Upload
killer99202
View
220
Download
0
Embed Size (px)
Citation preview
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
1/25
Requirements for a First Time IssuerRequirements for a First Time Issuer
of Securitiesof Securities IPO RequirementsIPO Requirements
October 31, 2008
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
2/25
2
Agenda
Fund Raising Options
Fund Raising History India
Why IPO?
Eligibility Criteria under SEBI DIP and BSE Regulations
Minimum Public Shareholding
Minimum Promoters Contribution and Lock-in
Pricing
Issue Structure Book Building
Corporate Governance Requirements
Disclosures in the Offer Document
Special Dispensation to PSUs
Intermediaries involved and their Roles
Process and Timeline
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
3/25
3
Options forRaising Funds
Fund Raising Options
HybridDebt Equity
In India
outside India
From Banks & FIs
Public issue of
Bonds/Debentures
ECB ADR/GDR
IPO
FPO
Rights Issue
Pref. Issue
Various forms of
Convertibles
FCCB & FCEB
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
4/25
4
Fund Raising History India
Capital Market Issues
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
FY-2004 FY-2005 FY-2006 FY-2007 FY-2008
IPO FPO Righ s Issue QIP
Total Funds
Raised
Rs. 18,812 cr Rs. 24,707 cr Rs. 27,477 cr Rs. 32,950 cr Rs. 104,937 cr
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
5/25
5
Why IPO??
For Funding Needs
Funding Capital Requirements for Organic Growth
Expansion through Greenfield or Brownfield or De-bottle Necking Projects
Diversification
Funding Inorganic Growth through Acquisitions
Funding Global Requirements
Funding Joint Venture and Collaborations needs
Funding Infrastructure Requirements, Marketing Initiatives and Distribution Channels
Financing Working Capital Requirements
Funding General Corporate Purposes
Investing in businesses through other companies
Repaying debt to strengthen the Balance Sheet
Meeting Issue Expenses
For Non-funding Needs
Enhancing Corporate Stature
Retention and incentive for Employees through stock options
Providing Investors exit options
Provide liquidity to the shareholders
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
6/25
6
IPO Requirements
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
7/25
7
Eligibility Criteria forUnlisted Companies - SEBI
Companies with track record Companies without track record
Track record of distributable profits for3 outofthe
immediatelypreceding 5 years
Pre-issue net worthof notless than Rs. 1 Crore in
eachofthe preceding 3 fullyears
Nettangible assets of atleast Rs. 3 Crores foreachof
the preceding 3 fullyears
Notmore than 50% ofthese tobe held in the formof
monetary assets
(Proposed IPO + Previous Issues in the same financial
year) < 5 times the pre-issue net worth
In case the companyhas changed its name within the
lastone year, atleast 50% ofthe revenue forthe
preceding 1 fullyearis earned bythe company fromthe activity suggested bythe new name
Prospective allottees in the IPO should notbe less
than 1000 in number
Primary Criteria
Choice of Route: Fixed Price or
Book Building
Choice of Route: Book
Building
In case ofproject
funding, 15%
participation by Financial
Institutions / Scheduled
CommercialBanks
10% ofthis must come
from appraiser
10% ofissue size to
be allotted to QIBs
50% ofthe netofferto
public being allotted to
QIBs
Minimumpost-issue face
value capitalmustbe Rs.
10 CroresOR
Compulsorymarket
making foratleast 2
years fromthe date of
listing of shares
+ + Minimumpost-issue face
value capitalmustbe Rs.
10 CroresOR
Compulsorymarket
making foratleast 2
years fromthe date of
listing of shares
Choice of Route: Fixed
Price orBook Building
Exemptions
A banking company
including a local area bank
set up underthe Banking
Regulation Act, 1949
A corresponding new bank
set up underthe Banking
Companies Act, 1970
An infrastructure company:
Whose projecthas beenappraised by a public
financialinstitution (PFI)
Notless then 5% ofthe
project costis financed by
anyofthe PFI
Rights issue by a listed
company
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
8/25
8
Eligibility Criteria ForIPO Stock Exchange (BSE)
Large Companies Small Companies
The minimumpost-issue paid-up capitalof
the applicant company(hereinafterreferred
to as "the Company") shallbe Rs. 3 crore;and
The minimum issue size shallbe Rs. 10crore; and
The minimummarket capitalization oftheCompany shallbe Rs. 25 crore (market
capitalization shallbe calculated by
multiplying the post-issue paid-up numberofequity shares withthe issue price).
BSE Eligibility Criteria
The minimumpost-issue paid-up capitalof
the applicant company(hereinafterreferred
to as "the Company") shallbe Rs. 3 crore;and
The minimum issue size shallbe Rs. 3 crore;and
The minimummarket capitalization oftheCompany shallbe Rs. 5 crore (market
capitalization shallbe calculated by
multiplying the post-issue paid-up numberofequity shares withthe issue price).
The minimum income/turnoveroftheCompany shallbe Rs. 3 crore in eachofthepreceding three 12 months period; and
The minimum numberofpublic shareholders
afterthe issue shallbe 1000
A due diligence studymaybe conducted by
an independentteamof CAs orMerchant
Bankers appointed byBSE.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
9/25
9
Minimum Public ShareholdingPromoter includes:
The person orpersons who are
in over-all controlofthe
company;
The person orpersons who are
instrumentalin the formulation
of a plan orprogramme
pursuantto whichthe securities
are offered tothe public;
The persons orpersons named
in the prospectus as
promoters(s).
Promoter Group
Defined underclause 6.8.3.2 ofSEBI DIP
Public
Implies allinvestors otherthan
Promoterand PromoterGroup
In case of PSUs, the
Promoter is Government of
India (represented byPresident of India).
SEBI has granted exemption
on issue structure from Rule
19(2)(b) on case to case
basis
Clause 40A of the Listing Agreement
At least 25% of the post issue paid up capital with the public (ie. other than promoter and promoter group)
Exceptions under Rule 19(2)(b) of SCRR
As per rule 19(2)(b), a minimum of 25% of each class of security must be offered to the public for subscription
However, at least 10% can be offered if the following 3 conditions are fulfilled:
Minimum 2 MM securities (excluding reservations, firm allotment & promoter contribution) to be offered to
the public
Minimum offer size Rs. 100 crores
Issuance through book building with 60% QIB allocation
Continuous fulfillment of minimum shareholding criteria
Continuous public shareholding needs to be maintained as per Clause 40A of the listing agreement since listing
Exemption
The aforesaid requirement of maintaining minimum level of public shareholding on a continuous basis will not
be applicable to government companies (as defined under Section 617 of the Companies Act, 1956),
infrastructure companies (as defined under clause 1.2.1(xv) of the SEBI (DIP) Guidelines, 2000) and companies
referred to the Board for Industrial and Financial Reconstruction.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
10/25
10
Government Cos & Infrastructure Cos
Government
Companies
Section 617 of the Companies Act, 1956
Government company,means any companyin which notless than fiftyone percentofthe
paid-up share capitalis held bythe Central Government,orby anyState Governmentor
Governments,orpartlybyt
he Centra
lGovernment and part
lybyone ormore State
Governments, and includes a company whichis a subsidiaryof a Government company
as thus defined.
InfrastructureCompanies
Clause 1.2.1(xv) of the SEBI (DIP) Guidelines, 2000
Infrastructure Companymeans, a company wholly engaged in the business of
developing,maintaining and operating infrastructure facility.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
11/25
11
Minimum Promoters Contribution and Lock-in
Promoters
Contribution
Minimumof 20% ofthe postissue capitalofthe Company forunlisted companies; forlisted
companies, eitherto extentof 20% in issue orto ensure postissue holding of 20%
Following shares are ineligible forthe computation of Promoters contribution
Issued in lastone yearat a price lowerthan issue price, unless topped up
Issued in lastthree years outofbonus issue orrevaluation reserve forconsideration other
than cas
h
Lock-in period
ForPromoters:
Lock-in fora period of 3 years fromthe date of allotmentorfromthe date of commencement
of commercialproduction, whicheveris later
Balance pre-issue capital,otherthan held by Indian and Foreign Venture Funds (registered
withSEBI) and shares held foratleastone yearand being offered forsale in the issue
Mustbe locked-in for a period of 1 yearfromthe date of allotment
Shares issued
last wi
llbe
locked-in first
Exemption
In case ofpublic issue of securities by a company whichhas been listed on a stock exchange
foratleast 3 years and has a track record of dividend payment foratleast 3 immediately
preceding years.
In case of companies where noidentifiable promoterorpromotergroup exists.
In case ofrights issues.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
12/25
12
Pricing
SEBI allows free pricing of equity shares in an IPO
Approval of RBI might be required for public issues by banks
Differential pricing is permissible in a public issue to retail individual investors and retail
individual shareholders
Retail investors can be offered shares at a discount to the price offered to other investorcategories (Max discount can be 10%)
Price Band: The cap price can be 20% more than the floor price. Price band can be revised by
20% from the floor price.
No payment of commission by the promoter or issuer company to the public
If the issue price is above Rs.500 then the issuer can fix the FV of shares below Rs.10 but a
minimum of Rs.1.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
13/25
13
Issue Structure Book Building
Of the Net Offer to Public
Maximum 50% to QIBs
Atleast 15% to HNIs
Atleast 35% toretail
Dilution = 25% Dilution = 10% to 25%
Of the Net Offer to Public
Atleast 60% to QIBs
Maximum 10% to HNIs
Maximum 30% toretail
Netoffertothe public shallmean the offermade to Indian public and does notinclude
reservations/ firm allotments/ promoters contribution.
Net Offer to Public
Reservations / Firm Allotment shall notbe made to categories otherthan:
Permanent employees ofthe issuercompany and in the case of a new companythe permanentemployees ofthe promoting companies';
Shareholders ofthe promoting companies in the case of a new company and shareholders of
group companies in the case of an existing company eitheron a competitive basisoron a firm
allotmentbasis.
Persons who,on the date of filing ofthe draftofferdocument withthe Board,have business
association, as depositors,bondholders and subscribers to services, withthe issuermaking an
initialpublic offering,
Reservations
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
14/25
14
Corporate Governance Requirements
Composition
of the Board
Optimum numberof executive and non executive directors with atleast 50% being non-executive. If
the chairman,has executive powers then 50% ofBoard comprises of Independent directors. While if
chairman has non-executive powers then 1/3 ofthe Board comprises of Independent directors.
Audit
Committee
Mandatory constitution of Audit Committee withminimumthree directors and headed by an
Independent director.
Allmembers shallbe financiallyliterate (should be able to understand financial statements) and at
leastone membershould have accounting and financialmanagement expertise.
Investor
Committee
Shareholder/InvestorGrievances Committee tobe formed underthe chairmanshipof a non
executive directortolook intothe redressing of shareholderand investorcomplaints like transferof
shares, non-receiptofbalance sheet, non-receiptof declared dividends
Atleastone directoron the Board ofthe holding company shallbe a directoron the Board of a
material non listed Indian subsidiary Company
- Material non-listed subsidiarymeans a subsidiary whose turnoverornet worth exceeds 20% of
the consolidated turnoverornet worthin the preceding accounting year
Audit committee ofthe listed holding company shall alsoreview the financial statements,in
particular,the investments bythe unlisted subsidiary Company
A separate section on Corporate Governance tobe included in the Annual Reports with disclosures
on compliance ofmandatory and non-mandatoryrequirements
Submission of quarterly compliance reporttothe stock exchanges
CEO/CFOto certifythe financial statements and cash flow statements
Subsidiary
Company
Report on
Corp.
Governance
CEO/CFO
Certification
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
15/25
15
Disclosures in the OfferDocument
Capital Structure
Shareholding Pattern (pre-issue and post-issue)
Securities Premium Account(pre-issue and post-issue)
Holding ofthe promoterand promotergroup
Disclosure aboutESOPs if any
Objects of the
Issue
Total
requirements of funds Means of Financing
Undertaking bythe issuercompany confirming firm arrangements of finance through
verifiable means towards 75% ofthe stated means of finance (excluding proposed IPO)
Details aboutthe appraisalofthe project
Interim use of funds
Business Description aboutthe Industryin whichthe Companyoperates
Detailed description aboutthe business ofthe Company
Risks related tothe Company
External Risk Factors
Details aboutthe Board ofDirectors and various committees
Details about keymanagementpersons
Risk Factors
Company
Management
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
16/25
16
Disclosures in the OfferDocument(Contd)
Financial
Disclosures
Auditors Reporttohave five yearrestated financials forthe
IssuerCompany, and
AllSubsidiaries ofthe IssuerCompany or Consolidated Financials ofthe IssuerCompany
Audited financials presented should notbe more than sixmonths old atthe time of filing DRHP
withSEBI and mustbe updated tobe notmore than sixmonths old on the date of filing the
prospectus withthe ROC
All financials should be presented based on Indian GAAP
MD&A
Detailed discussion on performance forthe past 3 years
CapitalExpenditure
Cash Flow and Liquidity
Litigations andDefaults
Allpending litigations in whichthe Company/Promoters / PromoterGroup / Directors / Group
companies are involved.
Both,litigations filed byoragainstthe Company/Promoters / PromoterGroup / Directors /
Group companies
Outstanding litigations, defaults, etc.,pertaining tomatters likelyto affectoperations andfinances ofthe company.
The pending proceedings initiated foreconomic offences againstthe directors,the promoters,
companies and firms promoted bythe promoters indicating theirpresent status.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
17/25
17
Special dispensation to PSU - Precedents
* Obtained relaxation from SEBI and issue structure is 50% to QIB, 15% to HNI and 35% Retail# Based on DRHP filed with SEBI
REC PFC Power Grid OIL India#
Promo
er
Government of India, represented
by the President of India disclosed
as promoterwith noadditional
details
Yes Yes Yes Yes
Promotergroup
companies
Nopromotergroupcompanies
disclosed However,the
disclosuresw r.tSubsidiariesneed
tobemade
No No No No
Corporate
governanceClause49ofthelistingagreement Yes Yes Yes Yes
IssuestructureCompliancewith rule19(2)(b)of
SCRRYes No* No* Yes
DisclosuresRemarksParticulars
OnlyrestatedAudited
FinancialStatementsneedstobedisclosedin
theDRHP.However,SEBI
hasgrantedexemptionon
casetocasebasistoPSUBankswhereby,evenlimitedreviewfigures
weredisclosedinDRHP,
soastocomplywith thecriteriaoffinancialstatementsbeingnot
morethansixmonthsold.
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
18/25
18
Special dispensation to PSU
Has 2689 branches + subsidiaries in India (BOB Caps,BOB
Cards,BOB AMC) + foreign subsidiaries
Limited Review forJune 2005 numbers allowed. Limited Review
done foronly select(around 20 branches)by auditors and rest
were relied on by auditors. Limited review of foreign subsidiary for
June 2005 allowed.
Bank of
Baroda
NTPC
Promoteris presidentof India
Relaxation in disclosure ofpromoterand promotergroupin
offerdocument
SEBI guidelines do not
allow limited review or
unaudited numbers in
prospectus
Limited review allowed
Disclosure ofpromoter
and promotergroup
Need to comply with
Corporate governance
norms
Promoters contribution
and lock-in
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
19/25
19
Intermediaries Involved
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
20/25
20
Intermediaries and theirRoles
Lead Managers
Overall Co-ordination
Conduct due diligence and finalize disclosure in OfferDocument
Assistthe legal counselin drafting ofOfferDocument
Interface / ensure compliance protocol withSEBI / NSE / BSE
Domestic &International Legal
Counsels
LegalDue Diligence
Drafting the offerdocument
Guidance on anyotherincidentallegalmatters
Assistance in complying withrequirement forselling in internationalgeographies
Bankers Acting as collecting agents
Escrow Account & Refund account
Co-ordination withthe Issuerand Bankers regarding collections,reconciliation,refunds etc
Securing allocation approval fromStock Exchanges
Postissue co-ordination collation and reconciliation ofinformation
Reviewing and auditing financials and preparing financial statements forinclusion in the OfferDocument
Verify/audit various financial and otherdata used in the Offerdocument and provide Comfort Letter
Bulk printing ofthe Red Herring Prospectus Bid Forms, final Prospectus, CAN, Refund orders etc.
Ensure timely dispatch and distribution of stationeryto all centers
Registrars
Auditors
Printers
Preparing and getting published all statutory notices
Creating all advertisementmaterialsAdvertisers
Self Certified Syndicate
Bank (SCSB)
Acting as collecting agents forASBA (Application Supported byBlock Amount)process
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
21/25
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
22/25
22
IPO Process Fixed Price Issue
Due diligence
Appointment of
BRLM and legal
counsel
Drafting of Draft
Prospectus
Filing with SEBI &
Stock Exchanges
SEBI Clearance
& ROC Filing of
the Prospectus
Pre-Marketing
Decision to go for
IPO
Roadshows
Issuer
Issue Open
Allotment
Issue Closure
Listing
Funds transferred
to issuer
Preparation / Approvals Filing the Prospectus and Marketing Launch & Completion
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
23/25
23
IPO Process Book Built Issue
Due diligence
Appointment of
BRLM and legal
counsel
Drafting of Draft
Red Herring
Filing with SEBI &
Stock Exchanges
SEBI Clearance
& ROC FilingPre-Marketing
Decision to go for
IPO
Roadshows
Issuer
Book building
RoC filing of final
Prospectus
Pricing & Allocation
Listing
Funds transferred
to issuer
Preparation / Approvals Marketing and Estimation of Price Range Launch & Completion
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
24/25
24
Execution Process Timeline
Activity
PreparatioPhase
DueDilience
Filingof
Draft
Document
week
Sebi Observation
Finalization & filingofofferDocument
IssuePerio
Min. 3
Days
PostIssue Activities 2 - 3 weeks
IPO Process - 23 weeks
2 weeks
4 - 5 weeks
4 - 8 weeks
2 - 3 weeks
8/8/2019 Bse Ceo Conclave 2 Dipti an Jm Financial
25/25
25
Thank You