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Issue Management
Issue Management
MANAGEMENT
INTERMEDIARIES – MEANING?
• Net Tangible Assets: (defined in AS26) at least Rs. 3 Cr. In each of the
preceding three years,
• Not more than 50 % of which should be in its projects(for which fund are
proposed to raise)
• If exceeds 50%, the issuer should make firms commitment to utilize the
excess in its project.
• Minimum average pre-tax profit of 15 Cr. Calculated during
the three most profitable years out of the immediately
preceding 5 years
• If an issuer does not satisfy any above conditions, it can
make IPO if the issue is made through book building
process.
CONDITIONS OF FPO
• Pricing:
(1) An issuer may determine the price of specified securities
in consultation with the lead merchant banker or through
the book building process.
(2) ***An issuer may determine the coupon rate and
conversion price of convertible debt instruments in
consultation with the lead merchant banker or through
the book building process.
• Differential Pricing:
companies may issue shares/convertible securities to
applicants in the firm allotment category at a price different
from the price at which the net offer to the public is made,
provided the price at which the securities are offered to
public
• Price Band:
The issuer / issuing company can mention a price band
(cap & floor price 20%) in the offer document filed with
SEBI and the actual price can be determined at a later date
before filing it with the ROC.
• Price Discovery:
Book building is the process by which
an underwriter attempts to determine at what price to offer
an initial public offering (IPO) based on demand from
investors
• Denomination of Shares: Public of equity shares can be made in any
denomination in accordance with Sec. 13(4) of the Companies Act and in
compliance with norms specified by SEBI from time to time.
• The companies which have already issued shares in the denominations of
Rs. 10 or Rs. 100 may change their standard denomination by splitting /
consolidating them
CLASSIFICATIO
N OF
COMPANIES
CLASSIFICATION OF
COMPANIES
Company
On the basis
On the basis
of
of liabilities
incorporation
One
Public Private
person
STATUTORY COMPANY
• Excel file.
MINIMUM LISTING
REQUIREMENTS BSE
• The minimum paid-up capital of the applicant company shall be Rs. 3
crore for IPOs
• The minimum market capitalization of the Company shall be Rs. 25
crore (paid-up number of equity shares * the issue price).
• The Issuer shall comply to the guidance/ regulations applicable to
listing as bidding inter alia from
• Securities Contracts (Regulations) Act 1956
• Securities Contracts (Regulation) Rules 1957
• Securities and Exchange Board of India Act 1992
• Companies Act 2013
MINIMUM LISTING REQUIREMENTS
FOR NEW COMPANIES(NSE)
• The paid up equity capital of the applicant shall not be less
than 10 crores * and the capitalisation of the applicant's
equity shall not be less than 25 crores
PROMOTERS’
CONTRIBUTION
MINIMUM PROMOTERS’
CONTRIBUTION
• Public Offer
• Right Issue
• Private Placement
• A public offer may be Initial Public Offer (IPO) or Further/Follow on
Public Offer
• It is essential for a public company to issue a prospectus, if they
intend to appeal to the public for capital.
• According to Section 2 (70), prospectus means “any
document described or issued as a prospectus and includes
any notice, circular, advertisement or other document
inviting deposits from the public or inviting offers from the
public for the subscription or purchase of any shares in, or
debentures of a body corporate.”
TYPES OF PROSPECTUS
• Red herring
• Abridged
• Shelf (Information Memo. if any changes)
• Deemed
BOOK BUILDING
BOOK BUILDING
• A private placement offer cannot be made to more than 200 people (per security)
in aggregate in a financial year excluding “qualified institutional buyers” and
employees of the company
• If a company makes an offer to allot or invite subscription, or allots, or enters in
to an agreement to allot, securities to more than 200 persons. the same shall be
deemed to be an offer to the public .
• The number of such offers or invitations shall not exceed 4
in a financial year and not more than once in a calendar
quarter with a minimum gap of 60 days between any 2 such
offers or invitations.
• The value of such offer or invitation shall be with an
investment size of not less than 20,000 Rupees of the face
value of the Securities
• The payment for the subscription should be made through
cheque or demand draft or other banking channels but not
by cash
• A company making an offer or invitation shall allot its
securities within sixty days from the date of receipt of the
application money for such securities and if the company is
not able to allot the securities within that period
• it shall repay the application money to the subscribers
within fifteen days from the date of completion of sixty
days and if the company fails to repay the application
money within the aforesaid period
• it shall be liable to repay that money with interest at the
rate of twelve per cent per annum from the expiry of the
sixtieth day.
PROCEDURE FOR PRIVATE
PLACEMENT OF SECURITIES:
• The person(s) to whom private placement offer/invitation
shall be made has to be identified first. All offers shall be
made only to such persons whose names are recorded by
the company prior to the invitation to subscribe.
• The proposed offer of securities or invitation to subscribe
securities needs to be approved by the shareholders of the
company, by way of a special resolution for each of the
offers/invitations
• The offer letter and the application form addressed
specifically to the allottee shall be sent to him, either in
writing or in electronic mode, within 30 days.
RIGHT ISSUE
• As per Section 62(1) of the Companies act, 2013 if the
Company decides to issue fresh shares, these should be
offered to existing shareholders in proportion to existing
persons who are holders of equity shares.
• ‘Right Issue’ means offering shares to existing members in
proportion to their existing share holding. The object is to
ensure equitable distribution of Shares and the proportion of
voting rights is not affected by issue of Fresh shares.
PROCEDURE FOR ALLOTMENT
OF RIGHT ISSUE OF SHARES:
• a. Call a Board meeting by issue notice of meeting.
• b. Approve right issue including “letter of offer”, which shall
include right of renunciation also and Appointment of merchant
banker
• c. Send offer letter to all existing members as on the date of offer.
(Through registered post or speed post or through electronic mode
to all the existing share -holders at least three days before the
opening of the issue.)
• d. Receive acceptance/ rejection of rights from members to whom
offer has been sent & also from persons in whose favour right
renounced.
• E. Time of Sending Notice : At least 3 days before the opening of
the offer, Opening of Offer Period: 15 to 30 days
• f. Approve allotment by passing of Board Resolution.
• g. Issue of share certificates.
• h. Authorize two directors and one more person for signature on
Share Certificates.
• i. Attach list Name, Address, occupation if any and number of
securities allotted to each of the allottees and the list shall be
certified by the signatory
• j. Authorize a director to file to ROC within 30 days of passing of
Resolution.
• K. Issue share certificate.
• L. Make Allotment within 60 days of receiving of
Application Money.
SEBI GUIDELINES
REGARDING
RIGHTS ISSUES OF
A COMPANY
• 1. Applicability:
• These guidelines apply to the rights issues made by existing
listed companies (the companies whose equity capitals
listed) Therefore a company whose debentures/bonds are
listed but not the equity (i.e. shares) will not be governed by
guidelines. These guidelines are not applicable where the
size of the issue is below Rs. 50 lakhs
• 2. Withdrawal of a Rights Issue:
• Rights issue cannot be withdrawn after the announcement
of the record date. If done, then no security of the company
shall be eligible for listing up to 12 months.
• 3. Appointment of Registrar:
Appointment of Registrars to Issue shall be compulsory.
• 4. Letter of Offer:
Letter of offer shall contain
disclosures specified by SEBI
(Section 3 of SEBI guidelines relating
to contents of offer document).
5. MINIMUM SUBSCRIPTION:
• The investors can make complaints to SEBI if they face problems relating
to their investment in industrial securities and financial assets. SEBI
receives thousands of complaints relating to non-receipt of refund orders,
allotment letters, non-receipt of dividend or interest and delays in the
transfer of shares and debentures. SEBI is making efforts to solve such
complaints through appropriate measures.
• SEBI is keen to solve the complaints of investors and wants to protect their
interests. It is committed to co-operating with various consumer redressal
forum in this regard.
Although, a large number of complaints reaching SEBI are being redressed,
still a large number of complaints remain unredressed.
• (4) Investor education:
• SEBI is aware that investor education is important for his
protection. It encourages the formation of investor
associations that disseminate information through news
letters. SEBI is bringing out two monthly publications for
the investors.
• These are:
(a),SEBI- Market Review, (b) SEBI News-letter.
• (5) Investor surveys:
• SEBI has also conducted surveys in respect of investment
and opportunities for the benefit of small investors. The
findings of the surveys are given wide publicity so as to
provide proper guidance to investors regarding their
investment decisions.
• (6) Disclosures by companies:
• SEBI has introduced norms for disclosure of half yearly
unaudited results of companies. It has also revised the format
of prospectus to provide more information to investors.
• It also insists that every share application Form is
accompanied by an abridged prospectus. The provisions
relating to disclosures are for the information and protection
of small/average investors.
• (7) Code regarding takeovers:
• SEBI has now issued code regarding takeovers of
companies, mergers and amalgamations. It has introduced
regulations governing substantial acquisition of shares and
takeovers and lays down the conditions under which
disclosures and mandatory public offers have to be made to
the shareholders.
Here, the purpose is to protect the interests of investors even
when they are not directly party to such takeovers.
RESPONSIBILITIES
OF LEAD
MANAGER
No lead manager shall agree to manage the Issue unless:
• His responsibilities i.e. disclosures, allotment and are defined
clearly & statement furnished 1 month before the issue.
DISCLOSURES TO SEBI
The Merchant Bankers for managing public issue can negotiate a fee
subject to a ceiling. This fee is to be shared by all lead managers,
advisers etc. 0.5% of the amount of public issues up to Rs.25 crores 0.2%
of the amount exceeding Rs.25crores
PROPORTIONATE-ALLOTMENT
PROCEDURE
• an allotment shall be made on a proportionate basis within
the specified categories . The proportionate allotments of
securities in an issue, that is oversubscribed shall be subject
to reservation for the retail individual investors.
• A minimum 50% of the net offer of securities to the public
shall initially be made available for the allotment to retail
individual investors.
• The unsubscribed portion of the net offer to any one of the
categories may be made available for allotment to
applicants in the other category, if so required
BOUGHT OUT
DEAL (BOD)
• Bought out deal (BOD) is a process of investment by a
sponsor or a syndicate of investors / sponsors directly in a
company.
• Such direct investment is being made with an understanding
between the company and the sponsor to go for public
offering in a mutually agreed time.
• Bought out deal is a type of wholesale of equities by a
company.
• A company allots shares in full or in lots to sponsors at a price negotiated
between company and the sponsors.
• After a particular period of agreed upon between the sponsor and the
company the shares are issued to the public by the sponsor with a
premium.
• The holding cost of such shares by the sponsors may either be reimbursed
by the company , or the sponsor may absorb the profit in part or full as per
the agreement , arising out of the public offering at a premium .
• After the public offering , the shares are listed in one or more stock
exchanges.
FEATURES
• Parties : There are three parties involved in the bought out deals . They are
promoters of the company , sponsors and co- sponsors who are generally
merchant bankers and investors .
• Outright sale : there is an outright sale of a chunk of equity shares to a
single sponsor or the lead sponsor.
• Syndicate : Sponsor forms a syndicate with other merchant bankers for
meeting the resource requirements and for distributing.
• Sale price : The sale price is finalized through negotiations between the
issuing company and the sponsors, the sale being influenced by such factors
as project evaluation , promoters image and reputation , current market
sentiments etc.
CONTINUANCE OF
ASSOCIATION OF LEAD
MANAGER WITH AN ISSUE
• The lead manager undertaking the responsibility for refunds
or allotment of securities in respect of any issue shall
continue to be associated with the issue till the subscribers
have received the share or debenture certificates or refund
of excess application money;
• where a person other than the lead manager is entrusted
with the refund or allotment of securities in respect of any
issue,
• the lead manager shall continue to be responsible for
ensuring that such other person discharges the requisite
responsibilities in accordance with the provisions of the
Companies Act and the listing agreement entered into by
the body corporate with the stock- exchange.
BROKER