Equity Shares: Issuance, listing & trading,

disclosures & Other Important Provisions of

SEBI (ICDR) Regulations 2018

“Disclaimer: This interactive session wherein we will discuss various issue types, is only in the nature of
guidance to you to explains certain terms / concepts related to IPO, Compliance & Further Issue. However,
for full particulars of laws governing the IPO, Compliance & Further Issue, please refer to the
Acts/Regulations/Guidelines/Circulars as applicable under the Legal Framework.”

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 Table of Content
1 Indian Securities Market framework

2 Applicability of the Regulations

3 Fund Raising Options

4 Further Issue of Shares

5 Post Listing Compliance

6 Social Stock Exchange

Indian Securities Market framework

3
 Applicability of the Regulations
1 IPO by an unlisted issuer (Main Board / SME/ IGP / IDR)

2 Right Issue by listed issuer, issue size ≥ 50 Crs

3 Further Public Offer (FPO) by listed issuer

4 Preferential issue / QIP / Bonus issue by listed issuer

5 Social Stock Exchange

 Product Landscape
PRODUCT CLASS

EQUITY MARKET DERIVATIVES DEBT DATA VENDING INDICES

EQUITIES INDEX OPTIONS G-SEC ONLINE REAL TIME DATA BROAD MARKET

EXCHANGE TRADED FUNDS INDEX FUTURES CORPORATE BONDS DELAYED DATA SECTORAL

MUTUAL FUNDS STOCK OPTIONS OTC CLEARING HISTORICAL DATA THEMATIC

SECURITIES LENDING & STOCK FUTURES SOVEREIGN GOLD BOND STRATEGY

BORROWING
CURRENCY FUTURES ELECTRONIC BIDDING FIXED INCOME
OFFER FOR SALE PLATFORM
CURRENCY OPTIONS
SME PLATFORM TRI-PARTY REPO
INTEREST RATE FUTURES
IPO
COMMODITY FUTURES

INTEREST RATE OPTIONS

GROWTH DRIVERS
COMMON INTERFACE ON LINE RISK MANAGEMENT ROBUST SYSTEMS
Types of Securities Market

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Classification of Securities Market

• IPOs/ FPOs and Rights Issues

Primary • Offer For Sale

• Mutual Funds (Open Ended)
• Securitized Debt Instruments

Market • REITs / InvITs

• Municipal Bonds / NCRPS
• Innovators Growth Platform (IGP)

• Trading of Equity Share

Secondary • Equity Derivatives

• Currency Derivatives
• Interest Rate Derivatives

Market • Commodity Derivatives

• Debt Corporate Bond and Government Securities
• Mutual Funds (Close Ended)

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 Fund Raising Options

Equity Debt Hybrid

• IPO • From banks & FIs • Mutual Fund

• FPO • Public issue of • ETFs
• Rights Bonds/Debentures • InvITs
• QIP • Commercial Paper • REITS
• Pref • Private placement • Social Stock
• IDR of Bonds Exchange
• T-bills &
Government
Securities
 Advantages of Listing
✓ Provides Liquidity to securities.
✓ Regular information
✓ Easy Transferability
✓ Income tax benefit
✓ Transparency in dealing.
✓ Supervision and control of Trading in Securities
✓ Helps in raising additional capital and provides an exit
✓ Exit route to investors.
 Key Teams for IPO

• Team of 8 – 10 personal to be earmarked for the purpose of IPO

• CFO & CS can be point of contact for coordinating with counsels, lead managers, external intermediaries
• IPO committee to be formed
 Intermediary Structure
Book Runners Broker / Syndicate
BRLM
Legal Counsel

Legal Underwri Sponsor Registrars/ Escrow Advertising

Depository
Printers
Counsels ters Bank Bankers Agency

Auditors Issuer Company SCSBs

Arrangement
Co-ordination
 Eligibility Criteria For Main Board Listing –
ICDR,2018
As per SEBI(ICDR) , 2018 – Regulation 6 (1) & 6 (2)

Net Tangible Assets of Average operating profit of Rs

Option 1 :
at last Rs. 3 crores ( for 15 crores in preceding 3 years Net worth of at least Rs 1
Net tangible assets ,
3 past years ) (of twelve month each ) , with crore in each of the
profitability and net
Not more than 50% in operating profit in each of preceeding 3 years
worth track record.
monetary assets these preceeding 3 years

Option 2 : Issue through book If QIB part is not subscribed ,

No net tangible assets , building route with at the issue will fail even if it is
profitability and net least 75% allotted to oversubscribed on overall
worth track record QIBs basis

If option 1 is met If option 1 is not met

Qualified Institutional Buyer (QIB) : At least 75%
Qualified Institutional Buyer (QIB) Max 50%
Retail : Maximum 10%
Retail : At least 35%
Non Institutional Investors (NII) : Maximum 15%
Non Institutional Investor (NII) : At least 15%
 IPO Process Overview
Appointment Legal/Busines
Agreements
of s diligence by
Preparatory Setting up Restatement with Preparation
intermediarie BRLMs/
Stage data room of Accounts intermediarie of DRHP
s Kick-off Legal
s
presentation Counsels

DRHP Filing Stage Receipt of Receipt of Incremental due Filing responses

and Regulatory DRHP filing with in-principle interim diligence by to Interim & Final
Approvals SEBI & Exchanges approvals from comments from BRLMs/ Legal Observations by
Stage exchanges SEBI Counsels SEBI

Marketing, Finalise Anchor

Investors Retail Roadshows
Pricing Stage, Management Issue Closing/
File RHP & (Press / Broker / Issue Opens
Issue Open / Roadshows Pricing
Announce Price Analyst)
Close Stage Band

Commencement of
Settlement Filing Prospectus Allotment of Receipt of Funds to
Listing and Trading
Stage with RoC shares Issuer
at Exchanges
IPO Process - Option 2 (Confidential Filing)
Appointment Legal/Business
Agreements Preparation of
Preparatory Setting up of diligence by Restatement
with Pre-filing Offer
Stage data room intermediaries BRLMs/ of Accounts
intermediaries Document
& Kick-off Legal Counsels

Pre-filing of Offer Receipt of in

Pre-filing & QIB Marketing can
Document with principle approval Intimation of Receipt of final
be started post
Regulatory SEBI & Exchanges
Pre-filing of Offer
from exchanges & completion of QIB observations from
Approval (Confidential SEBI interim marketing SEBI
Doc
Filing) comments

Filing of UDRHP I Filing of UDRHP I

& II and Receipt Incremental due Incorporating
(to be hosted on
diligence by changes in UDRHP- Filing of UDRHP II
of Public BRLMs/ Legal
website) and
II due to Public and RHP
comments on responses to SEBI
Counsels comments
Final Observations
UDRHP I

Marketing,
Retail Roadshows
Pricing Stage, Management Determining Issue Closing/
(Press / Broker / Issue Opens
Issue Open / Roadshows Anchor Investors Pricing
Analyst)
Close Stage

Commencement of
Settlement Filing Prospectus Allotment of Receipt of Funds to
Listing and Trading
Stage with RoC shares Issuer
at Exchanges
 Summary of Key Chapters of the Offer
Document
Financial
Business Sections Non-business Sections
Information

◼ Industry ◼ Restated
overview Consolidated
Financial Corporate Legal and approvals Issue Related
◼ Business Statements
overview
◼ Tax Benefit ◼ Corporate ◼ Government ◼ Objects of
◼ Risk Factor Statements History Approvals Issue

◼ Management ◼ Financial ◼ Management ◼ Outstanding ◼ Issue Structure

Discussion & Indebtedness Profile Litigations
Analysis ◼ Basis of issue
◼ Related Party ◼ Promoter ◼ Regulations price
Transactions Profile and Policies
◼ General
◼ Dividend ◼ Group Entities information
Policy ◼ Issue
Procedure

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Issue Size and Minimum Dilution –Rule 19
(2)(b) of SCRR, 1957
Dilute Min 25%

4000 Crs < MCap ≤ 100000

1600 Crs < MCap ≤ 4000 Crs 100000 Crs MCap
Crs

Minimum 10% to be Such % equivalent to

Such % equivalent to 400 Crs
offered to public 5000 Crs and atleast 5%

Eventually to inc public shareholding to 25% within 3 years of listing Eventually to inc public
shareholding to 10%
within 2 years and at
least 25% within 5 years
 Manner of achieving MPS
✓Issuance of shares to public through prospectus
✓OFS by promoters / Promoter Group through secondary market
✓Rights issues to public shareholders , with promoters forgoing their entitlement
✓Bonus issues to public shareholders , with promoters forgoing their entitlement
✓Allotment to Qualified Institutional Placement
✓Promoter/Promoter Group can sell upto 2% of equity through open market sale
(with prior intimation)
✓Increase in public holding pursuant to exercise of options and allotment
of shares under an employee stock option (ESOP) scheme, subject to a
maximum of 2% of the paid-up equity share capital of the listed entity
✓Transfer of shares held by promoter(s)/ promoter group to an Exchange
Traded Fund (ETF) managed by a SEBI-registered mutual fund, subject
to a maximum of 5% of the paid-up equity share capital of the listed entity.
✓Any other method as may be approved by SEBI on case-to-case basis

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 Recent amendments in SEBI ICDR
Regulations for IPO
✓ Objects: Capping of utilization of IPO funds for Inorganic Growth and General Corporate Purpose at 35%
of Total IPO Size, 25% cap for Inorganic growth objects. Both these limits are only in case the Company
has not identified the acquisition/investment target.
✓ Limit on OFS: Selling Shareholder cannot exit completely through OFS. OFS Capped at 50% of pre IPO
holding (In case holding 20% or more of Company pre IPO Capital) and 10% of pre IPO holding (In case
holding less than 20% of Company pre IPO Capital). This is applicable on Companies without track record
i.e. Regulation 6(2) of SEBI ICDR Regulations
✓ Monitoring of IPO Funds: Credit rating agency to be Monitoring Agency (Earlier only Scheduled
Commercial Banks and Public Financial Institutions). Monitoring extended to 100% from 95% of issue size
earlier and now covers general Corporate Purpose too. To report to Audit committee quarterly (earlier
yearly) now.
✓ Price Band: Upper price band to have difference of at least of 5% from Lower price band. This is
applicable for issues opening on or after notification in Official Gazette.
✓ Anchor Lock-in: 50% of Anchor now to be locked in for 90 days (earlier 100% for 30 days from date of
allotment). This is applicable for all issues opening on or after April 1, 2022
 Recent amendments in SEBI ICDR
Regulations for IPO
✓NII Allotment: 1/3 reservation (of HNI Quota) for HNI applying between 2 lacs to 10 lacs and rest
2/3 for HNIs applying above 10 Lacs. This is applicable for all issues opening on or after April 1,
2022
✓All Offer Documents will be filed in Mumbai Head Office, irrespective of offer size
✓ Pre-filing of Offer Documents as an optional alternative mechanism for Main Board IPOs;
Existing mechanism to also continue
✓ Confidential filing of offer document with SEBI and SE (not available for public comments, no
advertising activities in this window).
✓ Public announcement of filing of confidential filing with SEBI and Stock Exchanges to be done.
✓ QIB Marketing can be initiated basis this offer document and list of QIBs to be submitted to
SEBI.
✓ Post receipt of SEBI observations, filing of updated offer document is to be made public for 21
days period.
 Listing Process

RHP filing with

ROC & 1%
security Issue Closes (Max 10 T+2 Day (Blocking of T+4 Day (Allotment of T+6 Day (Listing of
Deposit Working Days (T Day) Funds by SCSBs) Shares) Shares on Stock
Exchanges)

T+3 Day (Basis of

Allotment at DSE)
Issue Opens (Min 3 T+1 Day (Modification in T+5 Day (Credit of IPO Shares
Working Days) bids) & Exchanges issues circular)
Fund Raising Options

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Further Issue of Shares
 Further Issue of Shares

Further
Issue

3 Stage 2 Stage
Approval Approval

Scheme of
Preferential Bonus FCCB/ADR/
QIP Rights Issue Arrangeme ESPS ESOP Abeyance
Issue Issue GDR
nt
 Legal Framework

Companies Act, 2013

SEBI, Issue of Capital and Disclosure (Requirements) Regulations,

2018 (ICDR)

SEBI, Listing Obligations and Disclosure Requirements Regulations,

2015 (LODR)
Difference between QIP and Preferential
Issue

Basis QIP Issue Preferential Issue

Lock-in No mandatory Lock-in Mandatory 1 year (3 yrs in case of promoters)
Cost involved Higher Much less
Interval incase of Min 6 months NA
multiple issues
Price negotiation Upto 5% discount can be given NA
Timeline Short Longer
Issue eligibility Min 1 year from listing date NA
Pricing 2 weeks closing price avg. 90 / 10 trading days VWAP
 Rights issue
• Normal rights issue
a) In-eligibility –
➢ Debarment from accessing capital Market
➢ Company which is debarred from accessing capital market
➢ Promoter/Director is fugitive economic offender

b) No withdrawal of rights issue after announcement of Record Date (RD). If withdrawn, issuer shall not
make any application for a period of 12 months to the Exchange for listing of specified securities.
Exceptions for ESOPs, convertible securities, warrants issued prior to declaration of RD .
• Process for rights issue
➢ In-principle approval application to the Exchange
• Filing of draft letter of offer (DLOF) with SEBI and Exchange
• Incorporating changes if any suggested by SEBI and Exchanges in DLOF

➢ Filing of final letter of offer. Simultaneously fixing Record date

 Rights issue
➢ Submission of Security Deposit with Designated Stock Exchange

➢ Opening of Issue for minimum 15 days and maximum 30 days (within 12 months from observations of SEBI
and in case of Fast Track within 12 months of Record Date)

➢ Closing of Issue

➢ Basis of allotment

➢ Board Meeting for allotment of shares

➢ Post allotment application to the Exchange

➢ Credit confirmation form the depositories

➢ Final listing and trading application to the Exchange

 Fine under SEBI ICDR Regulation
₹ 20,000 per day of noncompliance till the date of compliance for the following: .
• Bonus- ( within 2 months of Board approval where shareholder approval required or 15 days from
the date of approval of the issue by its board of directors)

• Not completing the conversion of convertible securities and allotting the shares, within 18 months
from the date of allotment of cconvertible securities.

• make an application to the exchange/s for listing in case of further issue of equity shares from the
date of allotment within 20 days (unless otherwise specified).

• make an application for trading approval to the stock exchange/s within 7 working days from the
date of grant of listing approval (Post allotment approval) by the stock exchange/s.
Post Listing Compliance
SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015

Listing Compliances

Half yearly Annual Event Based

Qtr Compliances
Compliances Compliances Compliances
Social Stock Exchange
A platform for Social Enterprise
 Flow of todays discussion

Need for Social Stock Exchange Role of Social Enterprises in

(SSE) Indian Society

SSE at global experience Structure of SSE

Feedback on proposed structure

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 Need of “Social Stock Exchange”
• SEs have scarce and irregular inflow of funds- makes long term projects
difficult to sustain.

• Grants and Donations may not cover operational expenses- sustenance

questions emerge.

• Lack of transparency and accountability- deters attracting financial support.

• Reporting of Social Impact to the donors.

• Budget speech of 2019 proposed the idea of establishing Social Stock

Exchange under the aegis of Securities and Exchange Board of India.
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Role of Social Enterprises in Indian Society
• What are “Social Enterprises”- entities working towards achieving
positive social impact in the form of an association, Societies, Trusts,
Section 8 Cos.
• What they do - Address / extend assistance to issues that
government/corporates may not be able to or interested to address /
assist.
• Aim - Help closing the gap between ideal social development and actual
social development.
• Pros :
• Often emerge out of initiatives with microscopic understanding of diverse social
or cultural issues in a country like India
• Unlike government, SEs do not have constitutional or political hurdles.
 What shall be a “Social Stock Exchange”?

• A platform to be provided by recognized Stock Exchanges that brings

together social organizations and donors.

• Envisaged as a separate segment.

• Facilitates funding and growth of social enterprises.

• Establishes mechanism to regulate the functioning of Social Enterprises.

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 “SSE” at Global Level- Some Observations
• The Concept came into existence in 2003- Brazil
• Later South Africa (2006), Portugal (2009), Canada (2013), Singapore
(2013), United Kingdome (2013), Jamaica (2019) established SSE.
• Only 3 SSEs are still active- Canada, Singapore and Jamaica.
• Most SSEs have NPOs (Non-profit organizations) as well as FPEs (For
Profit Enterprises) eligible to raise funds
• Eligibility depends on various criteria such as track record, financial
viability of model, measurable deliverables, leadership, Global Impact
Investing Rating System, Market Capitalisation, etc.
• Major reason of failure of 4 out of 7 SSEs- lack of sustainable business
model. Initial days they received philanthropic funding, however later
they failed to sustain themselves
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 Eligibility Criteria
A For-Profit Enterprise (FPE) and Non-Profit Organization (NPO) can be qualified as Social Enterprise on Social Stock Exchange if it is
able to demonstrate that social intent and impact are its primary goals.

Eligible Activities
- 15 areas have been identified for demonstrating social intent
- These are based on Schedule VII of the Companies Act, 2013, Sustainable Development Goals and priority areas
identified by Niti Aayog

Target Segment
- May include but not limited to members belonging to Scheduled Castes, Scheduled Tribes, Other Backwards
Classes, people with special needs, elderly, children, at-risk adolescents, migrants, and displaced persons

Predominance (Any one of the following)

• Revenue - At least 67% of the preceding 3-year average of the SE’s revenues comes from providing the eligible
activities to members of the target population.
• Expenditure – Similarly 67% of the expenses been incurred for providing the eligible activities to the target
population
• Customer base - Members of the target population to whom the eligible activities have been provided
constitute at least 67% of the immediately preceding 3-year average of the SE’s customer base/ beneficiaries

- 67% /Activities
Ineligible Organizations of the preceding 3 yearfoundations,
- Corporate average valuePolitical
of one oror religious
more parameters shall or
organizations beactivities,
used to determine qualification
Professional or trade
associations, Infrastructure companies and housing companies (other than affordable housing companies)
 Onboarding - Process Flow
Only registration shall Listing shall impose
impose minimal annual additional annual
reporting requirements reporting requirements ✓ Zero coupon Zero
Principal Bonds
NPO Registration Security Listing ✓ Social Impact/Venture
Funds
✓ Mutual Funds

Establish Primacy of
Social Intent

✓ Equity
FPE No Registration Security Listing ✓ Debt

A FPE can proceed directly for listing, provided it is a company registered under Companies Act 1956/2013 and complies with the requirements in
terms of SEBI Regulations for Issuance and listing of equity or debt securities.
Q&A
Thank You