By:S. Prabhakar

M.COM, LLB, FCS, AMIMA, MICA, ACIS (London)

ELIGIBILITY NORMSINITIAL PUBLIC OFFER

(IPO)

A PEEP INTO HISTORY

Pre SEBI

All the issues of securities required the approval of the Controller of Capital Issues.

Post SEBI - 1992

SEBI has done away with the approval regime & introduced disclosure norms.

1996 Amendment

Three years consecutive dividend paying track record.

2000 Amendment

Distributable profits in three out of immediate preceding five years

2003 Amendment : the present norms

IPOs AT A GLANCE (Source : PRIME database)

Year No. of Issues Amount raised

(Rs./in crores)

1990-91 140 1,450

1991-92 195 1,399

1994-95 1,343 13,311

1995-96 1,423 8,881

1998-99 22 504

2001-02 6 1,082

2003-04 29 17,821

2004-05 29 21,302

ISSUE WORTH RS. 70,000 CRORES IN PIPE-LINE

ELIBILITY NORMSEntry Norm I

2.2 IPO BY UNLISTED COMPANIES

2.2.1 An unlisted company may make an IPO only if it meets all the following conditions:

a) The company has Net Tangible Assets of at least Rs 3 crores in each of the preceding three years (of 12 months each) of which not more than 50% is held in monetary assets

Provided if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/project

(`Tangible Assets’ shall mean the sum of all net assets of the company, excluding `intangible assets’ as defined in Accounting Standard 26 issued by

ICAI)

b) The company has track record of distributable profits (as per Section 205 of Companies Act, 1956) for at least 3 out of immediately preceding 5 years

Provided that extraordinary items shall not be considered

C) The company has net worth of at least Rs.1 crore in each of the preceding 3 full years of 12 month each

d) In case company has changed its name within last one year, at least 50% revenue for preceding 1 full year is earned from the activity suggesting the new name

e) Aggregate of proposed issue and all previous issues made in the same financial year in terms of size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) does not exceed 5 times its pre-issue net worth as per the audited balance sheet of the last financial year

Entry Norm II

2.2.2 An unlisted company not fulfilling any of the above conditions may make an IPO only if it meets both the following conditions :

a) (i) Issue shall be made only through book building route, with at least 50% issue size to be allotted to Qualified Institutional Buyers (QIBs) failing which full subscription monies shall be refunded

ORa) (ii) Project is appraised and participated to the extent of 15% by

Financial Institutions or Scheduled Commercial Banks out of which 10% comes from the appraiser

AND

b (ii) There shall be compulsory market making for at least 2 yearsfrom the date of listing of shares subject to the following conditions:

Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares

Market makers undertake to ensure the difference between quotation for sale and purchase for their quotes shall not at any time exceed 10%Inventory of the market makers on each of such stock exchanges, as on the date of allotment of shares shall beatleast 5% of the proposed issue

2.2.2A In addition the company shall satisfy the criterion of having atleast 1000 prospective allotees in its issue

b) (i) Minimum post issue face value of capital shall be Rs. 10cr.OR

Partnership converted into companiesTrack record of divisible profits shall be considered only if the financial statement of the partnership business for said years are revised in the format prescribed for companies under Companies Act and

• adequate disclosure are made in the financial statements as required under Schedule VI

• the financial statements shall be duly certified by a CAstating thata) accounts are revised and disclosure made in accordance

with provisions of Schedule VI of Companies Act, 1956

b) accounting standards of ICAI have been followed and they present a true and fair picture of the firms’ accounts

• lead merchant banker shall also verify and confirm that financial statements are in accordance with Accounting standards of ICAI

Qualified Institutional Buyers

• Public financial institutions as defined in Sec. 4A of Companies Act

• Schedule commercial banks• Mutual funds• FIIs registered with SEBI• Multilateral and bilateral financial institutions• Venture capital funds registered with SEBI• State industrial Development Corporations• Insurance companies registered with the Insurance

Regulatory and Development Authority (IRDA)• Provident Funds with minimum corpus of Rs. 25 crores• Pension Funds with minimum corpus of Rs. 25 crores

No need for any registration with SEBI as QIBs. They are treated as QIBs for participating in primary issuance process

2.3 PUBLIC ISSUE BY LISTED COMPANIES

2.3.1 A listed company is eligible to make a public issue

Provided aggregate of proposed issue and all previous issues made in the same financial year in terms of size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer document) does not exceed 5 times its pre-issue net worth as per the audited balance sheet of the last financial year

Provided further that in case company has changed its name within last one year from the date of filing of the offer document, at least 50% revenue for preceding 1 full year is earned from the activity suggesting the new name

2.3.2 If above criterion is not fulfilled

• Listed company shall be eligible to make a public issue subject to the complying with the conditions of clause 2.2.2

Exemptions

• Private sector banks

• Public sector banks

• An Infrastructure company whose project has been appraised by public financial institution or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financing Services Limited (IL&FS) or a bank which was earlier PFI and

not less than 5% of the project cost is financed by any of these institutions jointly or severally either by way of loan or subscription to equity or combination of both

• right issue by an existing listed company

PROMOTORS CONTRIBUTION AND LOCK-IN

Issue by Unlisted Companies

• promoters shall contribute not less than 20% of the post issue capital

Issue by Listed Companies

• promoters shall participate either to the extent of 20% of the proposed issue or

• ensure post issue promoter share holding to the extent of 20% of post issue capital

Composite Issue

at the option of promoters be either 20% of the proposed public issue or 20% of post issue capital

Imp : Right issue component shall be excluded while calculating the post issue capital

Shares in-eligible for computation of promoters contribution

• shares acquired during preceding 3 years before filing offer document with SEBI if the shares are acquired

for consideration other than cash or by capitalisation of intangible assets

resulting from bonus issue, out of revaluation reserve or reserves without accrual of cash resources

• In case of issue by un-listed companies, shares issued to promoters during preceding one year at price lower than the price at which shares are being offered to public

Provided

Such shares shall be considered if the differential price is brought in by promoters subject to company passing a revised resolution and filing of revised return of allotment with RoC

• No share forming part of promoter contribution should consist of

• any private placements made by solicitation of subscription from unrelated persons directly or through intermediary

• for which specific written consent has not been obtainedfor inclusion in promoter contribution subject to lock-in

• Minimum application Rs. 25,000/- in case of individuals and Rs. 1,00,000 in case companies.

Promoters’ contribution in excess of required limits

in case of excess contribution it shall attract provision

of guidelines of preferential allotment, if issue price is lower than the price as determined on the basis of preferential allotment guidelines

Promoter contribution to be brought in before opening of Public issue

at least one day before opening of issue for public

Board resolution to be passed for allotment of shares

Copy of resolution with CA certificate to be filed with SEBI before opening of the issue

CA certificate shall be accompanied by list of names, address and amount subscribed by friends and associates

LOCK IN REQUIREMENTS

In case of public issue, the minimum promoter contribution shall be locked in for a period of three years

Starting from the date of allotment in the proposed issue and

Last date shall be reckoned as 3 years from date of commencement of commercial production (last date of month in which commercial production in a manufacturing company is expected to commence as per offer document) or date of allotment in the public issue which ever is later.

Excess promoters' contribution

Shall also be locked in for a period of three years

Pre-issue capital of UNLISTED companies

Entire pre-issue capital other than that locked-in as promoter's contribution shall be locked-in for a period of one year

Exemption from Promoters contribution

• Issue by a company listed for last 3 years and has a track of record of dividend payment for at least 3 immediately preceding years

• right issue provided promoters shall disclose

- their existing share holding

- the extent to which they are participating

• where there is no identifiable promoter or promoter group exists

Inscription of Non-transferability on Share Certificates or marking in DP account

The non transferability clause should be inscribed on the share certificates

In case of credit to DP accounts non-transferability should be marked in the DP account and the account be frozen

Company should obtain a certificate from auditors to this effectand file it with SEBI and Stock Exchanges.

Dealing in shares in Lock-in

Pledge

• Can be pledged only with banks or FI as collateral security for loans granted by banks/FI provided it is one of the terms of sanction of loan

Inter-se Transfer

• permitted amongst promoters subject to lock-in being applicable to transferee for remaining period of lock-in

Inscription of Non-transferability on Share Certificates or marking in DP account

INTERMEDIARIES

MISC. PROVISIONS

Intermediaries / Key Players

Merchant Banker Syndicate Members

LeadManager

Co-LeadManger

Book Running Lead Manger

Underwriters Brokers

Banker to the Issue

Advertisement Agency

PrintersS. Prabhakar

Registrar to the Issue

S. Prabhakar

PRICING

Shares can be issued to applicants in firm allotment category at a price different from price offered to public provided the price at which shares are offered to firm allotment category is HIGHER

In a composite issue of public and right issue by a listed company, shares could be offered at differential prices

JUSTIFICATION for price differential should be given in the offer document

All the eligible companies can freely price their equity shares.

Differential Pricing

S. Prabhakar

DENOMINATION

If the issue price is more than Rs. 500/- Issuer Company is free to decide the denomination of face value of shares

If the issue price is less than Rs. 500/- face value of shares shall not be less than Rs. 10/-

It should not be decimal of a rupee

There shall be only one denomination of shares in a company at any given time

S. Prabhakar

BIFURCATION TO VARIOUS CATEGORIES

In a Book Built Issue

50% is to be reserved for QIBs on proportionate basis. (out of which 5% shall be available to MUTUAL FUNDS. Mutual funds can also apply for additional shares)QIBs shall submit 10% margin at the time of bidding

15% to non-institutional investors on competitive basis

35% to retail individual investors on competitive basis

S. Prabhakar

Minimum public offer for Listing

For listing minimum 25% of the post issue share capital is to be offered to public (Section 19 (2) (b) of Securities Regulation Act read with Rules.)

Relaxation of making only minimum 10% of post issue share capital to public is allowed for companies in the sector of IT, telecom, media and entertainment subject to condition that

minimum offer size of Rs. 100 crores

minimum offer to public of 20lakhs shares

S. Prabhakar

Appointment of Compliance Officer

An issuer company shall appoint a compliance officer who shall

Liaise with SEBI with regard to compliance with various laws, rules, regulations and

Other directives issued by SEBI and investors complaints relatedmatters

Name of the Compliance Officer shall be mentioned in the Offer document and issue related advertisements

Normally Company Secretary is appointed as Compliance Officer

S. Prabhakar

Agreement with depositories

The issuer company shall enter into agreements with all the depositories for dematerialization of securities.

The Issuer company shall give option to the investors to receive allotment of securities in dematerialised form through any of the depositories.

At present we have two depositories viz., NSDL and CDSL

S. Prabhakar

Underwriting

Fixed price issue

Getting the issue underwritten is optional.

If the issue is underwritten, the Merchant Banker shall underwrite to the extent of 5% of the total underwritten portion or 25 lakhs which ever is less.

Book Built Issue

Getting the issue underwritten is mandatory

Does not apply to the 50% of the net offer to be allotted to QIBs

Syndicate members shall enter into an agreement with Book Running Lead Manager

BRML will enter into agreement with Issuer company. In case of default by syndicate members BRML shall be responsible.

OFFER DOCUMENT / PROSPECTUS

When an issuer Company offers shares for public subscription, it is mandatory to issue prospectus containing matters specified in Part I of Schedule II and report specified in Part II of Schedule II to Companies Act, 1956

No prospectus / offer document is required to be issued to public in case of

Right issue

When the offer is on private placement basis for less than 50 persons

Information Memorandum(Section 60B of Companies Act)

A public company issuing shares may circulate Information Memorandum to public before filing of a prospectus

Information Memorandum can be issued by means of notice, circular, advertisement or document

It contains all the major information as may be necessary to facilitate investors to make investment decision

Information Memorandum carries the same obligations as that of a prospectus though it is not treated as a prospectus

Red Herring Prospectus (Explanation to Section 60B)

Red Herring Prospectus means a prospectus, which does not have complete particulars on the price and quantum of shares offered.

• Issuer company inviting subscription through Information memorandum shall file with ROC a prospectus prior to the opening of subscription list and offer as Red Herring prospectus at least 3 days before opening date.

• Red herring prospectus should containing all contents of prospectus as per Schedule II of the Companies Act

• Shall be signed by all the directors or duly constituted attorneys

Variation between Information Memorandum and Red herring prospectus

• Any variation shall be highlighted as variations

• Every variation shall be individually intimated to persons invited to subscribe

• In case any advance subscriptions have been received, cheques /drafts shall not be encashed before intimating variations and giving opportunity to withdraw the applications

• Option to withdraw shall be exercised within 7 days of intimation and shall be done in writing

• If cheques have been encashed without giving intimation /opportunity to withdraw, subscriber are entitled to get back the money with 15% interest

Filing of Final Prospectus with ROC

On closing of the bidding period a final prospectus shall be filed with RoC and SEBI stating

Share Price

Quantum of Shares

All other details which were not complete in the Red herring prospectus

Shelf Prospectus(Section 60A of Companies Act)

`Shelf Prospectus’ means a prospectus issued by any financial institution or bank for one or more issues of securities or class of securities specified in that prospectus

• Any public financial institution, public sector bank or scheduled bank whose object is financing may file a shelf prospectus

• Once shelf prospectus is filed with Registrar, issuer shall not be required to file prospectus afresh at every stage of offer within a period of validity of such shelf prospectus

• Issuer shall file a memorandum with ROC containing charges created and changes in financial position between two offers

• Information memorandum shall be issued to public along shelf prospectus filed at the stage of first offer and such prospectus shall be valid for one year from date of opening

• Where update of information memorandum is filed every time an offer is made, such memorandum together with Shelf prospectus shall constitute prospectus

Filing of Draft Prospectus with SEBI

• Issuer Company shall file a draft prospectus through Lead Manager with SEBIatleast 21 days prior to filing of the Prospectus with RoCand Stock Exchanges.

• Draft prospectus shall be made available on the Website of SEBI for public comment from the date of filing with SEBI

• 10 hard copies to SEBI regional office, 3 copies of SEBI Head Office, 25 copies to each of SE s where listed is sought are to be made available by Merchant Banker

• Hard copies of draft prospectus can be obtainedfrom Issuer company, Lead Manager and Stock Exchange by paying prescribed fee.

COMPLAINTS

Any person who has any reservation / complaint on the informationcontained in the offer document can lodge the complaint with SEBI / Company / The Lead Manger

After completion of twenty one days from the date of filing the draft prospectus if no complaints are received the Lead Manager shall file with SEBI a No Complaint Certificate.

OBSERVATION FROM SEBI

Normally SEBI gives its observations within 21 days of filing of the prospectus explanation for which should be file with SEBI forthwith and be incorporated in the prospectus.

No formal approval is given by SEBI. There are no observation within 21 days it may be treated as deemed approval.

A copy of prospectus incorporating all the explanations for the observations made by SEBI shall be filed atleast three days before opening of the issue with ROC.

No prospectus shall be issue to public unless the same is filed with ROC.

In a book building issue after the determination of the price the final prospectus with the details of price and no. of shares shall be filed with ROC within two days of closure of the issue.

Filing of prospectus with ROC

Abridged ProspectusSection 2(1) of Companies Act, 1956 defines Abridged Prospectus’ as a memorandum containing such salient features of prospectus (in form 2A) as may be prescribed.

• An issuer company is permitted to issue application along with abridged prospectus instead of Prospectus

• A copy of prospectus shall be supplied on demand

• SEBI permits two application forms to be attached to or form part of one Abridged prospectus

• Abridged prospectus shall not contain matters which are extraneous to the contents of the prospectus

• Shall be printed at least in point 7 size with proper spacing

Liabilities for mis-statement in the prospectus

Civil Liability - Section 62 of the Companies Act -1956

For any misstatement in the prospectus the following persons shall be liable to pay compensation to every person who subscribed for the shares on the faith of the prospectus for any loss or damage sustained

Every Director

Every person who is the promoter of the company

Every person who is authorized the issue of prospectus

Criminal Liability - Section 63 of the Companies Act -1956

Every person who authorized shall be punishable with imprisonment for a term which may extend to two years are with fine which may extent fifty thousand are with both.

S.Prabhakar

WHAT IS BOOK BUILDING?.

Book Building is a process by which demand for a security is ascertained at various prices

In this process Book Running Lead Manager (BRLM)

builds up and ascertains the DEMAND for the shares and

assesses the PRICE at which shares may be issued and

determines the quantum of shares to be issued.

S.Prabhakar

BOOK BUILDING PROCESS

KEY PARTICIPANTS

The Issuer Company

Investors

Book Running Lead Managers

Syndicate Members

Bidding Centers

Escrow BankersRegistrars

The stock exchanges

The Depositories

S.Prabhakar

Appointment of Book Running Lead Manager

Issuer Company shall appoint one of the Lead Managers (a Category I Merchant Banker) as the BRLM and mention the same in prospectus.

OBTAINING BOOK BUILDING SOFTWARE

BSE/NSE offer book building software, which runs on the BSE/NSE private network

S.Prabhakar

PREPARATION OF DRAFT PROSPECTUS

Draft Prospectus is prepared by BRLM including all information except price and number of shares and filed with SEBI.

After 21 days of filing with SEBI, if any observations are received, changes are made in the draft prospectus and filed with SEBI, ROC and Stock Exchange.

Then the draft prospectus is circulated to syndicate members, QIBs, HNIs and prospective subscribers.

S.Prabhakar

PRICE BAND

• A Price Band may be indicated giving Floor Price and Cap Price

• Cap Price should not exceed 20% of the floor price viz., if the floor price is Rs. 100, cap price should not be more than Rs. 120.

• Investors can opt to bid at any price in multiple of Rs. 1/- within the price band

• Retail investors can also bid at `cut off’ price

• Price band can be revised during period bid is open subject to extending bidding period by 3 working days

Minimum lot sizes

• The minimum application value shall be within the range of Rs. 5,000 to Rs. 7,000

• The issuer shall stipulate the minimum application size (in terms of number of shares) falling within the above range and make disclosure in the offer document

• Application can be made in multiples of the minimum size stipulated in the offer document

Ex: If issue price of shares is Rs. 500/-

The minimum application size would be in the range from 10 shares to 14 shares.

S.Prabhakar

S.Prabhakar

Bidding Period

Minimum 3 & maximum 7 working days.

If the price band is revised then the bidding period shall be extended for three workingdays subject to a maximum of ten working days.

S.Prabhakar

Electronic registration of Bids at Bidding Centers

Syndicate member will accept bid-cum application form from investors

Register the bids using the on-line facilities of BSE and NSE, who will provide screen based facility

Facilities can also be setup for off-line electronic registration of bids but the off-line data shall be uploaded into on-line facilities on regular basis

Generation of transaction registration slip (TRC) for each option

Lodge bid-cum-application with escrow bankers.

S.Prabhakar

Bids cannot be entered for less than the floor price.

Bidder has a choice of making 3 options (at different prices within the price band for different quantities of shares).

The bids will be treated as optional bids and will not be cumulated.

Syndicate members will enter each option into electronic bidding system as a separate bid.

S.Prabhakar

Bidding at “Cut off” Price: Retail Investor can bid at Cut off price. Bidding at cut off is prohibited for QIBs and non-institutional buyers

Payment of bidding money:

Bidding/application forms shall be deposited along with bidding money.

Bidding money should be calculated on the basis of highest money to be paid amongst the three alternative bids.

Retail bidder bidding at cut off shall deposit application money based on the cap price.

Cheques/ drafts should be drawn in favour on Escrow Account and be deposited either with the Escrow Bank or at the bidding center.

S.Prabhakar

ESCROW ACCOUNT

• The issue company shall open two escrow accounts – one for QIBs and the other for retailers/ HNIs.

• Margin amount collected along with bids is not the application money and hence the same will be deposited in an escrow account.

• After the discovery of the price, the money lying in the escrow account is transferred on the designated date to the extent of the shares proposed to be allotted.

• The excess margin money paid shall be refunded to the bidders through the Escrow account.

S.Prabhakar

Revision of Bids

Bid can be revised any number of timesbefore closure

Revision can be in terms of quantum and price of shares

Revision of bids can be made only at the bidding centers where the original bid was made

Revision bid form should be submitted along with original TRS

If revision is upwards, differential prices should be paid, if down wards, refund will be made by the issuer company after completion of the issue process

S.Prabhakar

Syndicate Members shall enter the following details at the time of registering the bids –

NameInvestor CategoryQuantityBid PriceBid cum Application NumberDepository Participant Identification Number Client ID NumberWhether payment is made or not.

S.Prabhakar

A system generated Transaction Registration Slip (TRS) is issued to the bidder as acknowledgement of the bid.

After determining the issue price, maximum number of shares bid for by a bidder at or above the issue price will be considered for allocation. The rest of the bids are treated as invalid.

Submission of second bid form will be treated as multiple bidding and both the bids are liable to be rejected.

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APPLICATION BY MUTUAL FUNDS

A separate application can be made in respect of each scheme of the fund registered with SEBI.

Such application shall not be treated as multiple application provided the details of each scheme are properly given.

S.Prabhakar

UPLOADING OF DATA: The aggregate demand and price for bids registered on each of bidding facility will be uploaded on an hourly basis and consolidated. In order to maintain transparency, the software gives visual graphs displaying price v/s quantity on the terminals

BID EVALUATION: On the close of the book building period the ‘book runner’ evaluates the bids on the basis of the the evaluation criteria which may include –

1. Price aggression

2. Investor Quality

3. Earliness of bids etc

PRICE DETERMINATION: The BRLM and the company decides the final price, within the price band, at which it is willing to issue shares without prior approval or intimation to the bidders.

S.Prabhakar

FILING OF FINAL PROSPECTUS: The final prospectus incorporating the prices and one set of financials is filed with the ROC

STATUTRORY ADVERTISEMENT: Will be released indicating the issue price and material updates after filing red-herring prospectus

ISSUE OF CAN:

BRLM or Registrar shall send syndicate members a list of successful bidders

Syndicate members shall issue Confirmation of Allocation Note (CAN), which shall be deemed a valid, binding and irrevocable contract for the bidder to pay the entire issue price.

S.Prabhakar

CREDIT OF SHARES

The issuer company shall enter into agreement with NSDL/CDSL before opening of the issue for giving credit of shares allotted electronically.

Successful bidders shall be given credit of shares compulsorily in dematerialised mode by crediting their DP accounts within 15 days of bid closing date. Shareholders can get share rematted subsequently.

Applicant who wishes to bid shall open a Beneficiary account with DP of NSDL or CDSL.

Applicant shall provide the details of DP account in the application form.

S.Prabhakar

In case of joint holdings, names should necessarily be in the same sequence as they appear in Depository account

On signing the application form applicant is treated as authorizing Registrar to have access to demographic details of the applicant from the DP

Applicant should make sure to update the demographic details in their DP accounts to avoid capturing of wrong data by Registrar

Fund Transfer: Upon the designated date funds will be transferred from Escrow account to company’s account

S.Prabhakar

ADVANTAGES

Cost Reduction: It results in cost reduction in printing stationary, dispatches, holding conference, advertisements etc.Realistic Price: Price gets determined very close to the date of openingFair Prices: Since the price is based on demand, the ultimate price will be fair.Better chance of success.Transparent System: Investors can make a well informed decision.Faster Processing.

S.Prabhakar

DISADVANTAGES

Possibility of Price Rigging.

Suitable for Mega Issues and Fundamentally strong Companies only.

Suitable for Matured Markets - In Indian markets, the technical jargons keeps the investors away from the process.

Allotment &

Listing

ALLOTMENT OF SHARES

Allotment is the process of appropriation of unappropriated share capital amongst the applicants.

Allotment is the acceptance of the offer made by the applicant to subscribe the share of the company and becomes a binding contract.

Pre Requisite for AllotmentA company having share capital shall before

allotment shall

• File prospectus with ROC or

• File a statement in lieu of prospectus with ROC 3 days before allotment. (Section 70 of the Companies Act, 1956)

As per section 69 (1) no allotment of shares shall be made of the shares offer to the public unless amount stated in the prospectus as minimum subscription has been received by the company.

ALLOTMENT PROCEDUREThe basis of allotment should be finalised by Lead Manager/BRLM in consultation with the Registrartaking the below mentioned limits into consideration.

(a) A minimum 50% of the net offer of securities to the public shall initially be made available for allotment to retail individual investors, as the case may be

(b) The balance net offer of securities to the public shall be made available for allotment to:

(i) Individual applicants other than retail individual investor, and

(ii) Other investors including Corporate bodies/ institutions irrespective of the number of shares, debentures, etc. applied for.

PROCEDURE OF BASIS OF ALLOTMENTApplicant shall be categorised according to number of shares applied for

Total number of share to be allotted to each category is arrived at on proportionate basis (total number of shares applied for multiplied by the inverse of over subscription ratio)

Ex :Total number of applicant in category of 100s : 1500Total number of shares applied for : 1,50,000Number of times oversubscribed : 3 times

Proportionate allotment to the category comes to : 150000 x 1/3 = 50,000

Category

Over Subscription (% age)

No. of Shares to be allotted

100 Shares

100

10,000

5 times

2000

No. of SharesApplied for

200 –500 Shares

500

2,00,000

5 times

40,000

6,00,000

5 times

1,20,000

500-1000 Shares

800No. Of Applicants

List of successful applicants is arrived at by draw lots

Example:

For getting basis approved the classified categories of applications should be arranged in following manner: -

The identification number on all the application forms should have six digits. Where the form does not have six digit number, the necessary number of zeros should be prefixed thereon;

Six Digit application number so given should be inverted i.e. 123456 should be made 654321;

The inverted applications numbers should be arranged in serial.

All the applications should then be numbered consecutively as 1, 2, 3, 4, etc.

After this the information be collated in specific format & submitted to designated Stock Exchange.

No of shares to be allotted should be rounded of to either to 100 shares or minimum application lot as the case may be.

The excess in one category shall be adjusted against the other categories.

For the purpose of rounding off over subscription to the extent of 10% of the issue size permitted.

RESPONSIBILITY FOR BASIS

Executive Director of the Stock Exchange approving the basis, post issue Lead Manager and Registrar shall ensure that the basis is finalized in a fair and proper manner

Drawal of lots (to find out successful applicant) , where required, shall be done in the presence of (SEBI designated) public representative on rotational basis

The allotment of the shares should be done strictly as per the basis of allotment approved by the Stock Exchange.

On the allotment the share application money gets converted into Share Capital.

On allotment, the allotee becomes the shareholder entitled to all right of being a shareholder

A return of allotment should be filed with ROC within 30 days form 2.

Activity Book Built Issue

Fixed Price Issue

Allotment to be made

Dispatch of Share certificate & refund order

To complete formalities of listing

Interest for delay in finalization of basis & dispatch

Within 15 daysfrom the closer date

2 working daysfrom finalization of basis

Within 7 daysof finalization of basis

To start from 15 days of closure.

Within 30 daysfrom the closer date

2 working daysfrom finalization of basis

Within 7 daysof finalization of basis

To start from 30 days of closure.

Irregular Allotment

Voidable :

• If allotment made without receiving Minimum Subscription (Sec. 69 of Companies Act)

• If allotment made without filing prospectus/statement in lieu of prospectus

To be avoided by applicant within 2 months of allotment

Void :• If the issuer company does not make application for

listing or listing is refused, then the allotment is void.

WHAT IS LISTING ?

Listing means admission of securities of incorporated company, Central/state Govt. financial institutions etc. to dealing on a recognized stock exchange

Listing is the permission granted by a recognized stock exchange upon fulfillment of the conditions of listing to a public company etc. for the securities being traded or dealt in on the stock

LISTING OF SHARES

• Listing of shares with at least with one stock exchange with nation wide terminals is mandatory

• Listing with any other exchange (s) voluntary

• Issuer Company shall name one exchange with nation wide terminals as Designated exchange

• Prospectus must contain details of the exchange where shares of the company are proposed to be listed

• 1% deposit shall be deposited with Designated exchange and the basis shall be finalised by the Designated exchange

• Company shall obtain `in principle' approval before opening of the issue from all the exchanges

• Listing of shares should be completed within 7 working days from the date of approval of basis of allotment

• No further issue of share shall be made till shares offered are listed or till application money is refunded on account of non listing

Steps involve in listing : -

In principle approval

• Before opening of the issue for public subscription the issuer company should make a initial listing applicationwith the designated stock exchange.

• The designated stock exchange grants a in principle approval and permission to use the name of Stock exchange in the offer document.

• After closure of the issue, issue of share certificate the issuer company should make detailed listing application along with all requisite documents.

• The issuer company should also enter into a listing agreement with the concerned Stock Exchange.

• The Issuer company shall pay listing fee based on paid up share capital

• On satisfaction of completion of required documents the concern exchange will grant a listing & trading permission.

• The continued listing permission is subject to fulfilling of all the conditions for listing as detailed in the listing agreement and payment of listing fees.

REFUSAL OF LISTING

Allotment made in pursuance of prospectus which states that listing shall be got done, shall be void, if

• Application has not been made to the stock exchanges

• If the permission for listing has not been granted by any exchange(s) within 10 weeks from the date of closure of subscription list

Provided where an appeal against decision of exchange is made, such allotment shall not be void until the dismissal of the appeal

• If permission has not been applied for and/or not granted by exchange, company shall forthwith refund the money collected.

• If there is a delay in repayment, after expiry of 8th daythe company, every director and officer in default shall be liable to pay interest at not less than 15% P.A.

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