An Insight to INITIAL PUBLIC OFFERING

IPO denotes the process by which the shares of the Company are first offered to prospective investors in the primary market. INITIAL PUBLIC OFFERING

Initial Public Offering REGULATORY ASPECTS SEBI (Issue of Capital & Disclosure Requirements) Regulations. 2009 (ICDR) The Companies Act, 1956. The Securities Contract (Regulation) Act, 1956 Listing Agreement.

ACTIVITY SCHEDULE FOR IPO To pass a Board Resolution for IPO Appointment of Intermediaries Preparation of Offer Document Regulatory Approvals Research Reports Filing of Offer Document with SEBI. Marketing. Determination of floor price. Opening of bids Closing of bids and allocation procedure Pay in of funds File return of allotment with the Registrar of Companies. Listing and Trading permission.

UNLISTED COMPANIES may make a Initial Public Issue after meeting ALL the following conditions:

ELIGIBILITY NORMS FIXED PRICE ROUTE BOOK BUILDING ROUTE

Eligibility Norms for issue through FIXED PRICE ROUTE NET TANGIBLE ASSET ( Net Assets - Intangible Assets) of atleast 3 Crores in the preceding three FULL (12 months each) years.

TRACK RECORD of distributable profits for atleast 3 out of immediately preceding 5 years. Eligibility Norms for issue through FIXED PRICE ROUTE

NET WORTH (Paid up Capital + Free Reserves) of at least ONE CRORE in each of the preceding THREE FULL Years. Eligibility Norms for issue through FIXED PRICE ROUTE

Proposed Issue + Firm Allotment + Promoters Contribution NOT to exceed 5 times its pre issue net worth as per the latest audited financial results. Eligibility Norms for issue through FIXED PRICE ROUTE

Eligibility Norms for issue through BOOK BUILDING ROUTE An unlisted company may make public issue only through the book building process route if

BOOK-BUILDING Process by which the demand for the securities is built up. Price of the security is elicited and assessed. This is done to determine the quantum of securities to be issued. The issue may be by way of notice, circular, advertisement, document or information memorandum or offer document.

Eligibility Norms for issue through BOOK BUILDING ROUTE It does not comply with the conditions specified in fixed price route; or

Eligibility Norms for issue through BOOK BUILDING ROUTE The minimum post issue FACE VALUE CAPITAL shall be atleast 10 Crores or A compulsory market making for two years from the date of listing shall be made. Subject to the following conditions. Minimum depth of 300 shares. Bid Ask Spread ( Quotation for Sale – Quotation for purchase) shall not exceed 10%. Inventory of the Market Markers at least 5% of the proposed issue

Offer Route

BOOK BUILDING

QUALIFIED INSTITUTIONAL BUYERS Public Financial Institutions Mutual Funds Scheduled commercial banks. Foreign Institutional Investor registered with SEBI. Multilateral/bilateral Development Financial Institutions Venture Capital Funds registered with SEBI. State Industrial Development Corporations. Insurance Companies regd under Insurance Regulatory and Development Authority Pension/Provident Funds with a minumum corpus of 25 crores.

ADDITIONAL REQUIREMENT Allotment pursuant to public issue by both the routes requires the following mandatory compliance: PROSPECTIVE ALLOTTEES OF NOT LESS THAN 1000 IN NUMBER

PRICING

PRICING OF ISSUES BY UNLISTED PUBLIC COMPANIES Companies eligible to go for issue and listing of securities on a Recognized Stock Exchange shall FREELY PRICE its securities.

DIFFERENTIAL PRICING The issuer may issue securities at different prices for firm allotment category and the public. Ensure that the price at which the securities are offered to the firm allotment category is higher that the price at which the securities are offered to the public.

FIRM ALLOTMENT CATEGORY Includes Indian/Multilateral developmental financial institution. Indian Mutual Funds Foreign Institutional Investors ( NRI/ Non-permanent / regular employees of the issuer company)

PRICE BAND The issuer company can mention a price band of 20% in the offer document filed with SEBI and the actual price can be determined at a later date before filing it with the Registrar of Companies. If the Board of Directors are authorized the determine the offer price within the price band, then they shall determine the price by passing a BOARD RESOLUTION.

PROHIBITION OF COMMISSION AND DISCOUNTS The issuer Company shall not pay any commission or discount to persons who are allotted Securities under firm allotment category.

DENOMINATION OF SHARES If the IPO is for Rs.500 or more, the issuer company has a discretion of fixing the face value below Rs.10 but not less than Re.1. If the issue price is less than Rs.500, the Face Value shall be Rs.10. However for the purpose of any advertisement the denomination shall be expressed as " X" in identical font size.

PROMOTERS’ CONTRIBUTION AND LOCK IN REQUIREMENTS

PROMOTERS’ CONTRIBUTION The promoters’ contribution shall not be less than 20% of the POST ISSUE CAPITAL. Illustration: Present Paid up Capital : Rs. 200 Crores. Issue Size : Rs. 100 Crores. Post Issue Capital : Rs. 300 Crores. Hence Promoters Contribution shall be 300 crores * (20/100) = 60 Crores.

SECURITIES INELIGIBLE FOR PROMOTERS CONTRIBUTION Securities ACQUIRED during the preceding THREE Years shall not be eligible if acquired for consideration other than cash and revaluation of assets; or Capitalisation of intangible assets. It is issued by way of bonus or Out of revaluation reserves or Reserves without accrual of cash resources.

Shares ISSUED to promoters during the preceding one year at a price less than the price offered to public are ineligible. However, if the difference amount is brought in by the promoters, it shall be eligible for promoters contribution and the issuer passes necessary resolution and files necessary forms with the Registrar of Companies. SECURITIES INELIGIBLE FOR PROMOTERS CONTRIBUTION

WHEN TO BRING IN PROMOTERS’ CONTRIBUTION Full amount of contribution including the premium shall be brought in atleast ONE DAY prior to the issue. Such contribution shall be kept in a separate Escrow Account and shall be released along with the public issue proceeds. Where the promoters’ contribution has been already brought in prior to the issue and if such contribution has already been employed, a cash flow statement as to method of deployment shall be given in the Offer Document.

Where the minimum contribution exceeds Rs. 100 Crores, then 100 Crores shall be brought in before the opening of issue. The balance amount shall be brought on a pro-rata basis before calls are made on public. WHEN TO BRING IN PROMOTERS’ CONTRIBUTION

LOCK IN REQUIREMENTS The minimum promoters contribution (Rs. 100 Crores) shall be locked in for a period of THREE YEARS. The period of three years shall start from the date of allotment and the last date shall be three years from the date of commencement of commercial production or the date of allotment whichever is later.

LOCK IN REQUIREMENTS EXCESS CONTRIBUTION The excess of promoters’ contribution over and above the minimum required contribution shall be locked in for a period of ONE YEAR. If the shortfall in firm allotment is met by the promoters, then such contribution shall be subject to a lock in for a period of ONE YEAR.

LOCK IN OF SHARES INELIGIBLE FOR CONTRIBUTION The entire pre-issue share capital, other than the locked in as promoters’ contribution shall be locked in for a period of one year from the date of allotment or commencement of commercial production whichever is later. Securities issued last shall be locked in first.

INTERMEDIARIES

APPOINTMENT OF INTERMEDIARIES

ADVERTISEMENTS

GUIDELINES ON ADVERTISEMENT The Advertisement shall be fair, true and clear and shall NOT contain any misleading or untrue statements. The Advertisement shall be clear, concise and unambiguous The Advertisement shall not contain any statement which guarantees rapid increase in profits The Advertisement shall not contain any matter that is NOT set out in the offer document.

GUIDELINES ON ADVERTISEMENT No celebrities, fictional characters ( Cartoons) landmarks or caricatures shall be displayed on or form part of the offer document. The Offer document shall be plain. If the advertisement includes any financial data, it shall contain the data of the past THREE Years and should include particulars like sales, Gross Profit, Net profit, Share Capital and reserves, Earnings Per Share ( EPS), dividends and the book value of shares

GUIDELINES ON ADVERTISEMENT The advertisements in newspaper, magazines, brouchers, pamphlets containg the highlights of the issue must equally contain the risk factors in the same print size. The advertisement shall contain the name of the issuer company, address of the Registered Office, name and address of the Lead Merchant Banker and the Registrar to the issue. It shall also disclose the face value of shares.

GUIDELINES ON ADVERTISEMENT No Corporate Advertisement shall be made after 21 days of filing the offer document with the SEBI till the date of closure of the issue unless risk factors as required to be stated in the offer document is mentioned in the Advertisement. No PRODUCT advertisement shall contain any statement directly or indirectly involving the performance of the company after 21 days of filing the offer document with the SEBI till the date of closure of the issue.

GUIDELINES ON ADVERTISEMENT No Advertisement shall be issued stating that the issue is oversubscribed during the period where the issue is open. There can be an advertisement stating the opening and the closure of the issue. Advertisement regarding Closure of the issue shall be made ONLY on the LAST Closing date If the issue is fully subscribed before the closure of the issue, announcement as to the fact of full subscription shall be made only after the issue if fully subscribed. That announcement shall also be made only the date of closure of the issue.

GUIDELINES ON ADVERTISEMENT Announcement regarding closure of the issue shall be made only after the lead merchant banker is satisfied that 90% of the issue is subscribed. This has to be ensured by way of a certificate from the Registrar to the issue. No INCENTIVES other than underwriting commission and brokerage permissible shall be offered to person associated with marketing of the issue. In case of reservation for NRI’s, the advertisement shall contain the fact as to the place where the NRI’s can procure the application forms.

OFFER DOCUMENT

Contents of Offer Document Issue Details Definitions and Abbreviations. Risk Factors General Information about the Company Capital Structure Objects of the Issue Fund Requirements Means of Finance Project appraisal. Schedule of implementation of the project Deployment of funds Basis for issue price Tax benefits for the Company, investors

Contents of Offer Document Business Strategy Property History and Major events Industrial Regulation Main objects Shareholders Agreements Board of Directors Managerial remuneration. Directors’ Interest Key Managerial Personnel. Promoters Dividend policy Financial Statements. Change in accounting policies

Contents of Offer Document Management Discussion and analysis of Financial Condition and results of operation. Legal and other information. Government approval and licences. Issue procedure Expert opinion Undertaking by Directors as to the adequacy of statements disclosed in the prospectus.

Agreements to be executed

THE COMPANIES ACT, 1956

COMPLIANCE UNDER COMPANY LAW PROSPECTUS. REGISTRATION OF PROSPECTUS WITH THE REGISTRAR OF COMPANIES. STATEMENT AND DISCLOSURES IN PROSPECTUS. EXPERT CONSENT AND OPINION. PREPARATION OF APPLICATION FORM. INFORMATION MEMORANDUM.

PROCEDURES UNDER COMPANY LAW MINIMUM SUBSCRIPTION FOR THE PROJECT TO BE STATED IN THE PROSPECTUS. REQUEST FOR LISTING OF SECURITIES IN RECOGNISED STOCK EXCHANGES FOR THE PURPOSE OF TRADING. MODE OF OPERATION OF APPLICATION MONEY. PRO-RATA ALLOTMENT IN CASE OF OVER SUBSCRIPTION. FILING RETURNS AS TO ALLOTMENT WITH THE REGISTRAR OF COMPANIES.

PROCEDURES UNDER COMPANY LAW If the minimum subscription has not been received by the company on the expiry of 120th day of the first issue of prospectus, then the ENTIRE money received on application shall be refunded to the applicants without interest. This shall be made within 10 days. If the money to be repaid is not repaid within 130 days after the issue of prospectus, it becomes the personal liability of directors ( Jointly and Severally) to repay the money

LISTING (Inclusion of securities in the official list of Stock Exchange for the purpose of trading)

BENEFITS OF LISTING Premier Market Place and easy reach Building up brand name domestically. Global investor participation through Foreign Institutional Investor Route. Access to large Indian Retail Investor Base. Liquidity Transparency in operations. Speedy Disposal of Transactions.

BENEFITS OF LISTING WITH OVERSEAS STOCK EXCHANGE Access to overseas investor base. Generates high profile for the Company. Leveraging the strong global brand name of the Company. Easy issue of American Depository Receipts and Global Depository Receipts.

LISTING REQUIREMENTS THIS IS TO ENABLE EASY TRADING OF SECURITIES. AN AGREEMENT SHALL BE ENTERED WITH THE NATIONAL STOCK EXCHANGE OF INDIA. APPLICATION FOR OTHER STOCK EXCHANGES SHALL ALSO BE MADE FOR THE PURPOSE OF TRADING.(Bombay Stock Exchange, Madras Stock Exchange Etc) MAY BE TRADED IN NASDAQ, LSE, NYSE ETC., PROVIDED AN APPLICATION IS MADE

LISTING REQUIREMENTS Compliance of Listing agreement and payment of listing fees is necessary for continued listing. Failure to comply with the listing agreement or default in the payment of fees, trading shall be suspended and may further give rise to delisting of securities. Restructuring the Board/Committees of the Board in line with the listing agreement.

BOARD COMMITTEES Audit Committee. Share Transfer Committee. Remuneration Committee. Shareholders’ Grievances Committee.

LISTING FEES - National Stock Exchange

LISTING FEES FOR BSE

Time frame for IPO Various Steps in IPO File offer document with Board and Stock exchanges Within 15 days of filing – obtain in principle approval and forward to Board Within 21 days of filing – made public the offer document Within 21 days of filing – the offer document has to be filed with ROC

Time frame for IPO Within 21 days of filing – modification if any will be suggested by Board After 21 days of filing – Lead merchant banker shall file statement of complaints with the Board (ie no complaint certificate) Within 3 months of observation/ or within 3 months of 22nd day of filing offer document, if no observation is made – open the issue Opening of issue – issue is kept open for a minimum of 3 working days and maximum of 7 working days (10 working days, if price band is revised)

Time frame for IPO Allotment Fixed price issue Allotment shall be made within 30 days of closure of public issue In case of delay – 15% interest p.a. shall be paid to the shareholders Book building process Allotment shall be made not later than 15 days of closure of public issue In case of delay – 15% interest p.a. shall be paid to the shareholders

Time frame for IPO Trading facility Within 6 days of closure – trading facility has to be obtained In case of failure, interest of 15% shall be paid to the investor

Time frame for IPO Refund Non underwritten public issue Forthwith refund entire subscription if minimum subscription is not received In case of delay – not less than 4% and not more than 15% interest pa shall be paid to the shareholder Also if minimum subscription is not received within 120 days of first issue of prospectus within further ten days make all the refunds In case of failure – interest at 6% p a shall be paid to the investor

Time frame for IPO Underwritten Public issue Within 60 days of closure of issue, entire subscription shall be refunded In case of failure – not less than 4% and not more than 15% interest shall be refunded

Time frame for IPO Advertisement Within 10 days of completion of various activities post issue advertisement about oversubscription, basis of allotment, percentage of application etc shall be made in English/ Hindi/ regional language newspapers.

Time frame for IPO Monitoring report Within 3 working days from the due date, monitoring report shall be made to the Board by lead merchant banker Maintenance of Records The book runner (ie Lead merchant banker) shall maintain IPO records and the board is having the right to inspect the records.

The End