Know all about SME IPO Procedure and Understanding By CS Rajesh Lachhwani


Dear Professional Colleagues,

The Topic is SME IPO Understanding.

  1. The Issuer can get the shares listed on BSE PLATFORM OR NSE EMERGE PLATFORM
  2. The criteria for listing the same is disclosed below:

PARTICULARS

NSE EMERGE

BSE SME

POINT OF DIFFERENCE

Incorporation

The Issuer should be a company incorporated under the Companies Act 1956 /

2013 in India.

The Company shall be incorporated under the Companies Act, 1956.

Though BSE doesn’t mention the companies covered under Act 2013, it includes the same

Post Issue paid up Capital

The post issue paid up capital of the company (face value) shall not be more than Rs. 25 crores. The post-issue paid capital of the company shall be at least Rs. 3 crores.

The post issue paid up capital of the company (face value) shall not be more than Rs.25 crore.

In BSE the post issue paid up shall be at least 3 crores.

This is liberalized in NSE where there is no such requirement.

However, under the preview of SME exchange

the post issue paid up can’t exceed 25 Crore

Networth

The company/entity should have positive cash accruals (earnings before depreciation and tax) from operations for at least 2 financial years preceding the application and its net-worth should be positive.

Positive NetworthNet worth (excluding revaluation reserves) of at least Rs.3 crore as per the latest audited financial results.  

 

In NSE it is said that EBIT and Networth should be positive

In BSE it is said that the

Net worth should be positive. positive excluding
revaluation reserves) of at least Rs.3 crore and
If the company does not have track record for the point mentioned below the networth of the company must be Rs 5 crore including
revaluation reserve

 

Net Tangible Assets

No such criteria

No such criteria At least Rs. 3 crores as per the latest audited financial results.

Omitted in BSE w.e.f 12/07/2018-

Track Record

Track record of atleast three years of either

i.     the applicant seeking listing; or

ii.      the promoters****/promoting the company, incorporated in or outside India or iii. Proprietary / Partnership firm and subsequently converted into a Company (not in existence as a

Company for three years) and approaches the Exchange for listing.

****Promoters mean one or more persons with minimum 3 years of experience in the same line of business and

shall be holding at least 20%

Track Record

The company /firm (or the firm which has been converted into the company) should have a (combined) track record of at least 3 years.

The company /firm (or the firm which has been converted into the company) should have combined positive cash accruals (earnings before depreciation and tax) from operations for at least 2 financial years preceding the application and its net worth should be positive.

→ Distributable profits in terms of Section 123 of the Companies Act 2013 for at least two years out of immediately preceding three financial years (each financial year has to be a period of at least 12 months). Extraordinary income will not be considered for the purpose of calculating distributable profits.

Or

→ The net worth shall be at least Rs.5 crores

 

→ In NSE promoters meaning is explained as the promoters must have relevant experience in the same field of altheas 3 years , Further as said EBIT should be positive for 2 preceding years and net worth should be positive

Net worth shall be at least Rs.5 crores is now liberalized

 

→ In BSE company must have a distributable profit which itself said that the company has positive Profit for distribution of profit, however, if the company does not have the same it must have a net worth of 5 crores which is mentioned in nse that the company must have positive net worth.

 

 

 

of the post-issue equity share capital individually or severally The company/entity should have positive cash accruals (earnings before depreciation and tax) from operations for at least 2 financial years preceding the application and its net-worth should be

positive.

 

 

Other Requirements

→ The Applicant Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).

→ No petition for winding up is admitted by a Court of competent jurisdiction against the Applicant Company.

→ No material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company.

→ It is mandatory for a company to have a website.

→ It is mandatory for the company to facilitate trading in demat securities and enter into an agreement with both the depositories.

→ There should not be any change in the promoters of the company in preceding one year from date of filing the application to BSE for listing under SME segment

 

Website

In Nse it is not particularly said, however, the same is

mandatory

The company must have a website as per BSE

 

Demat facility

The same is mandatory here also

It is mandatory for the company to facilitate trading in demat securities and enter into an agreement with both the

depositories

 

Disclosures

The following matters should be disclosed in the offer document:

1.      Any material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year in respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company.

2.      Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders, banks, FIs by the applicant, promoters/promoting company(ies), group companies, companies

promoted by the promoters/promoting

A certificate from the applicant company / promoting companies stating the following

 

a)      " The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR)."

 

Note: Cases where the company is out of BIFR is allowed.

 

b)     There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.

BIFR

The Applicant Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).

Disclosures are required in BSE Disclosures that

The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR)."

 

Winding up

→ No petition for winding up is admitted by a Court of competent jurisdiction against the Applicant Company.

→ There is no specific clarity that Cases

Disclosures is required in BSE Disclosures that

There is no winding up petition against the

company, which has

 


 

company(ies) during the past three years. An auditor's certificate shall also be provided by the issuer to the exchange, in this regard.

3.      The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, and status of litigation.

4.      In respect of the track record of the directors, the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge- sheeted with serious crimes like murder, rape, forgery, economic offences etc.

 

 

 

where the company is out of BIFR is

allowed in NSE.

been admitted by the court or a liquidator

has not been appointed

 

Change in promoters

There is no specific condition in NSE

There should not be any change in the promoters of the company in preceding one year from date of filing the application to BSE for

listing under SME segment

 

Disclosure

1.     No material regulatory or stock exchange pending against promoter/ promote \r group un last 1 year

2.     No default in any payment of interest of promoter and promoter companies along with auditor certificate

3.     Disclosure of litigation of promoters and promoter companies

4.     Directors track record and litigations including criminal actions shall

be disclosed.

1.     NO winding up petition

2.     No BIFR application or even application made the same shall be withdrawn

 

For good practice and common requirement we can merge and disclose both the NSE and

BSE requirements as good corporate governance

*Amendment in Existing Eligibility criteria of Listing on BSE SME Platform vide

https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20180711-23

In order to facilitate the growth-oriented companies to get listed on BSE SME Platform, it has been decided to amend the existing eligibility criteria. The revised eligibility criteria for listing on BSE SME Platform will be as follows:

Norms

Existing Norms

Revised Norms

Post Issue Paid-up Capital

The post-issue paid up capital of the company shall be at least Rs.3 crore

The post issue paid up capital of the company (face value) shall not be more than Rs.25 crore

Net worth

Net worth (excluding revaluation reserves) of at least Rs.3 crore as per the latest audited financial results

Positive Net worth

Net Tangible Assets

At least Rs.3 crore as per the latest audited financial results

Not Applicable

Track Record

Distributable profits in terms of Section 123 of the Companies Act 2013 for at least two years out of immediately preceding three financial years (each financial year has to be a period of at least 12 months). Extraordinary income will not be considered for the purpose of calculating distributable profits

Or

Net worth shall be at least Rs.5 crores

The company /firm (or the firm which has been converted into the company) should have a (combined) track record of at least 3 years.

The company /firm (or the firm which has been converted into the company) should have combined positive cash accruals (earnings before depreciation and tax) from operations for at least 2 financial years preceding the application and its net worth should be positive

All other norms (other than those revised as above) would remain unchanged.

There will not be any change in the existing guidelines for NBFC and Broking Companies

The above-revised criteria would be applicable with effect from July 12, 2018


Procedure for Listing on the SME Exchange

Listing on the SME Exchange involves different steps, namely:

Step 1: Appointment of Merchant Banker

→ The issuer Company must consult and appoint a Category 1 Merchant Banker in an advisory capacity for the listing on the SME exchange. The company in consultation with the Merchant banker will appoint other individuals and intermediaries

→ The basic documents for the same is taking the consent of all the parties involved in the issue

BOARD STRUCTURE

The →The company must have an adequate board, as the corporate governance is not applicable to the company, the companies Act 2013 is followed for the structure of the board. For bringing the SME IPO the company must have below parties

MANAGING DIRECTOR

EXECUTIVE

DIRECTOR/WHOLE TIME DIRECTOR

EXECUTIVE

DIRECTOR

NON EXECUTIVE

INDEPENDENT DIRECTOR

NON EXECUTIVE

INDEPENDENT DIRECTOR

NON EXECUTIVE

COMPANY SECRETARY

-

CFO

-

The company must have a women director if it falls under the criteria as per Companies Act 2013, further as it is going to be listed it must have a women director.

The two independent directors are required to constitute the committees AC, NRC AND SRC

→ PARTIES INVOLVED IN AN IPO

PARTIES

ROLES

LEGAL OBLIGATION AS PER PROSPECTUS AND ICDR

MERCHANT BANKER

The role starter and also sharing the liability as the Officer in default under section 2(60) of the Act 2013.

Consent and agreement between the company and the MB

DIRECTORS, CA, CS,

CFO

Board composition and role as per CA

2013

Consents of all the parties is to be

taken

STATUTORY AUDITORS

The statutory auditor plays a role as the company accounts are audited and

certified by the said auditor

Consent of the said auditor is to be taken

PEER REVIEWER AUDITOR

The peer review auditor will help out to restate al the 5 years Financials

Consent of the said auditor is to be taken along with the consent to act include the restated documents in

the prospectus

REGISTRAR AND SHARE TRANSFER AGENT

Looking after connectivity of DEPOSITORY, documents for T+2 to 6 Including basis of allotment

Consent and agreement between the company, RTA and depositories

LEGAL ADVISOR TO THE ISSUE

Looking after the legal litigations of the company and promoter

Consent of the said advisor

UNDERWRITER

The underwriter takes the obligation to underwrite the securities of the company to the shortfall, however here the issue is 100% underwritten.

Consent of the underwriter, underwriter also enters into an agreement to underwrite the shares of the company. The merchant banker shall underwrite

at least 15% of the issue size as


 

 

per Reg 106P of ICDR

MARKET MAKER

The main role of the Market maker will start after listing who will act as price stabilizing agent to the company and in

secondary market

Consent to act as Market Maker

PRACTICING

COMPANY SECRETARY

Coordinator on the secretarial part of the company

The Lock in share sheet is certified

by the PCS or PCA at the time of lodgment of post issue documents

Step 2: Due Diligence and Documentation

The Merchant Banker would then conduct a due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, Government Approvals, Promoter details etc. and prepare documentation for the IPO. Planning and documentation by the Merchant Banker must include IPO structure, share issuances and financial requirements

Step 3: Application to SME Exchange

Once the due-diligence and documentation are completed by the Merchant Banker, the draft prospectus or DRHP in case of book building is submitted to the Exchange as per SEBI requirements.

After submission of the required application and documents to BSE,/NSE BSE/NSE verifies the documents and processes the same. A visit to the company’s site is also undertaken by the Stock Exchange Executives.

On obtaining in-principle approval, the Merchant Banker would file the Prospectus with the ROC indicating the opening and closing date of the issue. On obtaining approval from ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.

Step 4: DRAFTING OF PROSPECTUS

The Chapters are prepared as per the ICDR Regulations, the short summary of the prospectus is tabled below

Schedule VIII part A of ICDR discloses the contents of Prospectus.

CHAPTERS OF PROSPECTUS

CONTENTS OF PROSPECTUS

COVER PAGE

→ The cover page includes the basic information which discloses which type of IPO we are coming with

→ On which platform we are getting listed

→ On what price, a lot we are issuing shares

→ Who are the promoter of the company and relevant page number of the prospectus where further information has to be read with

→ Risk to the issue is summarized in the front page

→ As per ICDR cover page is to be followed: Schedule VIII part A (I) of ICDR regulations the contents of the cover page is mentioned. Some of the main highlights are

1.      The front Page and inside page shall be white

2.      Cover Page shall be at least 100 GCM quality

3.      disclosure of the name of MB, issuer details, IPO grading iapplicable, , issue open and close

4.     Relevant details in draft prospectus shall be mentioned as [.] WHICH SHALL BE FILLED AT THE TIME OF PROSPECTUS, issue open and close date

→ Also the basic details like the Registered office of the company , corporate office of the company, name of company secretary and compliance offcer, lead manager and RTA name are disclosed here

→ relevant information for selling shareholders(offer for sale)

SECTION I – General

DEFINITIONS AND ABBREVIATIONS

The relevant terms are disclosed here as the

     

COMPANY RELATED TERMS

Nomenclature explains.

ISSUE RELATED TERMS

TECHNICAL AND INDUSTRY RELATED TERMS

CONVENTIONAL

/ABBREVIATIONS

 

AND        GENERAL       TERMS

PRESENTATION MARKET DATA

OF

FINANCIAL, INDUSTRY AND

Here the basis of accounts, how accounts are prepared is disclosed. GAAP is used in SME, IND

As is uded for main board IPO as per the applicable circular

FORWARD LOOKING STATEMENTS

The validity of the financial statements is presented in a practical way that the company may get affected by many factors and the same shall be taken into consideration while reading

financial s of the company

SECTION II – RISK FACTOR

The Company is operating since inception, all the laws are complied in a legal manner but there are many instances where a company fails to follow some rule and regulation , Risk factor is the same it puts mirror in front of the whole prospectus which discloses the faults done by company, promoters , promoter groups.

→ Generally the risk factor is divided into internal risk and external risk

→ Risk factor includes general risk like competition, litigations of the company, one of

the example is issuing of shares at the discounted price

SECTION III – INTRODUCTION

SUMMARY OF OUR INDUSTRY

The summery to the insusrty in which we operate shall be disclosed here. The reference to Our industry will be taken

SUMMARY OF BUSINESS OVERVIEW

The summery to the business in which we

operate shall be disclosed here. The reference to Our business will be taken

SUMMARY OF OUR FINANCIAL INFORMATION

The restaed accounts summery of 5 years or relevant periods if 5 years have not been completed will be disclosed here. This will include Restated Balancesheet , P/l and Cashflow

statement.

THE ISSUE

→ The issue is the chapter which will summerise what is the equity shares offered to the public. Secondly is the issue discloses the reserved portion say Pre IPO placements

 

→ The table of the issue discloses

 

Particulars

Details

 

Equity shares offered

Number of equity shares , issue price, and the agreegate

Amount

 

Of which

 

 


 

 

Reserved for Market Maker

At    least    5%    from public category

 

Net    issue    ie    after

deducting        Market maker portion

50% - 50% to Retail and non retail

 

As per the Regulation 43(4) of the SEBI (ICDR) Regulations, as amended, as present issue is a fixed price issue the

allocation is the net offer to the public category shall be made as follows:

a)      Minimum fifty percent to retail individual investor; and

b)     Remaining to:

i.      Individual 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 (a) or (b) above may be allocated to the applicants in the other category. If the retails individual investor category is entitled to more than fifty per cent on a proportionate basis, accordingly the

retails individual investors shall be allocated that higher percentage

GENERAL INFORMATION

General information provides information of the below

CAPITAL STRUCTURE

→ The capital structure of the company discloses the present authorised share capital

→ present and after the ipo allotment shares paid up share capital

→ securities premium amount in the accounts of the company

→ The capital structure will show the history of the company from the inception of the company that what is the authorised share capital, paid up capital computation

→ 62(1)© for the present issue

→ name of allotees and shareholding pattern of the company

→ shares issued under amalgamation are also disclosed in this chapter

→ the computation of lock in and minimum promoters contribution for the same as disclosed below this table

→ further in this chapters, relevant details are also given like

-what will be done in the case of undersbscription

-    Details of past issue of the company

-    total number of shareholders in the issue

-details of top ten shareholders as on the date of


 

Prospectus

SECTION IV – PARTICULARS OF THE ISSUE

OBJECTS OF THE ISSUE

OBJECTS OF THE ISSUE is the all about the money that will be utilised for the company Example

1.               To meet Incremental Working Capital Requirement;

2.      General Corporate Purpose;

3.      Meeting Public Issue Expenses

 

→ The requirement offunds and means of finance is disclosed here

→ the use of the funds is disclosed in the company

→ The upcoming immediate financial year is represented as an estimate figure and the further financial year is rerpresented as projected

→ Monitoring of Issue proceeds only if Issue size exceeds Rs 100 crore

→ the variation of the object, the clause is also disclosed that the company shall follow companies act 2013 for the same

 

Post listing the company shall disclose the statement on quarter basis till the amount is utilised under Reg 32 if SEBI LODR

BASIS FOR ISSUE PRICE

How the respective price arrives is disclosed here.

STATEMENT OF POSSIBLE TAX BENEFITS

The benefits of taxation as per Income tax 1961 is disclosed here and signed by Auditor of the

Company

SECTION V – ABOUT US

INDUSTRY OVERVIEW

→ the company is operating in the relevant industry is disclosed here

→ The backgroung industry of the company is taken from various source where the updated articles of government published articles are taken into consideration

→ help is also taken from various agensies operating in the said industry

→ Generally industry overview starts with the economy of INDIA and then the relevant backgroung of the industry is reproduced

→ For eg if the company is operating in steel market then the relevant market of steel industry is presented here and the source from where the respective information is taken is disclosed here

→ the copy right articles are not taken here

BUSINESS OVERVIEW

→ This is one of the main part of the prospectus

→ the details of the business like location of the

business, registered office, corporate office , machineries details are disclosed here


 

→ The company also discloses the ongoing project of the company, indebtedness ie the standing charge of the company, the insurance policies of the company, Intellectual Properties

 

→The details of the business of the company in which it operates, the disclosure of service or flow chart how they provide the services to the customers shall be disclosed

→ in the case of manufacturing the manufacturing

the process can also be shown

→ SWOT ANALYSIS

→ the plant nad machineryused

→Competition export obligation

→ Achievement, awards of the company are disclosed here

KEY INDUSTRY REGULATIONS AND POLICIES

Here the act, rules and regulation applicable to the companies are disclosed For Eg in case of

seeds industries seeds act is applicable to the company

HISTORY AND CERTAIN CORPORATE MATTERS

The history is the step by step how company progreesed is disclosed here

OUR MANAGEMENT

→ Our management is the chapter where all the KMP, directors are introduced

→ the relevant details like name, father name,

directorship in other company are disclosed here

→     brief profile and relevant experience is

disclosed here

→ composition of an audit committee, NRC, SRC

→ Management Organization Structure

→ changes in board structure in last three years

from the filling of this document

OUR PROMOTERS AND PROMOTER GROUP

→ the relevant profile and background of

promoters

→ it is on the company to divide the promoter

and promoter group

→ all the subscribers of the company are a promoter, however the same can be included in the promoter group

→ the HUF, partnership deeds and the companies in which the promoters hold more than 10% of the shares are included in a promoter group.

FINANCIAL COMPANIES

INFORMATION

OF

OUR

GROUP

→The board resolution is made for the said

purpose

→ As per the SEBI ICDR Regulations, for the purpose of identification of Group Companies, our Company has considered those companies as our Group Companies which is covered under the applicable accounting standard (AS-18)

→ further companies in which the promoters hold more than 10% of the shares are included

in promoter group

           

RELATED PARTY TRANSACTIONS

The parties as per restated of accounts are considered here as RPT

SECTION VI – FINANCIAL INFORMATION

AUDITORS REPORT AND FINANCIAL INFORMATION OF OUR COMPANY

The peer review auditor provides the said documents and MDAR is prepared

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL    CONDITION    AND     RESULTS     OF OPERATIONS

SECTION     VII     –      LEGAL     AND     OTHER INFORMATION

→ In consiltation with the legal advisor, the pending litigation on the company, by the company, on the promoter, directors and by the promoter and directors is disclosed here

1.      Outstanding litigations involving Our Company.

2.      Outstanding litigations involving Our Promoter.

3.      Outstanding litigations involving Our Directors.

4.          Outstanding litigations involving Our Group Companies.

5.        Penalties imposed in past cases for the last five years.

6.      Material Developments.

7.        Amount owned to small scale undertaking or any such type

→ The summery of the said is disclosed in the

risk factor

OUTSTANDINGS      LITIGATIONS      AND                                MATERIAL DEVELOPMENTS

SECTION XI – DECLARATION

 

DIVIDEND POLICY

Under the Companies          Act,              2013   our Company can pay dividends upon a recommendation by our   Board of Directors and approval by a majority of the shareholders at the Annual General Meeting. The shareholders of the Company have

the right to decrease but not to increase the amount of dividend recommended by the Board of Directors. The dividends

may be paid out of profits of our Company in the year in which the dividend is declared or out of the undistributed

profits or reserves of previous fiscal years or out of both. The   Articles of Association of our Company also gives the

discretion to our Board of Directors to declare and pay interim dividends.

GOVERNMENT AND OTHER STATUTORY APPROVALS

The legal documents and registry with the government department

OTHER       REGULATORY       AND       STATUTORY DISCLOSURES

The relevant provisions who can apply in the issue is disclosed here

This chapter also includes jurisdiction clause and also includes SEBI CLAUSE

SECTION            VIII      –      ISSUE      RELATED INFORMATION

 

TERMS OF ISSUE

What is the lot, what is the issue size, and what

are the terms of the issue is disclosed here

ISSUE STRUCTURE

This is in relation to the issue and capital structure, issue open and close details are

disclosed in this chapter

ISSUE PROCEDURE

How the application is submitted to SCSB and processed is disclosed here

 

→ the instructions are disclosed in the chapter that what are the grounds on which the application is rejected

RESTRICTIONS   ON                           FOREIGN INDIAN SECURITIES

OWNERSHIP

OF

Relevant information are disclosed like

As per the existing policy of the Government of India, OCBs cannot participate in this Issue.

The Equity   Shares have not   been and will   not be registered,   listed or   otherwise qualified in any other

jurisdiction outside India and may not be offered or sold, and Applications may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction, except in compliance with

the applicable laws of such jurisdiction.

The above information is given for the benefit of the Applicants. Our Company   and the LM are not liable for

any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Prospectus. Applicants are advised to make their independent investigations and   ensure that the Applications are not in violation of laws or

regulations applicable to the

SECTION IX – DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION

MAIN PROVISIONS OF ARTICLES OF ASSOCIATION

The chartered document of the company made as per Companies ACT

SECTION X – OTHER INFORMATION

MATERIAL  CONTRACTS                   AND INSPECTION

DOCUMENTS

FOR

the chapter is divided into material contracts and inspection 

1.      Material contract includes

Agreements entered between all the parties

2.               Material Documents includes chartered documents like MOA, AOA, BR for the issue, SR for the issue, Consents of all the parties, Due diligence certificate of lead manager

3.        And a copy of approval which will be filled in prospectus after exchange approves it

→ The original copy of this chapter is inverded in ROC for prospectus approval along with the soft copy and hard copy apart from BR which will also be required for the approval

 

 


The Merchant banker in consultation of the company fixes the company fix the issue size and lot. The company makes the issue structure and capital structure for the same

→ The Merchant banker shall determine lock-in of the shares as per REGULATION 32 ND 36 OF ICDR

Promoters Lock in for 3 years

At least 20% of post issue capital

If the post issue paid-up capital is not 20% but it should be At least 10% then additional upto 10% can be contributed by Alternative investment fund

Promoters holding in for 1 year

In excess of 20% shall be locked in for 1 year

For considering minimum contribution the following shall be excluded

1. Securities acquired during the preceding 3 years
  • acquired for consideration other than cash
  • bonus issue out of revaluation reserves
2. Securities acquired during the preceding 1 years
  • securities acquired at the lower price from the issue price

However, the ICDR Reg 33 has provided the way out if the difference between the issue price and the price at which allotment was made, is deposited in the escrow account with a scheduled commercial bank, at least one day prior to the opening of the ISSUE.

Hence above will not be considered in the lock-in STEPS AFTER DRAFT PROSPECTUS IS PREPARED

  1. The issuer shall prepare the documents in the above manner which will be much exhaustive in practical mannered submit the same to the stock exchange

The stock exchange shall look after the said information and ask the merchant bankers to justify some queries, the same shall be replied by the company in consultation with Merchant banker.

If all the queries are ok the Stock exchange shall give the green signal and lodge the document with ROC in between the company filling the reply shall do the needful for Opening of an escrow account for the IPO . The term of approval is known as in principle approval

  1. Then The company shall lodge the Prospectus with the Jurisdictionary ROC with Letter of authority duly authorized which shall be on the stamp or franking, board resolution soft and hard (original copy ) of Material documents and contracts where ROC will check the geniuses of document and approve the prospectus after that there must be 3 days gap to open up the issue. The company must file the form GNL-2 by attaching the prospectus.
  1. After the same the company shall publish the Pre IPO advertisement as per Regulation 47 of ICDR which will disclose that “This is only an advertisement for information purpose and not a Prospectus announcement “ in which the issue opened details, price are to be disclosed (one English national daily newspaper with wide circulation, Hindi national daily newspaper with wide circulation and one regional language newspaper with wide circulation at the place where the registered office of the issuer is situated) Format of advertisement is given Part A of Schedule
  1. In the case of the Book building process, the company must give issue openly an issue close advertisement in the newspaper
  1. The company shall open the Demat suspense account with the broker for the issue before the issue opens for the securities that will remain unclaimed
  1. Merchant bankers shall issue the application forms and upload the said forms in the website where an investor can download the forms

THE APPLICATION FORM SHALL HAVE IN BETWEEN THE ABRIDGED PROSPECTUS WHICH IS NOT FORM

2A as the same is substituted as per SEBI circular CIR/CFD/DIL/1/2016 January 01, 2016.

  1. Along with the Abridged prospectus, the merchant banker shall also prepare information memorandum which will be part and parcel for submission to the stock exchange
  1. The company shall submit the prospectus in SEBI after The same is submitted to ROC, simultaneously upload a Soft copy of the Prospectus for uploading on website
  1. After the issue closes, post issue compliances start which is terms as t+2, 3,4,5,6
  1. T+6 is the listing of the securities
  1. All the respective formats are given by the stock exchange which requires to be submitted as soft and hard copy to the
  1. One of the foremost roles comes when the company in consultation with merchant banker executive, RTA executive and stock exchange approves the basis of allotment which is named as the basis of allotment minutes
  1. The said document is published in the same paper where the pre-issue advertisement was
  1. The company will get online password for NSE emerge Neaps or BSE platform BSE filling for uploading the Shareholding pattern for the company as per Reg 31(1)(a) on the portal. Please note that the company has already submitted the pre IPO shareholding, issue shareholding to the stock exchange in the soft and scanned copy, however the uploading is possible only after password is given after listing so Reg 31(1)(a) is well in compliance and the same is to be uploaded on the portal
  1. Thereafter the company shall file PAS 3 of the t of allots in the issue, (remember the list of allots which is signed by the director or CS shall only certify PAS-3)
  1. After the listing, you must keep all the ledgers ready for the payment made for the release of one per cent securities
  1. Within 30 days send a declaration to RBI within 30days from allotment to NRI on repatriation basis Please refer FCGPR and rbi circular along with Section VIII issue procedure drafted in the prospectus for the same
  1. Appointment of internal auditor, secretarial auditor, and Sebi LODR compliances

SEBI BOARD MEETING

Please find a summary of the board meeting of SEBI meeting held on 21.06.2018 There are many agendas, this article is focused on the key changes in ICDR

TOPIC

CHANGES

IMPACT

ANNOUNCING PRICE BAND

The requirement of announcing price band 5 working days before the opening of the issue would be reduced to 2 working days before the opening of the issue.

This will be applicable in the case of book building process where price band is to given to determine the price

FINANCIAL DISCLOSURES

Financial disclosures to be made for 3 years as against the present duration of 5 years.

 

Restated and audited financial disclosures in the offer document to be made on the consolidated basis only.

The restated financials were shown upto 5 years now the same will be shown for 3 years

ANCHOR INVESTOR

Minimum Anchor investor size to be reduced to Rs. 2 Crore from the existing Rs. 10 Crore in case of SME ipo

 

Insurance Companies and Foreign Portfolio Investors except for Category III, promoted by entities related to the lead manager permitted to participate in the Anchor Investor category, in addition to mutual funds promoted by lead

managers.

Now there will be two definitions for Anchor investor, For mainboard IPO size shall be 10 crores and for SME it will be 2cr

Insurance Companies and Foreign Portfolio Investors except for Category III can be included in this category

PROMOTER GROUP

The shareholding threshold for identifying promoter group has been revised from 10 per cent to 20 per cent.

 

Now in case, the promoter is a body corporate, any body corporate in which the promoter holds20 %or more or which holds 25 % or more of the promoter would be classified as being part of the same promoter group.

 

Also, in case the promoter is a body corporate, any body corporate in which a group of individuals or companies or combinations thereof, which holds 20% or more of the equity share capital in that body corporate, also holds 20 percent or more of the issuer, can be classified as promoter group only if they are acting in concert.

From now identifying promoter group shareholding shall be 20%

The Body corporate in which holds 20 % or more is held by the promoter would be classified in the same promoter group

 

GROUP COMPANIES

Definition of group companies has been made more specific by clarifying that group company/ies, shall include such companies (other than promoter(s) and subsidiary (ies)) with which there were related party transactions, during the period for which financial information is disclosed (3 years), as covered under the applicable accounting standards and also other companies as considered material by the board

The definition is more cleared, to identify the group company 3 years AS 18 will be seen , further material companies as per board will be the part of the same

 

 

Promoter body and Subsidiaries are kept out of the preview

 

Underwriting provisions –MAIN BOARD COMPANY

If 90 per cent of the fresh issue is subscribed in the main board IPO, underwriting will be restricted to that portion only and accordingly the requirement to underwrite 100% of the issue without regard to the minimum subscription requirements has been deleted.

Underwriting provisions will be aligned to requirements of minimum subscription

Further new ICDR will have drafting which will be more user-friendly
→ All the chapters will be categorized on the basis of the type of offering so that all relevant information pertaining to regulations relating to a particular type of offering is available at one place.

→ The procedural requirements will be specified through Schedules to the draft regulations.

→ The provisions will be rearranged based on their sequence in the public issue process and relevance.

→ the provisions of the Companies Act, 1956 (wherever applicable), Companies Act, 2013 will be substituted. 

NOTE: ABOVE ARTICLE IS ON PERSONAL BASIS, RESPECTIVE NOTIFICATIONS SHALL BE REFERRED BEFORE PRACTICAL IMPLICATION

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Write a Comment

  • An IPO not only means just to get money raised for a company but also a good means to get a company build its trust and get good relation building

    role of ipo

    23-11-2018 / 12:30:13 PM
    Reply