution of shares

a. Basis of distribution

b. Board meeting for distribution

c. Crediting offers in recipient account/dispatch of offer

authentications

d. Despatch of discount requests

e. Payment of stamp obligation

7. Posting

a. Filing for Listing with Designated Stock Exchange

b. Finalisation of Listing Process

8. Post issue compliances

a. To guarantee legitimate consistence with Listing Agreement

b. Redressal of shareholder protestations

c. Timely filing of required reports with ROC/SEBI/Stock

trade

As can be seen from the above, a Company Secretary is a key member

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in an IPO team. A part from checking the applicability and eligibility

standards or exemption from qualification standards and the pre-

posting prerequisites of Stock Exchange, he is in charge of

guaranteeing that the organization has conformed to the pre-issue,

issue and post-issue commitments of the company and corporate

administration necessities incorporating revelations as for, entomb

alia, material contracts, statutory approvals, subsidiaries and promoter

holding and prosecutions. Consistence of SEBI (ICDR) Regulation

2009 and other applicable Act sand guide lines is a primary

responsibility of the Company Secretary in the event that the

organization proposes to rundown its securities abroad; he is likewise

required to follow conditions for posting abroad.

The discussion in this chapter on Indian IPO market take us to the

conclusion that, the SEBI through its DIP guidelines has laid down the

guidelines with respect to the eligibility norms for the organizations,

pricing of securities, promoters proprietorship and lock-in

prerequisites and other pre-and post-issue commitment so as to

guarantee that all the concerned entity observe high gauges of truth

and reason able production.

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