Description
Due Diligence on Capital Issues
Due Diligence on Capital Issues
What is Due Diligence?
? Dictionary Meaning of ‘Due’ is ‘Sufficient’ & ‘Diligence’ is ‘persistent effort or work’ ? Due Diligence review (DDR) is a process whereby an individual, or an organization, seeks sufficient information about a business entity to reach an informed judgment as to its value for a specific purpose ? Can also be defined as the fact-finding process that knowledgeable investors perform before making an investment
Objectives
? To assess the commercial & technical feasibility & resource requirement of the business ? To ensure the compliance of necessary statutes and ascertain the liability in the event of non compliance ? Assess the quality of management ? Provide value added information about the business ? Satisfaction as to the offering, veracity & adequacy of disclosure in offer documents
Due Diligence Certificate in Issues
? Due Diligence Certificate to be given by Lead Merchant Banker(s) along with Draft Offer Document ? Due Diligence Certificate to be given by the Debenture Trustee before Opening of the Issue ? Due Diligence Certificate at the time of filing the Offer Document with ROC ? Due Diligence Certificate at the time of Opening of the Issue ? Due Diligence Certificate after the Issue has opened but before it closes for Subscription
Time of Filing of DDC
? As specified in Schedule III, DDC shall be filed along with the draft prospectus to the Board. ? In case of a debenture issue, DDC given by the debenture trustee as specified in Schedule IIIA along with the draft offer document. ? Shall furnish a fresh DDC at the time of filing the prospectus with the ROC as per the format specified at Schedule IV.
Time of Filing of DDC (cont)
? Furnish a fresh certificate to SEBI immediately before the opening of the issue that no corrective action on its part is needed as per the format specified at Schedule V. ? Furnish a fresh certificate to SEBI after the issue has opened but before it closes for subscription as per the format specified at Schedule VI.
Approval by Stock exchanges
? DDC shall be filed with the Stock exchange on which same class of shares or securities are listed. ? Should state that the issue is being made pursuant to the SEBI guidelines and complies with its requirements. ? It should seek in-principle approval for listing of the specified securities.
Other Formalities
? The Lead Managers who conduct due diligence exercise with respect to contents of the offer document shall sign due diligence certificate ? In case the issuer company appoints more than one merchant banker: i. the names of all such merchant bankers who have submitted the DDC to SEBI, to be mentioned on the front cover page of the prospectus. ii. A disclosure to the effect that the investors may contact any such merchant banker for any complaint pertaining to the issue shall be made in the prospectus
doc_632888319.pptx
Due Diligence on Capital Issues
Due Diligence on Capital Issues
What is Due Diligence?
? Dictionary Meaning of ‘Due’ is ‘Sufficient’ & ‘Diligence’ is ‘persistent effort or work’ ? Due Diligence review (DDR) is a process whereby an individual, or an organization, seeks sufficient information about a business entity to reach an informed judgment as to its value for a specific purpose ? Can also be defined as the fact-finding process that knowledgeable investors perform before making an investment
Objectives
? To assess the commercial & technical feasibility & resource requirement of the business ? To ensure the compliance of necessary statutes and ascertain the liability in the event of non compliance ? Assess the quality of management ? Provide value added information about the business ? Satisfaction as to the offering, veracity & adequacy of disclosure in offer documents
Due Diligence Certificate in Issues
? Due Diligence Certificate to be given by Lead Merchant Banker(s) along with Draft Offer Document ? Due Diligence Certificate to be given by the Debenture Trustee before Opening of the Issue ? Due Diligence Certificate at the time of filing the Offer Document with ROC ? Due Diligence Certificate at the time of Opening of the Issue ? Due Diligence Certificate after the Issue has opened but before it closes for Subscription
Time of Filing of DDC
? As specified in Schedule III, DDC shall be filed along with the draft prospectus to the Board. ? In case of a debenture issue, DDC given by the debenture trustee as specified in Schedule IIIA along with the draft offer document. ? Shall furnish a fresh DDC at the time of filing the prospectus with the ROC as per the format specified at Schedule IV.
Time of Filing of DDC (cont)
? Furnish a fresh certificate to SEBI immediately before the opening of the issue that no corrective action on its part is needed as per the format specified at Schedule V. ? Furnish a fresh certificate to SEBI after the issue has opened but before it closes for subscription as per the format specified at Schedule VI.
Approval by Stock exchanges
? DDC shall be filed with the Stock exchange on which same class of shares or securities are listed. ? Should state that the issue is being made pursuant to the SEBI guidelines and complies with its requirements. ? It should seek in-principle approval for listing of the specified securities.
Other Formalities
? The Lead Managers who conduct due diligence exercise with respect to contents of the offer document shall sign due diligence certificate ? In case the issuer company appoints more than one merchant banker: i. the names of all such merchant bankers who have submitted the DDC to SEBI, to be mentioned on the front cover page of the prospectus. ii. A disclosure to the effect that the investors may contact any such merchant banker for any complaint pertaining to the issue shall be made in the prospectus
doc_632888319.pptx