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ussharda@yahoo.co.in
IPO- ELIGIBILITY
Issue of Equity share or other securities to be
A.Companies having track record must fulfill following conditions: Net tangible assets of at least Rs.3.00 Crore in each of preceding 3 full year (Full 12 months each) of which not more than 50% is held in monetary assets; if excess, than the company must have firm commitment to deploy such excess monetary assets in business or project.- Clause 2.2.1(a) Company must have track record of distributable profits for at least 3 years out of immediately preceding 5 years. - Clause 2.2.1(b) Company must have net worth of Rs.1 Crore in preceding 3 years (full 12 months each). ussharda@yahoo.co.in Clause 2.2.1(c)
IPO- ELIGIBILITY
If name of the Company has been changed in last 1 year, 50% income of the Company must be earned from the activity suggested by new name. Clause 2.2.1(d) Aggregate of proposed issue & all previous issues made during that financial year does not exceed to 5 times to its pre issue net worth as per the last audited balance sheet. Clause 2.2.1(e)
B. Companies not fulfilling conditions specified in Clause 2.2.1, have to fulfill following conditions: (i) Issue through book building process with at least 50% of net offer to public to be issued to QIB. Or Project has been appraised & at least 15% participation by FI/Sched. Commercial banks, of which at least 10% from appraiser & at least 10% of issue size from QIBs. Minimum post issue face value of capital Rs.10.00 Crore. Or Compulsory market making for at least 2 years from the date of listing subject to following:
(ii)
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PRICING
Companies are free to price its share or security to be converted into shares at a later date are: Listed companies for its Public/right issue Unlisted companies Infrastructure Companies IPO by Banks (Subject to approval of RBI).
DIFFERENTIAL PRICING: Unlisted Company : Firm allotment may be made on higher price than the price officer to Public. If equity shares or securities convertible into shares are issued to retail individual investor/retail individual share holder, the same can be issued at lower price than to other categories. The difference shall not exceed 10%. Listed Company: Differential price may be charged in composite issue of public and right offer. Justification of differential price in the offer document.
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PRICING
PRICE BAND: For Fixed price issues, there may be price band of 20% at the time of filing offer documents with SEBI. Price shall be freezed in the final offer documents and before filing it to ROC. DENOMINATION OF SHARE:
If issue price is more than Rs.500/- any face value denomination not less Re. 1/- and not in decimal. If Issue price is less than Rs.500/-, face value shall be Rs.10/ Only one denomination at a given time. FACTORS DETERMINING PRICE: Financials of the Company Net worth, EPS, profit margin. Industry P/E Ratio. Standing of the Company in the relevant industry Future prospect of the Industry as well as the Company Background of the promoters.
PROMOTERS CONTRIBUTION
In case of : Unlisted Companies: 20% of post issue capital For Offer for Sale : 20% of post issue capital Listed Companies: 20% of proposed issue or 20% of post issue capital Composite issue: 20% of proposed issue or 20% of post issue capital (Right issue component shall be excluded from Post Issue Capital) . SECURITIES ELIGIBLE FOR PROMOTORS CONTRIBUTION: Except following, all securities are eligible to form part of promoters contribution, if brought in by promoters: Issue of any share with in preceding 3 years out of revaluation of assets or capitalization of intangible assets. Resulting from Bonus issue out of revaluation reserves or reserves without cash generation or against the shares which are not eligible to form part of promoters contribution. ussharda@yahoo.co.in
Any securities acquired by promoters within one year at a price lower than the offer price. (whether issued to acquired by promoters otherwise) (If difference of the same has been brought out before opening of issue, than eligible). Funds brought in with in one year, in case of companies converted from partnership firm and shares allotted at lower price than offer price. (If partners capital existed on continuous basis since more than one year, than eligible) Application less than Rs.25000/- in case of individual and Rs.100000/- in case of firm or body corporate. Any private placement made by solicitation of subscription from unrelated person directly or through intermediary. Contributors who have not given their specific consent For promoters contribution and lock in period. Pledged securities held by promoters.
LOCK IN PERIOD
In case of IPO, the locking period is as under: Promoters contribution equal to 20% - start from date of allotment & end after 3 years from the date of allotment or date of commencement of commercial production, whichever is later. Promoters contribution in excess of 20% - 1 year Pre issue share capital: In excess of promoters contribution equal to 20%, for 1 year. Basis of Lock in Last allotted share locked in first Omitted since 29.11.07. Lock in of firm allotment security: For one year Inter se transfer amongst promoter permissible. ussharda@yahoo.co.in
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Coordination with intermediaries a. Underwriters b. Bankers to the issue Basis of allotment Post issue advertisement : giving detail about oversubscription, basis of allotment etc. within 10 days from the date of
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BOOK BUILDING
It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. The Process: The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. The Issuer specifies the number of securities to be issued and the price band for orders. The Issuer also appoints syndicate members with whom orders can be placed by the investors. Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. A Book should remain open for a minimum of 3 days and maximum for 10 days. Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes.
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On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include Price Aggression Investor quality Earliness of bids, etc. The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. Allocation of securities is made to the successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.
BOOK BUILDING
Guidelines for Book Building Rules governing book building is covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000. Book building is a process by which demand of securities which are being offered, is elicited and price is determined.
BSE's Book Building System BSE offers the book building services through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks anywhere spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS The software is operated through book-runners of the issue and by the syndicate member brokers. Through this book, the syndicate member brokers on behalf of themselves or their clients' place orders. Bids are placed electronically through syndicate members and the information is collected on line real-time until the bid date ends. In order to maintain transparency, the software gives visual graphs displaying price v/s quantity on the terminals.
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BOOK BUILDING
Initial Public Offerings Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner: 100% of the net offer to the public through the book building route. 75% of the net offer to the public through the book building process and 25% through the fixed price portion.
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CONTENTS OF PROSPECTUS
Definitions & Abbreviations Risk Factors & Proposals to address the risks thereof Highlights PART I I. General information II. Capital structure of the company III. Terms of the present issue IV. Particulars of the issue V. Description of industry and business VI. Company, management and project VII. Management discussion and analysis of the financial condition and results of the operations as reflected in the financial statements. VIII. Financial of group companies IX. Basis for issue price X. Outstanding litigations or defaults XI. Risk factors and Proposals to address the risks on the same, if any
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CONTENTS OF PROSPECTUS
PART II I. General information II. Financial information III. Statutory and other information PART III Declaration
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QIB
Qualified Institutional Buyers (QIBs) those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. a Qualified Institutional Buyer shall mean: a) Public financial institution as defined in section 4A of the Companies Act, 1956; b) Scheduled commercial banks; c) Mutual Funds; d) Foreign institutional investor registered with SEBI; e) Multilateral and bilateral development financial institutions; f) Venture Capital funds registered with SEBI. g) Foreign Venture Capital investors registered with SEBI. h) State Industrial Development Corporations. i) Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA). j) Provident Funds with minimum corpus of Rs.25 crores k) Pension Funds with minimum corpus of Rs. 25 crores "These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process."
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