RAISING OF CAPITAL IN

PRIVATE AND PUBLIC

COMPANIES
FUND RAISING – WHY???

Growth
Pursue Expansion
Merger and
Plans
Acquisitions

Diversification

Debt
Investor
Repayment
Obligations

Working Strategic
Running of Capital / Investment
business bridge
operations
 STAGES OF FUND RAISING

Ticket Size:
Requirement Based

Mezzanine

Round 3/C
Amount of Money

Round 2/B
Ticket Size:
0 - 2 Million USD
Round 1/A

Early Stage
Ticket Size:
Angel Investors 2 - 10 Million USD
Seed
Funding

Concept/ Business Product Fully IPO

First Deal Expansion
Research Planning Development Operational

Stages of fund raising

DIFFERENT MODES OF FUND RAISING

Equity
Shares

Preference
Shares
Secured Unsecured Deposits
Loans Loans

Hybrid
Instruments

Capital Loans Deposits

Investors Company
BROAD CLASSIFICATION OF CAPITAL INSTRUMENTS

TYPES OF CAPITAL
INSTRUMENT

EQUITY DEBT

Compulsory Optionally
Equity Shares/ Convertible Redeemable Loans & Convertible Non Convertible
Warrants Preference Shares/ Preference Shares Deposits Debentures/ Debentures
Debentures Preference
EQUITY SHARES V/S PREFERENCE SHARES

EQUITY SHARES BASIS PREFERENCE SHARES

Shares having preference over the
Ordinary capital of the company MEANING equity shares
Mandatory, based on the nature of
No mandatory right DIVIDEND RIGHT shares

Fluctuating RATE OF DIVIDEND Fixed pre agreed rate

Voting right in all the matters VOTING Voting rights in limited matters

No obligation to repay REPAYMENT Can be redeemable

Residual right over the asset of the LIQUIDATION Preference right over the liquidation
company PREFERENCE proceeds

Possible to convert into preference

N/A CONVERSION shares

Treated as capital EXCHANGE CONTROL Treated as debt (except CCPS)

Entitled for bonus shares BONUS SHARES No entitlement

EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS

Authorization by Articles of No default in filing financial

Association statements for previous 3FYs

Shareholder Approval No default in payment of dividend

(Ordinary Resolution) and repayment of preference
share, term loan and debentures

> 26% of total post-issue paid up Not penalized by Court or Tribunal

equity share capital of any offence for last 3 FYs

Track record of distributable Register of Member to contain all

profits for the last three years relevant details of shareholders
SEBI CONSULTATION PAPER
LISTED COMPANIES
ISSUANCE OF FR SHARES
ISSUE
Permissible post 1 year of
listing by way of Right issue,
Bonus Issue or FPO.
Only one class of FR shares can be
issues.
Minimum Public Shareholding
requirement shall be complied
DIVIDEND
Possible to give superior
dividend then ordinary shares
VOTING RIGHTS
Maximum Ratio : 1:10
Only one class of FR shares is
possible
CONVERSION
Can be converted to OR
Shares only in scheme of
arrangement
PROPOSED TO BE LISTED COMPANIES
ISSUANCE OF SR SHARES
ISSUE VOTING RIGHTS
Can be issued only to
Promoters.
Maximum Ratio : 10:1
IPO of ordinary shares permissible
provided the SR Shares are held by Except in case of Coat -Tail
promoters for more than 1 Year. Provision
No Subsequent Issue of SR Shares
Permissible
DIVIDEND CONVERSION
After 5 years has to convert to
Eligible for same dividend as OR Shares ,
OR Shares Can be extended by passing
special resolution
MODES AVAILABLE FOR RAISING CAPITAL

• Pre-emptive right of existing shareholders

• Approach third party subject to special resolution of members

• Nature of instrument & other terms to be pre-approved

• Secretarial compliances & filings

• Allotment of instrument and utilisation of funds

• Stamp duty and RoC fees

MARKETS AVAILABLE FOR RAISING CAPITAL

COMPANY

DOMESTIC FOREIGN

FOREIGN EXTERNAL
PUBLIC RIGHT PRIVATE
DIRECT COMMERCIAL
ISSUE ISSUE PLACEMENT
INVESTMENT BORROWING

FURTHER
INITIAL PUBLIC OFFER FOR
PUBLIC OFFER
OFFER (IPO) SALE
(FPO)
PRIVATE PLACEMENT – RELEVANT REGULATORY PROVISIONS

Section 55 read with Rule 9 & 10 of

Section 42 read with Companies (Share Capital and
Rule 14 of Companies (Prospectus and Allotment of
Securities) Rules, 2014 PRIVATE PLACEMENT Debentures) Rules, 2014

ISSUANCE OF
Section 62 read with Rule 13 PREFERENTIA
of Companies (Share Capital and REDEEMABLE
Debentures) Rules, 2014 L OFFER
PREFERENCE
SHARES

ISSUANCE OF
Section 71 read with Rule 19 the
Companies (Share Capital and REDEEMABLE
Debentures) Rules, 2014
DEBENTURES
CONDITIONS RELATED TO PRIVATE PLACEMENT
No public advertisement to
Authorization by way inform public at large
of Special Resolution
Allotment of securities with

1 9
in 60days of receipt of
allotment money^

No further issue until the

8 previous issue procedure are

2
pending
Valuation report from
Registered Valuer 7
6 Non utilization of
34 5 application money before
filing of return of allotment
to ROC
Allotment process to
complete with in 12
Allotment money shall be
months of SR
received only by way of
cheque, demand draft or
other banking channels
Maximum 200 people
can be offered in a
financial year
CONDITIONS FOR ISSUANCE OF PREFERENCE SHARES

Debentures
Preference Shares
• -Creation of debenture redemption reserve &
• Restriction on issuance of irredeemable
maintaining liquid funds
preference shares
• Term of secured debentures shall not exceed
• Term of redeemable preference shares cannot
10 years (except infra)
exceed 20 years (except in case of
infrastructure projects) • Restriction on issuance of unsecured
debentures – to be categorised as Deposits
• Redeemable out of profits or fresh issue
• Charge to be created on the asset of the
• Creation of capital redemption reserve
company, its subsidiaries, holding company
• Right to vote on all the resolution, if dividend or associate companies
is not paid for two years
• Appointment of debenture trustee
IMPORTANT DISCLOSURES IN OFFER DOCUMENT

Business carried on by company

Pending defaults committed, litigations or legal actions

Financial Position for last 3 Years

Details of security offered along with the price it is offered

Details of valuer along with basis of valuation of security

Details of change in control pursuant to private placement

Pre- Post Shareholding of the Company

Terms of the security offered say dividend rate, voting rights

Related party transaction and Audit Qualifications of the Company

Details of dividend declared by the company in past 3 years

TIMELINE AND STEP FLOW FOR PRIVATE PLACEMENT

Days Time frame – 3 to 4 months

120

100

80

60

40

20

0
Initial Discussions Board Approval Shareholders Recording of al- Dispatch of offer Acceptance of of- Board meeting Return of al- Issuance of shares
Meeting lotees in PAS 5 letter (PAS -4) fer by allotees for allotment lotment (PAS - to allotees
3)

In case of listed entities, compliance with respect to SEBI LODR and SEBI ICDR shall also be ensured and in principal approval
shall be required to be obtained for listing of new shares issued pursuant to private placement
RIGHT ISSUE – RELEVANT REGULATORY PROVISIONS

Right Section 62 read with Rule 12 of Companies (Prospectus and

Allotment of Securities) Rules, 2014
Issue

80

70

60 Time frame – 2 to 3 months

50

40

30

20

10

0
Initial Discussions Board Approval Dispatch of offer letter Acceptance of offer by Board meeting for al- Return of allotment Issuance of shares to
allotees lotment (PAS -3) allotees
SEBI V/S COMPANIES ACT
Particulars SEBI ICDR Regulations (Chapter VII) Companies Act, 2013

In-Principle Approval Stock Exchange in-principle approval is required No Approval is required

Valuation Clear cut pricing criteria is defined . Pricing to be done by Registered Valuer

Relevant Date Specific Criteria for determination of Relevant Date No specific criteria for determination of Relevant
Date

Offer Document No Offer document is prescribed for raising funds via Offer document is prescribed for issuance of shares
preferential issue. even to a single investor.

Filing of Offer Not Applicable Mandatory filing of offer document with ROC &
Document with ROC & SEBI
SEBI

Time period for making Within 15 days from the date of passing of Special Resolution Within 12 months from the date of passing of
allotment or receipt of Regulatory Approval, whichever is later Special Resolution.

Provided in the event of receipt of application

money, the said allotment is required to be made
within 60 days from the date of receipt.

Tenure of Convertible Maximum tenure is 18 months Not prescribed.

Securities However, as per deposit provisions, the maximum
tenure of CCDs can be 5 years
PENAL PROVISIONS

Failure in filing of return of Penalty of INR 1000 per day

allotment with ROC to the extent of INR 25 Lacs

Contravention of section 42 Penalty of amount raised

of Companies Act, 2013 through private placement or
(private placement) INR 2crs (Lower) + Refund of
application money

Refund in next 15 days.

Failure to make allotment
Otherwise, refund along with
with in 60 days of receipt of
interest @ 12% form the end of
money
60th Day
IPO – INITIAL CONSIDERATIONS

Determining the Strong Sales and

Volatility of Market Earnings

A
F B
Cost Consideration Attractive Track Record

E C
D
Effective Leadership Unique Product &
services
IPO – ADVANTAGES

KEY
ADVANTAGES Increased A
OF BEING Capital
Improved
B Liquidity LISTED
Increased Market
Value C

Enhanced
D More Business
Brand Image E
Opportunities
PRE IPO-IMPLEMENTATION PLAN

A Selection of
IPO Market
Identifying
Going Public
Team E
B Internal Group
Structuring
Building a
Brand image F
C Board
Composition
Developing
Corporate
Governance G
Procedures
D Management
Discussion
Robust
H
Analysis
Financial
Reporting
Procedures
LISTING PROCESS
 SME EXCHANGE

Statistics SME- BSE SME- NSE

Market Capitalisation INR 17,984cr INR 12,639cr
Easy access
Total amount of money raised INR 3,183cr INR 3,020cr Easy to List
to capital
SME Listing Criteria SME Exchange Main exchange
Post issue paid up capital Min 3 cr and less than 25 cr (BSE-SME) Min 3 cr (BSE)
Less than 25 cr (NSE-SME) Min 10 cr (NSE)
New class
Enables
Net Worth Min 3 cr (BSE-SME) Min 10 cr (BSE) of
liquidity
Positive net worth (NSE-SME) Min 25 cr (NSE) investors
Minimum application size INR 100,000 10,000 to 15,000

Minimum no. of allotees 50 1,000 Equity

Track record Distributable profits in 2 years out of Distributable profits in at least 3 years financing Encourages
immediately preceding 3 years or Net through growth of
worth of INR 5 crore (BSE-SME) venture MSME
capital
Positive cash accruals in 2 years out of
immediately preceding 3 years (NSE-
SME)
Enhanced
Alternate
Visibility &
Valuation
IPO Underwriting 100% Compulsory except where 75% is allotted Prestige
to QIBs

Reporting Requirements Half yearly Quarterly

DEPOSITS

“Deposit” includes any receipt of money by way of deposit or loan or in any other form by a
Company but does not include such categories of amount as may be prescribed in consultation
with the Reserve Bank of India.

The Banning of Unregulated Deposit Scheme Ordinance, 2019

E

Companies (Acceptance of Deposit) Rules, 2014

D

Section 76A – Punishment for contravention

C

Section 76 – Acceptance of deposits from public by certain companies

B

Section 73 – Prohibition on acceptance of deposits from Public

A
WHO CAN ACCEPT DEPOSITS?

Deposits

Deposits from Members Public Deposits

Public Company Private Company Public Company

Net worth Turnover

>= >=
INR 100 Crores INR 500 Crores
ELIGIBLE COMPANY Shareholder approval and credit
rating report
CONDITIONS FOR ACCEPTING DEPOSITS FROM MEMBERS

Issuance of circular (DPT-1) along Creation of deposit repayment

with CA certificate in relation to reserve account ~ 20% of amount
default on repayments maturing in the FY

Shareholder
ROC filing of DPT-1 altleast 30 days Restriction on utilisation of deposit
Approval
before issuance of same to the repayment reserve account
members
CONDITIONS FOR ACCEPTING DEPOSITS FROM MEMBERS

No deposit shall be repayable on
demand or upon a notice of < 6
months or > 36 months
Exemptions
Deposit payable before notice of 6
months may be accepted subject to
following conditions:
• Must be for short term
requirements of fund
• Such deposit shall be < 10%
of [PUC+FR+SP]
• Not repayable before
Months
Total outstanding deposit shall be Eligible company shall not accept
less than 35% of [PUC+SP+FR] deposit in excess of
- 10% of [PUC+SP+FR] in
case of Members
Exemptions - 25% of [PUC+SP+FR] in
• Permissible upto 100% of case of any other deposits
[PUC+FR+SP] in case of
• IFSC; and
• Private Company, which is a
start up within 5year from date
of incorporation
• Private company which is:
• Not an associate or
subsidiary of any other
company;
3 • Total Borrowings < 2* PUC
or INR 50 Crs (Lower)
• Has not defaulted in
repayment of such
borrowing
WHAT DOESNOT CONSTITUTES DEPOSIT?

Amount received from statutory authority

Amount received from foreign authorities or non residents

Secured debentures or CCD’s convertible into shares within 10 Years

Amount received from directors or relative of directors of private company

Share Application Money

Amount received from another corporate

Listed Non convertible debentures and commercial papers

Loan from Banking Institutions

Amount received from the employee of the Company

Amount held under trust or in the ordinary course of business

Amount received by a start up company by way of convertible note (5 Years)

PENAL PROVISIONS

Deposit Amount + Fine (INR 1Cr

Contravention of Section 73 or 2x of Deposit can extend up to
INR 10cr.
and Section 76 of
Imprisonment of 7yrs and fine of
Companies Act, 2013 INR 25lac which may extend up to
INR 2 Crs

Non payment of matured Penal rate of interest of

and claimed deposits eighteen per cent. per annum
for the overdue period

INR 5000 or INR 500 per day

Contravention of companies
in case of continuous
(acceptance of deposit) rules,
contravention
2014
LOAN

01 Directors/Shareholders

TINYPPT designed template for presentation in PowerPoint

02 03
NBFC TINYPPT designed template for presentation in PowerPoint
Banks

SECTION 179 AND 180 EMPOWERS THE BOARD OF THE COMPANY TO OBTAIN
LOAN SUBJECT TO SHAREHOLDER APPROVAL IN EXCEPTIONAL
CIRCUMSTANCE
FACTORS CONSIDERED BY BANK BEFORE SANCTIONING LOAN
PROFESSIONAL OPPORTUNITIES

• Regulatory analysis
• Identifying targets
• Tax optimisation
• Identifying investors
Deal Deal • Mitigate transaction
• Value proposition Sourcing Structuring cost

• Statutory
• Due Diligence
reporting
Legal & Capital Deal • Valuations
• Audits
Compliance raising Closing • Deal Documentation
• Licenses &
registrations

• Performance Reviews
• Operational Analysis Deal • Business Plans
• Regular valuations Monitoring Integration
• Organisation structuring
• Value creation
• ESOPs