ISSUE MANAGEMENT & COMPLIANCES

Bharat Ku. Sahu

Capital Market
Four Pillars of Capital Market
SEBI Act, 1992 - Protect Investors - Develop & Regulate Securities Companies Act, 1956 - Set out code of conduct for the corporate relating to issue, allotment & transfer of securities - Disclosure to be made in public issue Securities Contracts (Regulation) Act, 1956 - Provides for regulation of transaction in securities through control over Stock Exchange Depositories Act, 1996 - Electronic maintenance and transfer of ownership of demat securities.

Regulatory Bodies
Regulation of market was shared by Dept. of Economic Affairs, Ministry of Corporate Affairs, RBI & SEBI Before SEBI Act, 1992 it was Capital Issue (Control) Act, 1947 * Restriction on Issuers access to capital market * Controlled free pricing of issues * Repealed in May, 1992 SEBI Act, 1992 was enacted with the objectives: * Protecting interest of Investors * Promoting development of securities market * Regulating the securities market

Securities Exchange Board of India(SEBI)

Section 11 of the SEBI Act gives the power and function
- dozens of guidelines formulated by SEBI after inception - Streamlined by consolidating all individual guidelines - Declared SEBI (Disclosure & Investor Protection)Guidelines, 2000 - New Regulation called SEBI(Issue of Capital & Disclosure Requirement) Guidelines, 2009 was notified in September, 2009. - SEBI(DIP) Guideline, 2000 now stand rescinded

ICDR Summary
01. Definitions Section 2(1)

(a) Act means the Securities and Exchange Board of India Act, 1992 (15 of 1992); (c) anchor investor" means a qualified institutional buyer an application for a value of ten crore rupees or more in a public issue made through the book building process in accordance with these regulations; (d) Application Supported by Blocked Amount (ASBA) means an application for subscribing to a public issue or rights issue, along with an authorisation to Self Certified Syndicate Bank to block the application money in a bank account;

(f) book building means a process undertaken to elicit demand and to assess the price for determination of the quantum or value of specified securities or Indian Depository Receipts, as the case may be, in accordance with these regulations;

(g) book runner means a merchant banker appointed by the issuer to undertake the book building process; (h) composite issue means an issue of specified securities by a listed issuer on public cum-rights basis, wherein the allotment in both public issue and rights issue is proposed to be made simultaneously;

(l)designated stock exchange means a recognized stock exchange in which securities of an issuer are listed or proposed to be listed and which is chosen by the issuer as a designated stock exchange for the purpose of a particular issue of specified securities under these regulations: Provided that where one or more of such stock exchanges have nationwide trading terminals, the issuer shall choose one of them as the designated stock exchange: Provided further that subject to the provisions of this clause, the issuer may choose a different recognised stock exchange as a designated stock exchange for any subsequent issue of specified securities under these regulations;

(n) further public offer means an offer of specified securities by a listed issuer to the public for subscription and includes an offer for sale of specified securities to the public by any existing holders of such securities in a listed issuer; (o) green shoe option means an option of allotting equity shares in excess of the equity shares offered in the public issue as a post-listing price stabilizing mechanism; (p) initial public offer means an offer of specified securities by an unlisted issuer to the public for subscription and includes an offer for sale of specified securities to the public by any existing holders of such securities in an unlisted issuer; (u) net offer to public means an offer of specified securities to the public but does not include reservations;

(v)net worth means the aggregate of the paid up share capital, share premium account,and reserves and surplus (excluding revaluation reserve) as reduced by the aggregate of miscellaneous expenditure (to the extent not adjusted or written off) and the debit balance of the profit and loss account.
(w)non institutional investor means an investor other than a retail individual investor and qualified institutional buyer; (x) offer document means a red herring prospectus, prospectus or shelf prospectus and information memorandum in terms of section 60A of the Companies Act, 1956 in case of a public issue and letter of offer in case of a rights issue;

(z) preferential issue means an issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis and does not include an offer of specified securities made through a public issue, rights issue, bonus issue, employee stock option scheme, employee stock purchase scheme or qualified institutions placement or an issue of sweat equity shares or depository receipts issued in a country outside India or foreign securities; (za)promoter includes: (i) the person or persons who are in control of the issuer; (ii) the person or persons who are instrumental in the formulation of a plan or programme pursuant to which specified securities are offered to public; (iii) the person or persons named in the offer document as promoters:

- Provided that a director or officer of the issuer or a person, if acting as such merely in his professional capacity, shall not be deemed as a promoter: -Provided further that a financial institution, scheduled bank, foreign institutional investor and mutual fund shall not be deemed to be a promoter merely by virtue of the fact that ten per cent. or more of the equity share capital of the issuer is held by such person; -Provided further that such financial institution, scheduled bank and foreign institutional investor shall be treated as promoter for the subsidiaries or companies promoted by them or for the mutual fund sponsored by them;

(zd) qualified institutional buyer means: (i) a mutual fund, venture capital fund and foreign venture capital investor registered with the Board; (ii) a foreign institutional investor and sub-account (other than a subaccount which is a foreign corporate or foreign individual), registered with the Board; (iii) a public financial institution as defined in section 4A of the Companies Act, 1956; (iv) a scheduled commercial bank; (v) a multilateral and bilateral development financial institution; (vi) a state industrial development corporation; (vii) an insurance company registered with the Insurance Regulatory and Development Authority;

(viii)a provident fund with minimum corpus of twenty five crore rupees; (ix) a pension fund with minimum corpus of twenty five crore rupees; (x) National Investment Fund set up by resolution no. F. No. 2/3/2005DDII dated November 23, 2005 of the Government of India published in the Gazette of India; (xi) 2[insurance funds set up and managed by army, navy or air force of the Union of India;] (ze) retail individual investor means an investor who applies or bids for specified securities for a value of not more than Two lakh rupees;

02.

Applicability

These regulations apply to the following: (a) a public issue; (b) a rights issue, where the aggregate value of specified securities offered is fifty lakh rupees or more; (c) preferential issue; (d) issue of bonus shares by a listed issuer; (e) qualified institutions placement by a listed issuer; (f) issue of Indian Depository Receipts.

Initial public offer Unlisted Companies

Eligibility (a) It has net tangible assets of at least three crore rupees in each of the preceding three full years (of twelve months each) - not more than fifty per cent are held in monetary assets Provided if more than fifty per cent of the net tangible assets are held in monetary assets, firm commitments to utilize such excess monetary assets in business or project; (b) It has a track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three out of immediately preceding five years: Provided extraordinary items shall not be considered for calculating distributable profits; (c) It has net worth of at least one crore rupees in each of the preceding three full years (of twelve months each);

(d) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size does not exceed five times its pre-issue net worth as per the audited balance sheet of the preceding financial year; (e) If it has changed its name within the last one year, at least fifty per cent of the revenue for the preceding one full year has been earned by it from the activity indicated by the new name. Listed Company Only Clause (d) & (e) above applicable.
In case of non-fulfillment:

A.

- Issue to be through Book-Building process(at least 50% to be offered to QIBs), OR - Project has 15% participation by FIs/Sch. Comm. Bank of which 10% by the Appraiser itself. In addition 10% allotment to QIBs

B.

minimum post-issue face value capital of the issuer is ten crore rupees, OR - issuer undertakes to provide market-making for at least two years from the date of listing of the specified securities, subject to the following:

(A) the market makers offer buy and sell quotes for a minimum depth of three hundred specified securities and ensure that the bid-ask spread for their quotes does not, at any time, exceed ten per cent.; (B) the inventory of the market makers, as on the date of allotment of the specified securities, shall be at least five per cent of the proposed issue

Issuer may make an initial public offer of convertible debt instruments without making a prior public issue of its equity shares and listing thereof Issuer shall not make an allotment pursuant to a public issue if the number of prospective allottees is less than one thousand Grading of IPO from at least one Credit Rating Agency(CRA) mandatory

Conditions for Offering the Issue:

(a) Application to one or more recognised stock exchanges for listing of specified securities - Declare one of the SE as the designated stock exchange: Provided in case of IPO, the issuer shall make an application for listing of the specified securities in at least one recognised stock exchange having nationwide trading terminals; (b) Agreement with a depository for dematerialisation of specified securities already issued or proposed to be issued; (c) Existing partly paid equity shares of the issuer have to be fully paid up or forfeited; (d) firm arrangements of finance through verifiable means towards seventy five percent of the stated means of finance, excluding the amount to be raised through the proposed public issue or rights issue or through existing identifiable internal accruals,have to be made.

In-principle approval from recognised stock exchanges

In-principle approval from recognised stock exchanges: (a) in case of IPO, from all the recognised stock exchanges in which the issuer proposes to get its specified securities listed; and (b) in case of a further public offer and rights issue: (i) where the specified securities are listed only on recognised stock exchanges having nationwide trading terminals, from all such stock exchanges; (ii) where the specified securities are not listed on any recognised stock exchange having nationwide trading terminals, from all the stock exchanges in which the specified securities of the issuer are proposed to be listed; (iii) where the specified securities are listed on recognised stock exchanges having nationwide trading terminals as well as on the recognised stock exchanges not having nation wide trading terminals, from all recognised stock exchanges having nationwide trading terminals.

Appointment of Merchant Banker and other intermediaries

(1) Issuer shall appoint one or more merchant bankers, at least one of whom shall be a lead merchant banker (2)Appoint other intermediaries, in consultation with the lead merchant banker, to carry out the obligations relating to the issue.

(3) Where the issue is managed by more than one merchant banker, the rights, obligations and responsibilities, relating to disclosures, allotment, refund and underwriting obligations, if any, of each merchant banker shall be predetermined and disclosed in the offer document as specified in Schedule I.
(4) The lead merchant banker shall, only after independently assessing the capability of other intermediaries (SEBI registered) to carry out their obligations, advise the issuer on their appointment.

Draft offer document to be made public

(1) The draft offer document filed with the Board shall be made public, for comments, if any, for a period of at least twenty one days from the date of such filing, by hosting it on the websites of the Board, recognized stock exchanges where specified securities are proposed to be listed and merchant bankers associated with the issue. (2) The lead merchant bankers shall, after expiry of the period stipulated in sub-regulation (1), file with the Board a statement giving information of the comments received by them or the issuer on the draft offer document during that period and the consequential changes, if any, to be made in the draft offer document.

Face value of equity share

In case of IPO by an unlisted company:a) if issue price is Rs.500 or more , issuer company have a discretion to fix the face value below RS.10/- per share. However, face value shall in no case be less than Rs.1/- per share. b)if the issue price is less than Rs.500, the face value shall be Rs. 10/- per share.

Filing of offer document

(1) No issuer shall make, (a) a public issue; or (b) a rights issue, where the aggregate value of the specified securities offered is fifty lakh rupees or more, unless a draft offer document, along with fees as specified in Schedule IV, has been filed with the Board through the lead merchant banker, at least thirty days prior to registering the prospectus, red herring prospectus or shelf prospectus with the Registrar of Companies or, filing the letter of offer with the designated stock exchange, as the case may be. (2) The Board may specify changes or issue observations, if any, on the draft offer document within thirty days from the later of the following dates: (a) the date of receipt of the draft offer document under sub-regulation (1); or (b) the date of receipt of satisfactory reply from the lead merchant bankers, where the Board has sought any clarification or additional information from them.

Fast Track Issue

(1) if the issuer satisfies the following conditions: (a) the equity shares of the issuer have been listed on any recognised stock exchange having nationwide trading terminals for a period of at least three years immediately preceding the reference date; (b) the average market capitalisation of public shareholding of the issuer is at least five thousand crore rupees; (c) the annualised trading turnover of the equity shares of the issuer during six calendar months immediately preceding the month of the reference date has been at least two per cent of the weighted average number of equity shares listed during such six months period;

(d) the issuer has redressed at least ninety five per cent of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date; (e) the issuer has been in compliance with the equity listing agreement for a period of at least three years immediately preceding the reference date; (f) the impact of auditors qualifications, if any, on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed in the offer document does not exceed five per cent of the net profit or loss after tax of the issuer for the respective years; (g) no show-cause notices have been issued or prosecution proceedings initiated or pending against the issuer or its promoters or whole time directors as on the reference date; (h) the entire shareholding of the promoter group of the issuer is held in dematerialised form on the reference date.

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. (3) The issuer shall undertake the book building process in a manner specified in Schedule XI.

Price and price band

(1) Issuer to mention a price in the draft prospectus (fixed price issue) and floor price or price band in the red herring prospectus (book built issue) and determine the price at a later date before registering the prospectus with the Registrar of Companies: Provided that the prospectus registered with the Registrar of Companies shall contain only one price or the specific coupon rate, as the case may be. (2) If floor price or price band is not mentioned in the red herring prospectus, the issuer shall announce the floor price or price band at least two working days before the opening of the bid (in case of an initial public offer) and at least one working day before the opening of the bid (in case of a further public offer), in all the newspapers in which the pre issue advertisement was released. (3) The announcement shall contain relevant financial ratios computed for both upper and lower end of the price band and also a statement drawing attention of the investors to the section titled basis of issue price in the prospectus. (4) The cap on the price band shall be less than or equal to one hundred and twenty per cent of the floor price. (5) The floor price or the final price shall not be less than the face value of the specified securities.

Differential pricing
Issuer may offer specified securities at different prices, subject to the following: (a) retail individual investors or employees of the issuer making application of value not more than one lakh rupees may be offered securities at a price lower than the price at which net offer is made to other categories of applicants: Provided difference shall not be more than ten per cent of the price at which specified securities are offered to other categories of applicants; (b) in case of book built issue, the price offered to anchor investor shall not be lower than the price offered to other applicants;

(c) in case of a composite issue, the price of the specified securities offered in the public issue may be different from the price offered in rights issue and justification for such price difference shall be given in the offer document.

Underwriting
(1) Where the issuer making a public issue (other than through the book building process) or rights issue, desires to have the issue underwritten, it shall appoint the underwriters (2) Where the issuer makes a public issue through the book building process, such issue shall be underwritten by book runners or syndicate members: Provided that fifty per cent of the net offer to public proposed to be compulsorily allotted to qualified institutional buyers (QIB) cannot be underwritten. (3) The issuer shall enter into underwriting agreement with the book runner, who in turn shall enter into underwriting agreement with syndicate members, indicating therein the number of specified securities which they shall subscribe to at the predetermined price in the event of under subscription in the issue. (4) If syndicate members fail to fulfill their underwriting obligations, the lead book runner shall fulfill the underwriting obligations.

(5) The book runners and syndicate members shall not subscribe to the issue in any manner except for fulfilling their underwriting obligations. (6) A copy of the syndicate agreement shall be filed with the Board before the opening of bids. (7) In case of every underwritten issue, the lead merchant banker or the lead book runner shall undertake minimum underwriting obligations as specified in the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992. (8) Where hundred per cent of the offer through offer document is underwritten, the underwriting obligations shall be for the entire hundred per cent of the offer through offer document and shall not be restricted up to the minimum subscription level.

Minimum subscription
(1) Minimum subscription to be received shall not be less than ninety per cent of the offer through offer document. (2) In the event of non-receipt of minimum subscription, all application moneys received shall be refunded to the applicants forthwith, but not later than: (a) fifteen days of the closure of the issue, in case of a nonunderwritten issue; and (b) seventy days of the closure of the issue, in the case of an underwritten issue where minimum subscription including devolvement obligations paid by the underwriters is not received within sixty days of the closure of the issue. (3) The offer document shall contain adequate disclosures regarding minimum subscriptions (4) Nothing contained in this regulation shall apply to: (a) offer for sale of specified securities; (b) public issue by infrastructure companies if the disclosures regarding the alternate source of funding of the objects of the issue have been made in the offer document.

Restriction on further capital issues

No issuer shall make any further issue of specified securities in any manner whether by way of public issue, rights issue, preferential issue, qualified institutions placement, issue of bonus shares or otherwise: (a) in case of a fast track issue, during the period between the date of registering the red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with the Registrar of Companies or filing the letter of offer with the designated stock exchange and the listing of the specified securities offered through the offer document or refund of application moneys; or (b) in case of other issues, during the period between the date of filing the draft offer document with the Board and the listing of the specified securities offered through the offer document or refund of application moneys; unless full disclosures regarding the total number of specified securities and amount proposed to be raised from such further issue are made in such draft offer document or offer document, as the case may be.

Promoters contribution
The promoters of the issuer shall contribute in the public issue as follows:
(a) in case of an initial public offer, not less than twenty per cent of the post issue capital; (b) in case of a further public offer, either to the extent of twenty per cent of the proposed public issue or to the extent of twenty per cent of the post-issue capital; (c) in case of a composite issue, either to the extent of twenty per cent of the proposed public issue or to the extent of twenty per cent of the post-issue capital excluding the rights issue component.

Promoter contribution must be brought at least 1 day before issue opens. Amount to be kept in Escrow account with scheduled commercial Bank.

Amount to be released to the issuer along with the release of the issue proceeds:
Provided that where the promoters contribution has already been brought in and utilized, the issuer shall give the cash flow statement disclosing the use of such funds in the offer document; Provided if promoters contribution is more than one hundred crore rupees, the promoters shall bring in at least one hundred crore rupees before the date of opening of the issue and the remaining amount may be brought on pro-rata basis before the calls are made to public.

Lock-in restriction on transferability

In a public issue, the specified securities held by promoters shall be locked-in: (a) minimum promoters contribution shall be locked-in for a period of three years from the date of commencement of commercial production or date of allotment in the public issue, whichever is later;

(b) promoters holding in excess of minimum promoters contribution shall be locked-in for a period of one year.
(c ) In case shares are listed for at least 3 years and Company is paying dividend for last 3 years, promoters contribution shall not be subject to lock-in. (d) Entire pre-issue capital other than promoters shall be subject to lock-in for 1 year from the date of commencement of commercial production or date of allotment in the public issue, whichever is later.

 Provided that nothing contained in this regulation shall apply to: (a) equity shares allotted to employees under an employee stock option or employee stock purchase scheme of the issuer prior to the initial public offer, if the issuer has made full disclosures with respect to such options or scheme. (b) equity shares held by a venture capital fund or a foreign venture capital investor for a period of at least one year prior to the date of filing the draft prospectus with the Board. Pledging of shares and Inter-se transfer of shares among the promoters allowed.

Minimum offer to public

(1) Subject to the provisions of sub-clause (b) of clause (2) of rule 19 of

Securities Contracts (Regulations) Rules, 1957, the net offer to public:

(a) in case of an initial public offer, shall be at least ten per cent or twenty five per cent of the post-issue capital, as the case may be; and (b) in case of a further public offer, shall be at least ten per cent or twenty five per cent of the issue size, as the case may be. (2) Nothing contained in sub- regulation (1) shall apply if the issuer is: (a) a government company or statutory authority or corporation or any special purpose vehicle set up and controlled by any one or more of them, which is engaged in infrastructure sector; (b) an infrastructure company fulfilling the following conditions: (i) its project has been appraised by one or more public financial institutions;

(ii) not less than fifty per cent of the project cost is financed by one or more such institutions, jointly or severally, by way of loan or subscription to equity shares or a combination of both, irrespective of whether they appraise the project or not.

Allocation in net offer to public

(1) No person shall make an application in the net offer to public category for that number of specified securities which exceeds the number of specified securities offered to public. (2) In case issue made through book building process, the allocation in the net offer to public category shall be made as follows: (a) not less than thirty five per cent to retail individual investors; (b) not less than fifteen per cent to non-institutional investors; (c) not more than fifty per cent to qualified institutional buyers, five per cent of which shall be allocated to mutual funds Provided in case of issue of shares under Rule19(2)(b), sixty per cent of the net offer to public shall be allocated to QIBs,thirty percent to retail individual investors and ten per cent to non-institutional investors (3) In case issue is through book building process, the issuer may allocate upto thirty per cent of earmarked for QIBs to anchor investor

(4) If issue made is other than book building process, allocation shall be made as follows: (a) minimum fifty per cent to retail individual investors; and (b) remaining to: (i) applicants other than retail individual investors; and (ii) other investors including corporate bodies or institutions, irrespective of the number of specified securities applied for; (c) the unsubscribed portion in either of the categories specified in clauses (a) or (b) may be allocated to applicants in the other category.

Safety net arrangement

Safety net arrangement is an arrangement provided by the issuer under which a person offers to purchase specified securities from the original resident retail individual allottees at the issue price. Issuer may provide for safety-net arrangement for the specified securities offered in any public issue in consultation with the merchant banker after ascertaining the financial capacity of the person offering the safetynet arrangement. any such arrangement shall provide for an offer to purchase up to a maximum of one thousand specified securities per original resident retail individual allottee at the issue price within a period of six months from the last date of despatch of security certificates or credit of demat account

Period of subscription
(1)public issue is kept open for at least three working days but not more than ten working days. (2) In case the price band in a public issue made through the book building process is revised, the period disclosed in the prospectus get extended for a minimum period of three working days: Provided that the total bidding period shall not exceed ten working days.

Minimum application value

(1) The issuer shall stipulate in the offer document, the minimum application size in terms of number of specified securities which shall fall within the range of minimum application value of five thousand rupees to seven thousand rupees. (2) The issuer shall invite applications in multiples of the minimum application value. (3) The minimum sum payable on application shall not be less than twenty five per cent of the issue price: Provided that in case of an offer for sale, the issue price payable for each specified security shall be brought in at the time of application. Explanation: minimum application value shall be with reference to the issue price of the specified securities and not with reference to the amount payable on application.

Green shoe option

Green shoe option (GSO) means an option of allocating shares in excess of the shares issued in Public issue. GSO is provided to stabilize the post listing price of securities subject to the following: - Issuer is authorized by the shareholder in the meeting where approval for public issue was obtained. - One merchant banker is appointed as Stabilizing Agent (SA) who will be responsible for price stabilization process. SA shall enter into agreement with the promoters or preissue shareholders or both for borrowing. Allotment or allocation in excess of the issue size shall not be in excess of fifteen per cent of the issue size.

 in case of Unlisted Company, pre-issue shareholders and promoters and in case of Listed Company Promoters and pre-issue shareholders holding more than five per cent shares, may lend specified securities to the extent of the proposed over allotment. the specified securities borrowed shall be in dematerialized form and allocation of these securities shall be made pro-rata to all successful applicants. For the purpose of stabilization of post-listing price, the SA shall determine the timing of buying the securities, quantity to be bought and the price at which such securities are to be bought from the market. The stabilization process shall be available for a period of thirty days from the date of trading permission by the recognized stock exchanges.

SA shall open a special bank account for crediting the monies received from the applicants against the over-allotment and a special demat account for crediting specified securities to be bought from the market during the stabilization period out of the monies credited in the special bank account. The specified securities bought from the market and credited in the special account with the depository participant shall be returned to the promoters or pre-issue shareholders immediately and not later than two working days after the end of the stabilization period. On expiry of the stabilization period, if the stabilizing agent could not be able to buy requisite no. of specified securities from the market, the issuer Company shall allot specified securities at issue price in dematerialized form to the extent of the shortfall. The shares in that case shall be credited to the special demat account within five days of the closure of the stabilization period.

 The specified securities shall be returned to the promoters or pre-issue shareholders and the account with the depository participant shall be closed thereafter. The issuer shall make a listing application to all the recognized stock exchanges in respect of the further specified securities allotted. The SA shall remit the monies with respect to the specified securities allotted to the issuer from the special bank account. Any monies left in the special bank account after remittance of monies to the issuer and deduction of expenses incurred by the SA for the stabilization process shall be transferred to the Investor Education & Protection Fund (IEPF) and the special bank account shall be closed .

Application Supported by Blocked Amount (ASBA)

ASBA is an application for subscribing to an issue , containing an authorization to block the application money in a bank account. The ASBA process is available in all public issues made through the book building route. It co-exist with the current process of issuing cheque as mode of payment. Self certified syndicate bank (SCSB) is a bank which offers the facility of applying through the ASBA process. A bank desirous of offering ASBA facility shall submit a certificate to SEBI . Only Resident Retail Individual Investors can avail ASBA process

Investor must be bidding at cut-off price Investor has agreed not to revise his bid Investor is not bidding under any other reserved categories. ASBA investor submit ASBA physically or electronically through the internet banking facility, to the SCSB with whom the bank account to be blocked, is maintained. The SCSB block the application money in the bank account specified in ASBA. The application money remains blocked till finalization of the basis of allotment in the issue or failure of the issue or rejection of issue. Once the basis of allotment of finalized, the registrar to the issue sends an appropriate request to the SCSB for unblocking the relevant bank account and for transferring the requisite amount to the issuers bank account.

Anchor Investors(AI)
Not applicable in case of Indian Depository Receipt(IDR) Means a QIB making application for a value of Rs.10 crore or more through Book building process Allocation to AI in Public issue is discretionary provided min. 2 AI if public issue size is upto Rs. 250 crores and 5 AI if issue size is more than Rs. 250 crores 30% of the portion reserved for QIBs shall be available to AI. One-third of AI portion shall be reserved for domestic MF.

 Bidding for AI takes place one day before the issue opening date AI to pay a margin of 25% on application and balance within 2 days of closure of issue. Allocation to AI complete on the day of bidding by AI. If price fixed is higher than the allocation price made to AI, the AI to bring the additional amount. However if price fixed is lower than the allocation price made to AI, no refund of excess price to AI. Shares allotted to AI shall be lock-in for 30 days from date of allotment.

Guideline for Right Issue

Right issue is an issue of capital under section 81(1) of the companies act , 1956 to be offered to the existing shareholder of the company through a Letter Of Offer (LOO). ICDR regulation is not applicable to the right issue where the aggregate value of securities does not exceed RS. 50 lakhs. Whether the right issue is within the authorized capital of the company. If not steps should be taken to increase the authorized capital of the company. Notify the stock exchange about the date of board meeting at least 2 days in advance of the meeting at which the right issue is proposed to be considered.

Steps involved in right issue

Convene the board meeting and place the proposal for right issue . Right issue shall be kept open for at least 15 days and not more than 30 days . Make arrangement with the bankers for acceptance of share application forms. Prepare a scheme of allotment in consultation with stock exchange. Convene a board meeting and make allotment of shares.

Guideline on Bonus Issue

A Listed Company may issue bonus shares if: (a) Authorized by its articles of association for issue of bonus shares, capitalization of reserves, etc. (b) if there is no such provision in the articles of association, the issuer shall pass a resolution at its shareholders meeting (c) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it; (d) it has not defaulted in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity and bonus; (e) the partly paid shares, if any outstanding on the date of allotment, are made fully paid up

(f) Proposed bonus issue should not dilute the rights of Fully/Partly Convertible Debentures. (g) Shares should be reserved out of bonus issue in proportion to the convertible part of FCD/PCD. (h) Shares so reserved may be issued at the time of conversion of FCD/PCD into equity shares (i) Bonus issue shall be made out of free reserves or securities premium collected in cash only (j) Reserves created by revaluation of fixed assets shall not be capitalized for issuing bonus shares. (k) Bonus share shall not be issued in lieu of dividend. (l) Issuer Company shall implement the bonus issue within fifteen days from the date of approval of the issue by its board of directors.

(m) If issuer is required to seek shareholders approval for bonus issue, the bonus issue shall be implemented within two months from the date of the meeting of its board of directors subject to shareholders approval.

(n) Once the decision to make a bonus issue is announced, the issue can not be withdrawn.

Preferential Issue regulations

A listed company may make a preferential issue of specified securities, if: (a) a special resolution has been passed by its shareholders; (b) all the equity shares, if any, held by the proposed allottees in the issuer are in dematerialised form; (c) the issuer has complied with the conditions for continuous listing of equity shares as specified in the listing agreement; (d) the issuer has obtained the Permanent Account Number(PAN) of the proposed allottees. The issuer shall not make preferential issue of specified securities to any person who has sold any equity shares of the issuer during the six months preceding the relevant date.

Pricing of preferential issue

1. Where the equity share of the company have been listed on a stock exchange for a period of six month or more as on the relevant date , the issue of equity share on preferential basis is being made at a price not less than higher of the following :a) The average of the weekly high and low of the closing price of the related equity shares quoted on the stock exchange during the six month preceding the relevant date. OR b) The average of the weekly high and low of the closing price of the related equity share quoted on a stock exchange during the two weeks preceding the relevant date.

(2) If the equity shares have been listed for a period of less than six months as on the relevant date, the equity shares shall be allotted at a price not less than the higher of the following: (a) the price at which equity shares were issued in its initial public offer or the value per share arrived at in a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956, pursuant to which the equity shares of the issuer were listed, as the case may be; or (b) the average of the weekly high and low of the closing prices of the related equity shares quoted on the recognized stock exchange during the period shares have been listed preceding the relevant date; or (c) the average of the weekly high and low of the closing prices of the related equity shares quoted on a recognized stock exchange during the two weeks preceding the relevant date.

(3) Where price of the equity shares is determined in terms of subregulation (2), such price shall be recomputed by the issuer on completion of six months from the date of listing on a recognized stock exchange with reference to the average of the weekly high and low of the closing prices of the related equity shares quoted on the recognized stock exchange during these six months. If such recomputed price works out to be higher than the price paid on allotment, the difference shall be paid by the allottees to the issuer. If the recomputed price is lower than the price paid on the allotment, the higher price paid on allotment becomes the final price. (4) Any preferential issue to QIBs not exceeding five in number, shall be made at average of the weekly high and low of the closing prices of the related equity shares during the two weeks preceding the relevant date.

Relevant date means the date thirty days prior to the date on which the meeting of shareholders is held to consider the proposed preferential issue. This guideline is not applicable where the preferential issue of equity shares is made: (a) pursuant to conversion of loan or option attached to convertible debt instruments in terms of sub-sections (3) and (4) of sections 81 of the Companies Act, 1956; (b) pursuant to a scheme approved by a High Court under section 391 to 394 of the Companies Act, 1956; (c) in terms of the rehabilitation scheme approved by the Board of Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985: Provided that the lock-in provisions of this Chapter shall apply to such preferential issue of equity shares. (2) The provisions of this Chapter relating to pricing and lock-in shall not apply to equity shares allotted to any financial institution.

Lock-in period for preferential issue - Securities allotted on preferential basis to promoter or promoter group are subject to lock-in for 3 years from date of allotment. Provided that not more than 20% of total capital should be lock-in for 3 year from date of allotment. -Securities allotted in excess of 20% to promoter or promoter group shall be lock-in for 1 year from date of allotment. -Securities allotted on preferential basis to persons other than promoters shall be lock-in for 1 year from date of allotment. -The entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date upto a period of six months from the date of preferential allotment. -Shares acquired by conversion of convertible instruments other than warrants shall be lock-in for periods as reduced by the extent the convertible instrument was already in lock-in. -Lock-in period for partly paid share shall commence from date of allotment and continue for a period of 1 year from the date it became fully paid-up.

Min. promoters contribution not to be considered under fresh lock-in even though it is considered for computation of 20% of total capital in case the shares are free from lock-in. Inter-se transfer among promoters permissible. If allotment is not complete within 15days from date of resolution, a fresh consent of shareholders is required. Statutory Auditors to certify that issue of shares on preferential basis is as per Regulation. Statutory Auditors certificate shall be placed before shareholder meeting considering the proposed issue.

Employee Stock Option (ESOP)

ESOP is an option to Whole time Directors, Officers, employees which give the benefit or right to purchase or subscribe at a future date, securities issued at a pre-determined price.Sec.2(15A) of the Companies Act, 1956 SEBI(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. ESOS means a scheme granting option to employees and option means a right but not an obligation to apply for shares at a pre-determined price. ESOP is subject to approval of shareholders by special resolution. In case of employee being offered more than 1% shares, specific disclosure and approval is required in AGM. Minimum 1 year period between grant of option and its vesting has been prescribed. Compensation Committee with majority of independent directors to superintendent the ESOS.

Directors Report to contain the following: Total number of shares covered under ESOP Pricing formula Option granted, option vested, option exercised and option forfeited, extinguishment/modification of option, employees wise details who receive grant in one year amounting to 5% or more of total option granted during that year. Fully diluted Earning per share (EPS). ELIGIBILTY An employee Director nominated by any Financial Institution(FI), provided * Agreement with the FI provides that the director can accept the ESOP in his personal capacity. * Option shall not be renounced in favour of FI.

Employee should not be promoter or belong to promoter group. Directors individually or with relatives, holding 10% shares can not participate. Compensation Committee: For administration and superintendence of the of the scheme Boards Committee with majority independent directors Committee to formulate : * quantum of option to be granted per employee & in aggregate * conditions under which option vested in employee may lapse in case of termination of employment for misconduct * exercise period for the employee and lapse of option on failure to exercise the option * specified time period within which option vested to be exercised in case of termination/resignation

*procedure to make fair and reasonable adjustment to the total no. of option and exercise price in case of Right issue, bonus issue etc.. *grant, vest and exercise of option in case of employees who are on long leave * procedure for cashless exercise of options Shareholders Approval Special Resolution to be passed approving the scheme Explanatory statement to contain the following: * total no. of options granted * identification of employees entitled to participate in the scheme * vesting period and maximum period of vesting * exercise price or pricing formula * confirmation of accounting policy for ESOS

Variations of terms of ESOS

Company should not vary terms of the scheme which may be detrimental to the interest of the employees If such variation is not prejudicial, Company has to pass special resolution to vary the terms of scheme Companies should be given option for re-pricing of options if offer price has become unattractive due to fall in market price

Pricing
Company has freedom to determine the exercise price subject to accounting policies.

Lock-in Period
Minimum period of 1 year between grant of option and vesting of option. Company has freedom to specify the lock-in period for the shares

Employee shall not have right to receive dividend or vote in respect of options granted, till shares are not issued If option vested to an employee in lieu of option granted by another company which has merged/amalgamated, then the period during which the option granted by the transferor company shall be adjusted against the minimum vesting period. Consequences of non-exercise of option Amount payable by employee, if any, at the time of grant of option, shall be forfeited if option not exercised. Amount will be refunded if option is not vested due to nonfulfillment of conditions relating to vesting.

Non-transferability of option Option granted to an employee is non-transferable. No person other than the employee to whom option is granted is entitled to exercise option. Under cashless system of exercise, the company may itself fund or permit empanelled stock brokers to fund the payment. Option granted to the employee can not be pledged, hypothecated, mortgaged. In case of death of employee, all option granted to him shall be vested in the legal heirs or nominees. In case of permanent incapacity, all option granted to the employee shall be vested on the date of incapacitation. If employee resigns or is terminated, options not granted but not vested, expires. Employee can retain all option already vested.

Disclosure in Directors Report Option granted, option vested, option exercised Pricing formula Total shares arising as a result of exercise of option Option lapsed/forfeited, total options in force Variation of terms of option Employee-wise details of option granted* senior managerial personnel * any employee who receive grants in one year option amounting to 5% or more of option granted * Identified employees who were granted option during any one year 1% of the issued capital Diluted Earning per share (EPS)

Employee Stock Purchase Scheme (ESPS) Eligibility * Permanent employee working in India or out of India * Director of the Company, whether whole time or not. However, Director who by himself or through relatives directly or indirectly hold more than 10% of outstanding shares is not eligible *Employee of subsidiary Company or Holding Company *Employee should neither be promoter nor belong to promoter group Shareholders Approval Scheme should be approved by the shareholders by special resolution.

Explanatory statement to specify the following Price of the shares and no. of shares to be offered to each employee Appraisal for determining the eligibility of employee Total no. of shares to be granted No. of shares to be offered may be different for different category of employees Conformity to the accounting policies Approval by separate resolution for* allotment of shares to employees of subsidiary company/holding company * allotment of shares to identified employees during one year, equal to or exceeding 1% of issued capital

Pricing and Lock-in Period Company has the freedom to determine the price subject to compliance of accounting policies Shares issued under ESPS are subject to lock-in for one year from date of allotment If scheme is part of public issue and shares are issued to employees at the same price as in the public issue, then shares are not subject to lock-in period. Disclosure and Accounting policies Details of the no. of shares issued in the scheme Price at which shares were issued Employee-wise details of option granted* senior managerial personnel * any employee who receive grants in one year option amounting to 5% or more of option granted * Identified employees who were granted option during any one year 1% of the issued capital Diluted Earning per share (EPS)

Listing Shares arising out of ESOS and issued under ESPS are required to be listed In case of ESOS, Company has to file a statement about grant of option and obtain in-principle approval As and when ESOS/ESPS are exercised, the Company has notified the concerned SE No listed company shall make any fresh grant of options under ESOS framed prior to IPO and prior to listing unless* such pre-IPO scheme is in conformity with these guidelines * such pre-IPO scheme is ratified by shareholders in general meeting subsequent to IPO No change in terms of option issued under such pre-IPO whether repricing, change in vesting period or maturity period unless prior approval of shareholders is taken. Company to appoint a Merchant Banker for the implementation of ESOS/ESPS as per the guideline till the stage of framing ESOS/ESPS.

Delisting of shares from Stock Exchange

SEBI(Delisting of Equity Shares) Regulation, 2009 - Delisting of shares from all or any of the Stock Exchanges where such shares are listed. - These Regulation is not applicable in case of delisting : * Under a scheme sanctioned by BIFR under SICA, 1985;or * by NCLT under Companies Act. - Circumstances where delisting is not applicable - Buy back of shares by the Company - Preferential allotment made by the Company - Unless a period of three years has elapsed since listing - If instruments which are convertible into equity are outstanding - Delisting of convertible securities

No promoter shall; Directly or indirectly employ the fund of the Company to finance an exit opportunity or to acquire shares made under these regulation. Employ any device, scheme or artifice to defraud any shareholder. Engage any transaction or practice that operates as a fraud or deceit upon any shareholder Engage in any act or practice that is fraudulent, deceptive or manipulative in connection with such delisting. Voluntary Delisting: If delisting from only some SE and continue their listing on other SE which has nationwide trading terminal, no exit opportunity needs to be given to the public shareholder; and If not remain listed on SE having nationwide trading terminal, exit opportunity needs to be given to all public shareholder

Delisting with no exit opportunity Approval of Board of Directors in a meeting Public notice of proposed delisting in at least one English newspaper, one Hindi newspaper and one regional newspaper Public notice to contain name of SE from which shares are proposed to be de listed, reason for such delisting and fact about continuance of listing in SE having nationwide trading terminal Company to make application to the concerned stock exchange Delisting application shall be disposed off by the concerned SE within 30 working days from date of receipt of application Fact of delisting to be disclosed in the first Annual Report prepared after delisting.

Delisting with exit opportunity Prior approval of the Board of Directors of the Company Prior approval of shareholders of the Company by special resolution through postal ballot. Votes cast by shareholders in favour of the resolution shall not be less than two times vote cast against it. Make application to the concerned SE for in-principle approval of the proposed delisting. Application to be accompanied by Audit Report covering a period of six months prior to the date of application. SE may require the Company to comply the following before disposing of the application: * Compliance with these regulation. * Redressal of investors grievances * Payment of listing fees to that recognized SE

* Compliance of any condition of the listing agreement with the SE having material bearing on interest of shareholders. * Any litigation or action pending against the Company pertaining to its activities in securities market. * Any other relevant matter SE shall dispose off such application within 30 working days from receipt of such application. Final application to SE within 1 year of passing special resolution with proof of having given exit opportunity. If special resolution passed before commencement of the Regulation, final application to be made within 1 year from passing such resolution or six month from commencement of these regulation, w.e.i. later.

Public Announcement (PA) Upon receipt of in-principle approval, the promoter make a public announcement in one English, one Hindi and one regional newspaper. PA to specify one date as Specified Date, being not later than 30 working days from date of PA for determining names of shareholders to whom letter of offer shall be sent. Promoter to appoint a MB before PA for ensuring compliance. Any associate of promoter can not be appointed as MB. Escrow Account Promoter to open an Escrow account and deposit the estimated amount of consideration based on floor price and no. of outstanding shares with public. On determination of final price, the promoter shall forthwith deposit the additional sum in the escrow account. Escrow account shall either consist of cash, or bank guarantee in favour of MB or both.

Letter of offer (LOO) Despatch of LOO to public shareholders not later than 45 days from PA, so as to reach them 5 working days before opening of bidding period. LOO to contain all disclosure made in PA for informed decision by shareholders. LOO to be accompanied with a bidding form for use by shareholders for tendering shares Bidding Period Date of opening of offer shall not be later than 55 working days from date of PA Offer shall be open for minimum 3 working days and maximum 5 working days Book Building process Only public shareholders to participate in the book building process. Promoter or person acting in concert shall not make a bid in the offer. Any holder of Depository receipt issued on underlying shares and custodian holding such shares shall not participate in the bid.

Offer Price Offer price shall be determined through book building process after fixation of floor price and disclosure of the same in PA and LOO. Fixation of Floor price In case of frequently traded shares: Floor price shall be the higher of the average weekly high and low of the closing prices during last 26 weeks or last 2 weeks preceding the date on which the SE was notified about Board meeting for considering the delisting proposal. In case of infrequently traded shares: Floor price to be decided by Promoter and MB considering the following factor: * Highest price paid by promoter for acquisition of equity shares, including price paid during public, right or preferential allotment during 26 weeks prior to the date on which the SE was notified about Board meeting for considering the delisting proposal and after that date up to the date of the public announcement , and

* Other parameters including return on net worth, book value, earning per share If shares are frequently traded in one SE and infrequently traded in another, then highest price arrived in accordance to the above two will be the floor price. Frequently/Infrequently Traded shares If the annualized trading turnover of such shares during preceding 6 months prior to date of notification of Board meeting is less than 5 per cent (by no. of equity shares) of the total listed equity capital. Promoter not to accept Offer Price Promoter not bound to accept the offer price determined by book building process. If promoter decides not to accept the price: * equity shares deposited by the shareholders shall be returned or released within 10 working days of closure of bidding period. * Company shall not make final application to the Exchange for delisting

* Promoter shall close the Escrow account * if public shareholding at the opening of the bidding period was less than minimum level of public shareholding, the promoter to bring it to minimum level within a period of 6 month from closure of the bidding period by any such means: - By issue of new shares - promoter making an offer for sale -promoter making sale of his holding in secondary market in a transparent way. Minimum number of equity shares to be acquired Offer shall be considered successful, if promoters shareholding with shares accepted through eligible bids reaches the higher of following:

90% of the total issued shares excluding shares held by custodian against Depository receipt Aggregate of pre offer promoter shareholding and 50 % of the offer size Closure of Offer Within 8 working days of closure of the offer, promoter and MB shall make PA in newspaper: Success of the offer along with final price accepted by the promoter Failure of the offer Rejection of the final price by the promoter Payment of Consideration Promoter to open a Bank account upon successful closure of the bid Entire amount due and payable shall be transferred from Escrow account Successful bidders will get the price in 10 working days from closure of the offer.

 Right of Residual shareholders - Residual shareholders can still tender their shares to the promoters up to 1 year from date of delisting of shares. - Promoters will accept the shares at same final price at which earlier shares were accepted. - The payment shall be made out of the balance lying in Escrow account. - The cash or bank guarantee lying in the Escrow account shall not be released to the promoter unless all payments are made in respect of shares tendered.

Compulsory Delisting Permanent removal of securities of a listed Company from SE Imposed as a penalty measure at the behest of the SE for not making submissions/complying with various requirements Enabling provisions under Section 21A of the Securities Contract Regulation Act, 1956. No such penalty unless the Company is given an opportunity of being heard. Decision of delisting by a panel consists of: * two directors of the recognized SE, one of whom shall be public representative one representative of the investors * One representative of MCA/ROC and * Executive Director/ Secretary of the recognized SE.

News paper notice in one English national daily and one regional newspaper about the proposed compulsory delisting. 15 working days time period to be given in the notice for any representation Schedule III provides the criteria for compulsory delisting Provisions related to exit opportunity is not applicable in case of compulsory delisting Right of Public Shareholders SE shall form a panel of expert valuers from whom valuer or valuers shall be appointed. The independent valuer shall determine the fair value of delisted shares. Promoter has to pay to the shareholders for the value of share acquired. Promoter, whole time director of such delisted Company can not access the securities market for next ten years.

INDIAN DEPOSITORY RECEIPTS (IDRs)

IDR is an instrument in the form of a Depository Receipt Created by the domestic depository in India against the underlying equity shares of the issuing company. Overseas Custodian Bank means Banking Company established in a country outside India and has a place of business in India. Overseas Custodian Bank to have custodial agreement with domestic depository who issue IDR. Companies(Issue of Indian Depository Receipts) Rules, 2004. Applicable only to those Companies incorporated outside India whether they have or have not established any place of business in India.

Eligibility Pre-issue capital and free reserves at least US$ 50 million. Minimum market capitalization during last three years at least us$ 100 million. Continuous trading listing in its present country for at least 3 immediately preceding years. Track record of distributable profits in 3 out of 5 immediately preceding years. Fulfils other eligibility criteria. Procedure Prior permission of SEBI. Application to SEBI at least 90 days prior to date of opening of issue with application fees of US$ 10,000. SEBI may call for further information within 30 days.

Dispose off the application in 60 days of receipt of such information. Changes, if any suggested by SEBI if not incorporated within 60 days, then it can not be filed with ROC. Once permission granted, issue fee @0.5% on issue value subject to Rs. 10 lakh where issue size is upto Rs. 100 crore in indian rupees. If issue size exceeds Rs. 100 crores, fee @0.25% on additional value of issue. Appointment of Overseas custodian Bank, Domestic depository and a Merchant Banker. Issuer Company to obtain in-principle approval from SE having nationwide trading terminal

Underwriters may be appointed. Due diligence report by issuer company through MB/domestic depository with ROC/SEBI. Prospectus/ LOO to be certified by 2 authorized signatories, one a whole time director and other Chief Accounts Officer. Other Conditions IDR to be denominated in Indian rupees. Repatriation from issue of IDR is subject to prevailing law under FEMA. IDR issue in any FY should not exceed 25% of paid up capital and free reserves.

 Documents
-

Instrument constituting the Company. (MOA) Enactment under which the Company incorporated. If having business in India, address thereof. Any other address where these documents are available for inspection. Certified copy of incorporation. Copies of agreement between Company, custodial Bank and domestic depository. Translated form of the documents if it is in other language. Prospectus to be filed by all whole time directors and chief accounts officer

 Issue of prospectus
-

Application form must be accompanied by memorandum containing salient features of prospectus. Prospectus can not be issued unless expert has given in writing consent to the issue thereof and has not withdrawn the same. IDRs issued are listed on the SE and freely tradable. IDRs issued by an issuing Company can be transferred, possessed by person other than Indian residents if specific approval of RBI is obtained. Holder of IDR may transfer the IDR or may ask the domestic depository to redeem these IDR. In case of redemption, domestic depository can request overseas custodian Bank to release corresponding underlying shares.

 Distribution of corporate benefits

-

Penalty

On receipt of dividend or other corporate benefits on the IDR, Domestic depository shall distribute the same to IDR holders. IDR holder may authorize a person as nominee to whom IDR will be vested in case of death.
If issuer contravenes any provision for which no punishment is provided in the Act, issuer will be punishable with fine twice the amount of IDR issue. If non-compliance continues, Rs. 5000/- for every day of contravention.

Disclosure in prospectus - General Information

*Statement by issuer that all moneys received out of issue shall be transferred to domestic bank account.

Capital Structure Terms of issue * Right of IDR holder against underlying securities. * Tax benefit, if any, to issuer and IDR holder Particular of Issue * Object of the issue *Cost of the project *Means of Financing Company, Management and project

 Report - A report in the format by statutory auditors of the issuer on

* audited financial results for last 3 year preceding the date of prospectus, and * interim financial statements in respect of the period ending on a date which is less than 180 days prior to date of opening of the issue. * If gap between such date of latest financial statement and date of opening of issue is 180 days or less, it is sufficient if the changes in financial position of issuer is reported in the prospectus. Gap between opening of issue and date of reports shall not exceed 120 days.

 SEBI (ICDR) Regulation, 2009

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Section 605A of the Companies Act, 1956 and Companies (Issue of IDR) Rules, 2004 Eligibility Issuer Company listed in its home country. Issuer is not prohibited by any regulatory body. Issuer has track record of compliance with securities market in its home country. Conditions Issue size shall not be less than Rs. 50 crores. Minimum application amount is Rs. 20,000/-. At least 50% to be allotted to QIB on proportionate basis. Balance 50% to be allocated among non-institutional investors and retail investors at the discretion of issuer.

At least 30% of IDR should be available to retail individual investors. Spill over to other categories to the extent of under subscription is permissible. Minimum Subscription For non-underwritten issue * If min.90% of offer is not subscribed, issuer to refund entire amount within 15 days. * Any delay beyond 15 days will attract interest @ 15% p.a.. For underwritten issue * If min. 90 % is not subscribed including devolvement of underwriters , issuer to refund the entire amount within 6o days from closure of issue. * Delay beyond 60 days will attract interest @ 15% p.a..

Fungibility IDR shall not be automatically fungible into underlying equity shares of issuing Company. Other Conditions Lead merchant banker to submit a due diligence certificate. Submit a fresh certificate of due diligence at the time of filing the prospectus with ROC. Furnish a certificate before opening of the issue that no corrective action is required. Furnish a certificate after issue is opened but before it closes for subscription. Arrangement for mandatory collection centres.

Post issue reports Merchant Banker to submit post issue reports to SEBI. Initial post issue report within 3 days of closure of issue. Final post issue report within 15 days of finalization of basis of allotment. Finalization of basis of allotment Executive Director/Managing Director of the SE, Lead merchant Banker, Registrar to the issue shall ensure that basis of allotment is finalized in fair and proper manner.

International Capital Market

EURO ISSUE : (A) Foreign currency convertible bonds (B) Equity shares through depository receipts Foreign currency convertible bonds (FCCB) - Unsecured, fixed rate of interest, option for conversion into fixed no. of equity shares. - If conversion is not opted, interest and redemption price paid in dollar. - Interest rate very low compared to Indian Standard Rate. - Issue need to conform External Commercial Borrowing (ECB) end use requirement - Foreign investor prefer because of dollar denominated service, conversion option, arbitrage opportunity i.e. equity issue at discount to market price. - 25% of FCCB can be used for corporate restructuring

FCCBs are issued in US$ by the depository in international market but underlying shares are denominated in in Indian Rupee and kept under custody local bank.

Disadvantage
Issuer can not plan capital structure since conversion is not assured. Projection of cash outflow can not be made.

Depository Receipts (DRs)

Negotiable instrument evidencing fixed no. of equity shares denominated in US dollar. Used by Company which sell securities in international market. DRs are listed and traded in international SEs.

American Depository Receipts (ADRs)

Issued in case the funds are raised through retail market in United States.

- Global Depository Receipts (GDRs) - Issue is not extended to retail US investors but QIBs can participate in this deal. - QIBs are the institutional investors having at least US$100 million under their portfolio to invest. - GDRs are converted into fixed no. of equity shares after a cooling period. - Investors advise depository to issue shares. Depository in turn will ask the custodian to cancel the GDR and issue share. - Underlying shares once released can not be recustodised. - Shares acquired from open market can not be custodised. - Until conversion, GDR are negotiable and traded in SE, entitled for dividend in dollar but no voting rights.

On conversion, the said shares carry voting rights, yield rupee dividend and tradable in Indian SE. ADR/GDR are part of Foreign Direct Investment (FDI) hence need to conform to FDI policy. Two way fungibilty in ADR/GDR. Investor can cancel ADR/GDR with depository and sell the underlying shares in the market. Issuer can issue fresh ADR/GDR to the extent shares cancelled. Transfer mechanism of GDR is effected through international clearing system i.e. Euroclear, Cedel.

FCCB and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993
Domestic custodian bank:- A banking company which act as a custodian for the ordinary shares or FCCB of an Indian company which are issued by it against GDR or certificates. Foreign currency convertible bonds:- means bonds issued in accordance with this scheme and subscribed by a non resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole ,or in part, on the basis of any equity related warrants attached to debt instrument. Global depository receipt:- means any instrument in the form of depository receipt or certificates created by overseas depository bank outside India and issued to non-resident investors against the issue of ordinary shares or foreign currency convertible bonds of issuing company.

Issuing Company: An Indian Company permitted to issue FCCB or ordinary shares of that Company against GDR. Overseas depository bank: means a bank authorized by the issuing company to issue global depository receipts against issue of FCCB or ordinary shares of the issuing company. Eligibility Issuer Co. to take prior permission of Dept. of Economic Affairs, Ministry of Finance, Govt. of India. Issuer Co. must not be ineligible to raise funds from Indian market or restrained from accessing securities market. Unlisted Company issuing GDR/FCCB are required to be simultaneously listed in Indian SE. Unlisted Company who have taken verifiable steps before 31.08.05 are exempted from parallel listing. Provided, the Company complete the issue by 31.12.2005.

Effective steps means: Company has completed due diligence and filed offering circular with overseas Exchange. Approval of overseas Exchange obtained. Payment of listing fees is made. RBI approval under FEMA 1999 is taken to meet issue expenses overseas.

Format of issue of GDR

Indian Company

Ordinary share

FCCB

Domestic depository bank

Overseas depository bank

Depository receipt
investor

Limits of Foreign investment

Ordinary shares and FCCB issued against GDR are treated as FDI in issuing Company. Aggregate of foreign investment made directly or indirectly (through GDR) should not exceed 51% of the issued & subscribed capital.

Issue Structure

GDR may be issued for one or more underlying shares or bonds held with domestic custodian bank. FCCB and GDR may be denominated in any freely convertible foreign currency. Ordinary shares underlying with the GDR and shares issued upon conversion of FCCB to be denominated in Indian currency. In case issuing company is listed, minimum price should be higher of following: * average of the weekly high and low of the closing price on SE during preceding six months from relevant date , * average weekly high and low of the closing price on SE during the preceding six month from relevant date.

Relevant date means the date 30 days prior to the date on which general meeting of shareholders took place.

Unlisted Companies
Pricing should be in accordance with Reserve Bank of India regulation notified under FEMA 1999. Rate of interest on FCCB shall be decided in consultation with Lead Manager. Conversion price ,coupon rate of the FCCB shall be as per above formula for listed and unlisted companies. No lock-in period for GDR issue.

Listing GDR issued may be listed on any overseas SE, Over the Counter Exchange or through Book Entry transfer system. Receipts can be purchased, possessed and freely transferable by a Non-resident.