Sebi Guidelines 6t3r3e
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SEBI Guidelines for Initial Public Offer& BUYBACK OF SHARES
Presented By: AMOL PATIL NITIN MALUSARE CHETAN DEVADIGA JHANAK SHAH
About IPO… • Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public • This paves way for listing and trading of the issuer’s securities.
11/15/2012
About IPO…(contd.) • The main objectives are to use the proceeds from the issue to fund the company's plans for the expansion of operations and to meet the expenses of the issue. • IPO in India is done through different methods like fixed price method, book building method, or a mixture of both.
11/15/2012
IPO Procedure
Company
Investment Bankers (Underwriters) Negotiate the deal Draft Offer document filed with SEBI
Approval by SEBI Stock offered to public 11/15/2012
IPO Filings with SEBI IPO Filings DIP Guidelines 2000 (Disclosure and Investor Protection) SEBI
11/15/2012
SEBI (DIP) Guidelines Covers… 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)
Eligibility Norms of the Issuer Size of the Public Issue Promoter Contribution Prospectus IPO Grading Collection centres for receiving applications Regarding allotment of shares Timeframes for the Issue and Post- Issue formalities Dispatch of Refund Orders Other regulations pertaining to IPO Restrictions on other allotments
11/15/2012
SEBI (DIP) Guidelines 1) Eligibility Norms of the Issuer: The company shall meet the following requirements – • Net Tangible Assets ≥ ` 3 crores (for 3 full years) • Should have track record of profitability in 3 out of previous years • Net worth ≥ ` 1 crore in three years • If change in name, atleast 50% revenue for preceding 1 year should be from the activity under new name 11/15/2012
SEBI Guidelines…. (contd.) 2) Size of the Public Issue: i) Issue of shares to public ≥ 25% of the total issue, ii) The issue size should not be more that five times the pre-issue net worth 3) Promoter Contribution: i) Minimum Promoters contribution is 20-25% of the public issue. ii) Minimum Lock in period for promoters contribution is 5 years 11/15/2012
SEBI Guidelines…. (contd.) 4) Prospectus: Abridged prospectus must be attached with every application form. i) Risk factors must be highlighted ii) Objectives of the issue and the cost of the project should be disclosed iii) Company’s management, past history and present business of the firm should be disclosed iv) Particulars of the company and other listed companies under the same management who have made public issues during the past 3 years are to be disclosed 11/15/2012
SEBI Guidelines…. (contd.) 5) IPO Grading: A company which has filed the draft offer document for its IPO with SEBI is required to obtain a grade from at least one CRA ed with SEBI like - CARE - ICRA - CRISIL - FITCH Ratings 11/15/2012
SEBI Guidelines…. (contd.) 6) Collection centers for receiving applications: There should be at least 30 mandatory collection centers For issues ≤ ` 10 crores, the collection centres shall be situated at: The 4 metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; At all such centres where stock exchanges are located in the region in which the ed office of the company is situated. 11/15/2012
SEBI Guidelines…. (contd.) 7) Regarding allotment of shares: • In an Issue of more than ` 25 crores the issuer is allowed to place the whole issue by Bookbuilding • 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 11/15/2012
SEBI Guidelines…. (contd.) 8) Timeframes for the Issue and Post- Issue formalities: • The min. period = 3 working days and the max. = 10 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 over-subscription 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. • Allotment has to be made within 30 days of the closure of the Public 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. 11/15/2012
SEBI Guidelines…. (contd.) 9) Dispatch 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.
11/15/2012
SEBI Guidelines…. (contd.) 10) Other regulations pertaining to IPO: • Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public except in disinvestment. • 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 ` 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. • Code of ment specified by SEBI should be adhered to. 11/15/2012
SEBI Guidelines…. (contd.) 11)Restrictions on other allotments: • Firm allotments to mutual funds, FIIs and employees not subject to any lock-in period. • Within 12 months of the public no bonus issue should be made. • For Employees: i) Maximum % of shares = 5% and ii) Maximum shares = 200 nos. 11/15/2012
BUYBACK OF SHARES • The provisions regulating buy back of shares are contained in Section 77A, 77AA and 77B of the Companies Act,1956. • The Securities and Exchange Board of India (SEBI) framed the SEBI (Buy Back of Securities) Regulations,1999 and the Department of Company Affairs framed the Private Limited Company and Unlisted Public company (Buy Back of Securities) rules,1999 pursuant to Section 77A(2)(f) and (g) respectively 11/15/2012
•
Procedure Where a company proposes to buy back its shares, it
shall, after ing of the special/Board resolution make a public announcement at least one English National Daily, one Hindi National daily and Regional Language Daily at the place where the ed office of the company is situated.
• The public announcement shall specify a date, which shall be "specified date" for the purpose of determining the names of shareholders to whom the letter of offer has to be sent. • A public notice shall be given containing disclosures as specified in Schedule I of the SEBI regulations. • A draft letter of offer shall be filed with SEBI through a merchant Banker. The letter of offer shall then be dispatched to the of the company. 11/15/2012
• A copy of the Board resolution authorizing the buy back shall be filed with the SEBI and stock exchanges. • The date of opening of the offer shall not be earlier than seven days or later than 30 days after the specified date • The buy back offer shall remain open for a period of not less than 15 days and not more than 30 days. • A company opting for buy back through the public offer or tender offer shall open an escrow . 11/15/2012
Penalty • If a company makes default in complying with the provisions the company or any officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. The offences are, of course compoundable under Section 621A of the Companies Act,1956. 11/15/2012
SEBI…. Viewing Companies Microscopically. COMPANIES
11/15/2012
Presented By: AMOL PATIL NITIN MALUSARE CHETAN DEVADIGA JHANAK SHAH
About IPO… • Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public • This paves way for listing and trading of the issuer’s securities.
11/15/2012
About IPO…(contd.) • The main objectives are to use the proceeds from the issue to fund the company's plans for the expansion of operations and to meet the expenses of the issue. • IPO in India is done through different methods like fixed price method, book building method, or a mixture of both.
11/15/2012
IPO Procedure
Company
Investment Bankers (Underwriters) Negotiate the deal Draft Offer document filed with SEBI
Approval by SEBI Stock offered to public 11/15/2012
IPO Filings with SEBI IPO Filings DIP Guidelines 2000 (Disclosure and Investor Protection) SEBI
11/15/2012
SEBI (DIP) Guidelines Covers… 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)
Eligibility Norms of the Issuer Size of the Public Issue Promoter Contribution Prospectus IPO Grading Collection centres for receiving applications Regarding allotment of shares Timeframes for the Issue and Post- Issue formalities Dispatch of Refund Orders Other regulations pertaining to IPO Restrictions on other allotments
11/15/2012
SEBI (DIP) Guidelines 1) Eligibility Norms of the Issuer: The company shall meet the following requirements – • Net Tangible Assets ≥ ` 3 crores (for 3 full years) • Should have track record of profitability in 3 out of previous years • Net worth ≥ ` 1 crore in three years • If change in name, atleast 50% revenue for preceding 1 year should be from the activity under new name 11/15/2012
SEBI Guidelines…. (contd.) 2) Size of the Public Issue: i) Issue of shares to public ≥ 25% of the total issue, ii) The issue size should not be more that five times the pre-issue net worth 3) Promoter Contribution: i) Minimum Promoters contribution is 20-25% of the public issue. ii) Minimum Lock in period for promoters contribution is 5 years 11/15/2012
SEBI Guidelines…. (contd.) 4) Prospectus: Abridged prospectus must be attached with every application form. i) Risk factors must be highlighted ii) Objectives of the issue and the cost of the project should be disclosed iii) Company’s management, past history and present business of the firm should be disclosed iv) Particulars of the company and other listed companies under the same management who have made public issues during the past 3 years are to be disclosed 11/15/2012
SEBI Guidelines…. (contd.) 5) IPO Grading: A company which has filed the draft offer document for its IPO with SEBI is required to obtain a grade from at least one CRA ed with SEBI like - CARE - ICRA - CRISIL - FITCH Ratings 11/15/2012
SEBI Guidelines…. (contd.) 6) Collection centers for receiving applications: There should be at least 30 mandatory collection centers For issues ≤ ` 10 crores, the collection centres shall be situated at: The 4 metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; At all such centres where stock exchanges are located in the region in which the ed office of the company is situated. 11/15/2012
SEBI Guidelines…. (contd.) 7) Regarding allotment of shares: • In an Issue of more than ` 25 crores the issuer is allowed to place the whole issue by Bookbuilding • 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 11/15/2012
SEBI Guidelines…. (contd.) 8) Timeframes for the Issue and Post- Issue formalities: • The min. period = 3 working days and the max. = 10 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 over-subscription 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. • Allotment has to be made within 30 days of the closure of the Public 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. 11/15/2012
SEBI Guidelines…. (contd.) 9) Dispatch 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.
11/15/2012
SEBI Guidelines…. (contd.) 10) Other regulations pertaining to IPO: • Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public except in disinvestment. • 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 ` 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. • Code of ment specified by SEBI should be adhered to. 11/15/2012
SEBI Guidelines…. (contd.) 11)Restrictions on other allotments: • Firm allotments to mutual funds, FIIs and employees not subject to any lock-in period. • Within 12 months of the public no bonus issue should be made. • For Employees: i) Maximum % of shares = 5% and ii) Maximum shares = 200 nos. 11/15/2012
BUYBACK OF SHARES • The provisions regulating buy back of shares are contained in Section 77A, 77AA and 77B of the Companies Act,1956. • The Securities and Exchange Board of India (SEBI) framed the SEBI (Buy Back of Securities) Regulations,1999 and the Department of Company Affairs framed the Private Limited Company and Unlisted Public company (Buy Back of Securities) rules,1999 pursuant to Section 77A(2)(f) and (g) respectively 11/15/2012
•
Procedure Where a company proposes to buy back its shares, it
shall, after ing of the special/Board resolution make a public announcement at least one English National Daily, one Hindi National daily and Regional Language Daily at the place where the ed office of the company is situated.
• The public announcement shall specify a date, which shall be "specified date" for the purpose of determining the names of shareholders to whom the letter of offer has to be sent. • A public notice shall be given containing disclosures as specified in Schedule I of the SEBI regulations. • A draft letter of offer shall be filed with SEBI through a merchant Banker. The letter of offer shall then be dispatched to the of the company. 11/15/2012
• A copy of the Board resolution authorizing the buy back shall be filed with the SEBI and stock exchanges. • The date of opening of the offer shall not be earlier than seven days or later than 30 days after the specified date • The buy back offer shall remain open for a period of not less than 15 days and not more than 30 days. • A company opting for buy back through the public offer or tender offer shall open an escrow . 11/15/2012
Penalty • If a company makes default in complying with the provisions the company or any officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. The offences are, of course compoundable under Section 621A of the Companies Act,1956. 11/15/2012
SEBI…. Viewing Companies Microscopically. COMPANIES
11/15/2012
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