Description
explains IPO, FPO, types of issues, private placement and alternative routes of investment in equity
Equity Markets Reforms
Primary Markets
Resourse Mobilisation by Government and Corporate Sector Issuer
Corporate Securities Domestic Issues Public Issues Non Govt. Public Companies PSU Bonds
Rs Mn 2006-07
1942560 1772510 313850 306030
2007-08
3228310 2962750 837070 636380
Govt. Companies
Banks and FIs Private Placement Euro Issues 7820 1458660 170050
25160
175530 2125680 265560
Government Securities
Central Government State Governments Total
2001980
1793730 208250 3944540
2559840
1682050 677790 5788150
Resourse Mobilisation from Public Equity Issues
Issuer
2006-07 (Rs. Mn.) Number Amount 285,040
2007-08 (Rs. Mn.) Number 85 Amount 425,950
IPOs
77
Issued by Listed Companies
Public Issues Rights Issues Total
47
8 39 124
50,040
12,930 37,110 335,080
39
7 32 124
444,340
119,160 325,180 870,290
Regulatory Framework
?
Abolition of Capital Issues (Control) Act, 1947 in May 1992 ? SEBI ACT 1992
?
?
?
Protecting the Interest of investors Promoting the Development of Securities Markets Regulating the Securities Markets
?
Securities Contracts (Regulation Act) 1956
? ?
Recognition and supervision of Stock Exchanges Listing of Securities
Regulatory Framework
?
Depositories Act 1996
?
?
Dematerializing the securities in the depository mode Maintenance of ownership records in book entry form
Issue, allotment and Transfer of Securities Management of Companies Disclosure standards Payment of dividend, issue of bonus shares, supply of annual reports etc.
?
Companies Act 1956
? ? ? ?
Reforms
?
Free Pricing
Abolition of formula based pricing ? Justification of Issue price ? `Book Building’ process
?
Reforms
?
DIP Guidelines
Disclosure requirements to enable the investors to take an informed decision ? Vetting by the Lead Manager – Due Diligence Certificate ? Eligibility Norms ? Promoter Contribution ? Lock In Requirements ? Basis of Allotment
?
Types of Issues
?
Initial public offer (IPO)
Issue by an unlisted company either as a fresh issue of securities or offer of its existing securities for sale or both for the first time to the public ? For listing and trading of securities in the Stock Exchanges.
?
?
Further public offer (FPO)
?
Issue by an already listed company to the public or an offer for sale to the public
Types of Issues
?
Rights issue
?
?
An issue of securities to existing shareholders. The rights are offered in a particular ratio to the number of securities held as on the record date.
An issue of securities to its existing shareholders as on a record date, without any consideration By capitalization of reserves in a particular ratio to the number of securities held
?
Bonus issue
?
?
Private Placement
?
An issue of securities to a select group of persons not exceeding 49 ? Preferential allotment
?
?
A listed issuer issues shares or convertible securities, to a select group of persons Requirement to comply with various provisions pricing, disclosures in the notice, lock-in etc. Issues of equity shares or securities convertible into equity shares to Qualified Institutions Buyers only
?
Qualified institutions placement (QIP)
?
Eligibility Norms – Unlisted
? ? ? ?
?
Net Tangible Assets of at least Rs. 3 crores in each of the preceding three full years. Distributable profits in at-least three of the immediately preceding five years. Net worth of at least Rs. 1 crore in each of the preceding three full years. If the company has changed its name within the last one year, at-least 50% revenue for the preceding 1 year should be from the activity suggested by the new name. The issue size does not exceed 5 times the pre-issue net worth as per the audited balance sheet of the last financial year
Eligibility Norms – Listed
If the company has changed its name within the last one year, at-least 50% revenue for the preceding 1 year should be from the activity suggested by the new name. ? The issue size does not exceed 5 times the pre issue net worth as per the audited balance sheet of the last financial year
?
Alternate Routes
?
“QIB Route”
?
?
Through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). Minimum post issue face value capital to be Rs. 10 crores or there shall be a compulsory market making for at least 2 years
The “project” is appraised and participated to the extent of 15% by Financial Institutions / Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). Minimum post issue face value capital shall be Rs. 10 crores or there shall be a compulsory market making for at least 2 years.
?
“Appraisal Route”
?
?
Promoters’ Contribution
?
Public issue by an unlisted company
Not less than 20% of the post issue capital ? Locked in for a period of 3 years. ? Remaining pre issue capital should also be locked in for a period of 1 year from the date of listing.
?
?
Public issue by a listed issuer
?
Not less than 20% of the post issue capital or 20% of the issue size.
Pricing
?
The issuer in consultation with the merchant banker decides the price ? Justification of Issue Price in the offer document
?
?
Quantitative Justification Qualitative Justification The issue price is decided in advance and mentioned in the Offer Document The price is discovered on the basis of demand received from the prospective investors at various price levels
?
Fixed Price Issue
?
?
Book built Issue
?
Intermediaries
?
Merchant Banker
?
Pre-Issue Obligations
Due diligence ? Prepare the offer document ? Ensure compliance with the legal formalities in the entire issue process ? Pricing of the Issue ? Size of the Issue ? Marketing of the issue ? Appointment of other Intermediaries
?
Intermediaries
?
Merchant Bankers
?
Post Issue Obligations
? ? ?
Basis of Allotment Refund, Issue etc. Listing of Securities
?
Registrars to the Issue
? ?
?
?
Receiving applications Data capture Finalizing the basis of allotment in an issue Sending refunds, allotment etc.
Intermediaries
?
?
Bankers to the Issue
?
Collection of funds in the issue process Undertake to subscribe to the securities offered by the company in case these are not fully subscribed by the public
Underwriters
?
Offer Document
?
Draft offer document
? ?
Offer document filed with SEBI before it is filed with the Registrar of companies (ROCs). Made available in public domain including SEBI website, for enabling public to give comments Offer document used in case of a book built public issue. It contains all the relevant details except that of price or number of shares being offered. To be filed with RoC before the issue opens. Offer document in case of a public issue, which has all relevant details including price and number of shares being offered. Registered with RoC before the issue opens in case of a fixed price issue and after the closure of the issue in case of a book built issue.
?
Red herring prospectus
? ? ?
?
Prospectus
?
?
Offer Document
? ?
Letter of offer
?
Offer document in case of a Rights issue Abridged version of offer document in public issue Issued along with the application form of a public issue. Abridged version of the letter of offer. Sent to all the shareholders along with the application form. Prospectus which enables an issuer to make a series of issues within a period of 1 year without the need of filing a fresh prospectus every time. Available to public sector banks /Public Financial Institutions. Offer document for the purpose of Qualified Institutional Placement and contains all the relevant and material disclosures.
Abridged prospectus
? ?
?
Abridged letter of offer
? ?
?
Shelf prospectus
?
?
?
Placement document
?
Offer Document
?
Cover Page
?
?
?
?
Full contact details of the Issuer Company, lead managers and registrars, The nature, number, price and amount of instruments offered and issue size, Listing information Credit Rating, IPO Grading,
Internal and external risks envisaged by the company The investors should go through all the risk factors of the company before making an investment decision.
?
Risk Factors
? ?
Offer Document
?
Introduction
? ? ? ? ? ?
?
? ? ?
?
Summary of the industry in which the issuer company operates, Business of the Issuer Company, Offer details in brief, Merchant bankers and their responsibilities, Brokers/syndicate members to the Issue, Credit rating (in case of debt issue), Debenture trustees (in case of debt issue), IPO Grading Underwriting Agreements Details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, Basic terms of issue, basis for issue price, tax benefits
Offer Document
?
About the Company
? ?
Details of business of the company, business strategy, competitive strengths, History and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation and dividend policy
Condensed financial statement Differences between any other accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per either US GAAP/IFRS)
?
Financial Statements
? ?
Offer Document
?
Legal and other information ? Outstanding litigations and material developments, litigations involving the company, the promoters of the company, its subsidiaries, and group companies ? Government approvals/licensing arrangements, investment approvals (FIPB/RBI etc.), technical approvals ? Other regulatory and statutory disclosures ? Authority for the Issue, ? Listing, minimum subscription, letters of allotment or refund orders, consents, ? Expert opinion, changes in the auditors in the last 3 years, ? Expenses of the issue, ? Fees payable to the intermediaries involved in the issue process, ? Details of all the previous issues ? Stock market data for equity shares of the company, ? Promise vis à vis performance in the past issues ? mechanism for redressal of investor grievances
Offer Document
?
Offer information
? ? ? ? ? ? ? ? ? ?
?
? ?
Terms of the Issue, Mode of payment Face value and issue price, Rights of the equity shareholder, Market lot, Nomination facility to investor, Issue procedure, Book building procedure Instructions for completing the bid form, Submission of bid form, Basis of allotment or allocation, Method of proportionate allotment, Dispatch of refund orders
IPO Grading
?
IPO grading grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares ? A relative assessment of the fundamentals of that issue ? Five point scale
? ? ?
?
?
IPO grade 1 - Poor fundamentals IPO grade 2 – Below Average fundamentals IPO grade 3 - Average fundamentals IPO grade 4 - Above average fundamentals IPO grade 5 - Strong fundamentals
Other Aspects
? ? ?
Compulsory DEMAT account Compulsory PAN Fixed price issue should remain open between 3-10 days ? Book building issue to remain open for 3-7 days ? Refund/ allotment
? ?
Fixed Price Issue – 30 days Book Built Issue – 15 days Fixed Price Issue – 37 days after closure Book Built Issue – 3 weeks after closure
?
Listing
? ?
doc_107158110.pptx
explains IPO, FPO, types of issues, private placement and alternative routes of investment in equity
Equity Markets Reforms
Primary Markets
Resourse Mobilisation by Government and Corporate Sector Issuer
Corporate Securities Domestic Issues Public Issues Non Govt. Public Companies PSU Bonds
Rs Mn 2006-07
1942560 1772510 313850 306030
2007-08
3228310 2962750 837070 636380
Govt. Companies
Banks and FIs Private Placement Euro Issues 7820 1458660 170050
25160
175530 2125680 265560
Government Securities
Central Government State Governments Total
2001980
1793730 208250 3944540
2559840
1682050 677790 5788150
Resourse Mobilisation from Public Equity Issues
Issuer
2006-07 (Rs. Mn.) Number Amount 285,040
2007-08 (Rs. Mn.) Number 85 Amount 425,950
IPOs
77
Issued by Listed Companies
Public Issues Rights Issues Total
47
8 39 124
50,040
12,930 37,110 335,080
39
7 32 124
444,340
119,160 325,180 870,290
Regulatory Framework
?
Abolition of Capital Issues (Control) Act, 1947 in May 1992 ? SEBI ACT 1992
?
?
?
Protecting the Interest of investors Promoting the Development of Securities Markets Regulating the Securities Markets
?
Securities Contracts (Regulation Act) 1956
? ?
Recognition and supervision of Stock Exchanges Listing of Securities
Regulatory Framework
?
Depositories Act 1996
?
?
Dematerializing the securities in the depository mode Maintenance of ownership records in book entry form
Issue, allotment and Transfer of Securities Management of Companies Disclosure standards Payment of dividend, issue of bonus shares, supply of annual reports etc.
?
Companies Act 1956
? ? ? ?
Reforms
?
Free Pricing
Abolition of formula based pricing ? Justification of Issue price ? `Book Building’ process
?
Reforms
?
DIP Guidelines
Disclosure requirements to enable the investors to take an informed decision ? Vetting by the Lead Manager – Due Diligence Certificate ? Eligibility Norms ? Promoter Contribution ? Lock In Requirements ? Basis of Allotment
?
Types of Issues
?
Initial public offer (IPO)
Issue by an unlisted company either as a fresh issue of securities or offer of its existing securities for sale or both for the first time to the public ? For listing and trading of securities in the Stock Exchanges.
?
?
Further public offer (FPO)
?
Issue by an already listed company to the public or an offer for sale to the public
Types of Issues
?
Rights issue
?
?
An issue of securities to existing shareholders. The rights are offered in a particular ratio to the number of securities held as on the record date.
An issue of securities to its existing shareholders as on a record date, without any consideration By capitalization of reserves in a particular ratio to the number of securities held
?
Bonus issue
?
?
Private Placement
?
An issue of securities to a select group of persons not exceeding 49 ? Preferential allotment
?
?
A listed issuer issues shares or convertible securities, to a select group of persons Requirement to comply with various provisions pricing, disclosures in the notice, lock-in etc. Issues of equity shares or securities convertible into equity shares to Qualified Institutions Buyers only
?
Qualified institutions placement (QIP)
?
Eligibility Norms – Unlisted
? ? ? ?
?
Net Tangible Assets of at least Rs. 3 crores in each of the preceding three full years. Distributable profits in at-least three of the immediately preceding five years. Net worth of at least Rs. 1 crore in each of the preceding three full years. If the company has changed its name within the last one year, at-least 50% revenue for the preceding 1 year should be from the activity suggested by the new name. The issue size does not exceed 5 times the pre-issue net worth as per the audited balance sheet of the last financial year
Eligibility Norms – Listed
If the company has changed its name within the last one year, at-least 50% revenue for the preceding 1 year should be from the activity suggested by the new name. ? The issue size does not exceed 5 times the pre issue net worth as per the audited balance sheet of the last financial year
?
Alternate Routes
?
“QIB Route”
?
?
Through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). Minimum post issue face value capital to be Rs. 10 crores or there shall be a compulsory market making for at least 2 years
The “project” is appraised and participated to the extent of 15% by Financial Institutions / Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). Minimum post issue face value capital shall be Rs. 10 crores or there shall be a compulsory market making for at least 2 years.
?
“Appraisal Route”
?
?
Promoters’ Contribution
?
Public issue by an unlisted company
Not less than 20% of the post issue capital ? Locked in for a period of 3 years. ? Remaining pre issue capital should also be locked in for a period of 1 year from the date of listing.
?
?
Public issue by a listed issuer
?
Not less than 20% of the post issue capital or 20% of the issue size.
Pricing
?
The issuer in consultation with the merchant banker decides the price ? Justification of Issue Price in the offer document
?
?
Quantitative Justification Qualitative Justification The issue price is decided in advance and mentioned in the Offer Document The price is discovered on the basis of demand received from the prospective investors at various price levels
?
Fixed Price Issue
?
?
Book built Issue
?
Intermediaries
?
Merchant Banker
?
Pre-Issue Obligations
Due diligence ? Prepare the offer document ? Ensure compliance with the legal formalities in the entire issue process ? Pricing of the Issue ? Size of the Issue ? Marketing of the issue ? Appointment of other Intermediaries
?
Intermediaries
?
Merchant Bankers
?
Post Issue Obligations
? ? ?
Basis of Allotment Refund, Issue etc. Listing of Securities
?
Registrars to the Issue
? ?
?
?
Receiving applications Data capture Finalizing the basis of allotment in an issue Sending refunds, allotment etc.
Intermediaries
?
?
Bankers to the Issue
?
Collection of funds in the issue process Undertake to subscribe to the securities offered by the company in case these are not fully subscribed by the public
Underwriters
?
Offer Document
?
Draft offer document
? ?
Offer document filed with SEBI before it is filed with the Registrar of companies (ROCs). Made available in public domain including SEBI website, for enabling public to give comments Offer document used in case of a book built public issue. It contains all the relevant details except that of price or number of shares being offered. To be filed with RoC before the issue opens. Offer document in case of a public issue, which has all relevant details including price and number of shares being offered. Registered with RoC before the issue opens in case of a fixed price issue and after the closure of the issue in case of a book built issue.
?
Red herring prospectus
? ? ?
?
Prospectus
?
?
Offer Document
? ?
Letter of offer
?
Offer document in case of a Rights issue Abridged version of offer document in public issue Issued along with the application form of a public issue. Abridged version of the letter of offer. Sent to all the shareholders along with the application form. Prospectus which enables an issuer to make a series of issues within a period of 1 year without the need of filing a fresh prospectus every time. Available to public sector banks /Public Financial Institutions. Offer document for the purpose of Qualified Institutional Placement and contains all the relevant and material disclosures.
Abridged prospectus
? ?
?
Abridged letter of offer
? ?
?
Shelf prospectus
?
?
?
Placement document
?
Offer Document
?
Cover Page
?
?
?
?
Full contact details of the Issuer Company, lead managers and registrars, The nature, number, price and amount of instruments offered and issue size, Listing information Credit Rating, IPO Grading,
Internal and external risks envisaged by the company The investors should go through all the risk factors of the company before making an investment decision.
?
Risk Factors
? ?
Offer Document
?
Introduction
? ? ? ? ? ?
?
? ? ?
?
Summary of the industry in which the issuer company operates, Business of the Issuer Company, Offer details in brief, Merchant bankers and their responsibilities, Brokers/syndicate members to the Issue, Credit rating (in case of debt issue), Debenture trustees (in case of debt issue), IPO Grading Underwriting Agreements Details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, Basic terms of issue, basis for issue price, tax benefits
Offer Document
?
About the Company
? ?
Details of business of the company, business strategy, competitive strengths, History and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation and dividend policy
Condensed financial statement Differences between any other accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per either US GAAP/IFRS)
?
Financial Statements
? ?
Offer Document
?
Legal and other information ? Outstanding litigations and material developments, litigations involving the company, the promoters of the company, its subsidiaries, and group companies ? Government approvals/licensing arrangements, investment approvals (FIPB/RBI etc.), technical approvals ? Other regulatory and statutory disclosures ? Authority for the Issue, ? Listing, minimum subscription, letters of allotment or refund orders, consents, ? Expert opinion, changes in the auditors in the last 3 years, ? Expenses of the issue, ? Fees payable to the intermediaries involved in the issue process, ? Details of all the previous issues ? Stock market data for equity shares of the company, ? Promise vis à vis performance in the past issues ? mechanism for redressal of investor grievances
Offer Document
?
Offer information
? ? ? ? ? ? ? ? ? ?
?
? ?
Terms of the Issue, Mode of payment Face value and issue price, Rights of the equity shareholder, Market lot, Nomination facility to investor, Issue procedure, Book building procedure Instructions for completing the bid form, Submission of bid form, Basis of allotment or allocation, Method of proportionate allotment, Dispatch of refund orders
IPO Grading
?
IPO grading grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares ? A relative assessment of the fundamentals of that issue ? Five point scale
? ? ?
?
?
IPO grade 1 - Poor fundamentals IPO grade 2 – Below Average fundamentals IPO grade 3 - Average fundamentals IPO grade 4 - Above average fundamentals IPO grade 5 - Strong fundamentals
Other Aspects
? ? ?
Compulsory DEMAT account Compulsory PAN Fixed price issue should remain open between 3-10 days ? Book building issue to remain open for 3-7 days ? Refund/ allotment
? ?
Fixed Price Issue – 30 days Book Built Issue – 15 days Fixed Price Issue – 37 days after closure Book Built Issue – 3 weeks after closure
?
Listing
? ?
doc_107158110.pptx