Presented By CA Swatantra Singh, B.Com , FCA, MBA Email ID: singh.swatantra@gmail.com New Delhi , 9811322785, www.caindelhiindia.com, www.carajput.com

Requirements for a First Time Issuer of Securities – IPO Requirements Rajput Jain & Associates

Rajput Jain & Associates

Rajput Jain & Associates 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 Rajput Jain & Associates

Options for Raising Funds Fund Raising Options Debt Equity Hybrid In India From Banks & FIs IPO Various forms of Convertibles Public issue of Bonds/Debentures FPO Rights Issue Pref. Issue outside India ECB ADR/GDR FCCB & FCEB Rajput Jain & Associates

Fund Raising History – India Total Funds Raised Rs. 18,812 cr Rs. 24,707 cr Rs. 27,477 cr Rs. 32,950 cr Rs. 104,937 cr Rajput Jain & Associates

Rajput Jain & Associates 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 Rajput Jain & Associates

Rajput Jain & Associates IPO Requirements Rajput Jain & Associates

Eligibility Criteria for Unlisted Companies - SEBI Exemptions A banking company including a local area bank set up under the Banking Regulation Act, 1949 A corresponding new bank set up under the Banking Companies Act, 1970 An infrastructure company: Whose project has been appraised by a public financial institution (PFI) Not less then 5% of the project cost is financed by any of the PFI Rights issue by a listed company Primary Criteria Companies with track record Companies without track record Track record of distributable profits for 3 out of the immediately preceding 5 years Pre-issue net worth of not less than Rs. 1 Crore in each of the preceding 3 full years Net tangible assets of atleast Rs. 3 Crores for each of the preceding 3 full years Not more than 50% of these to be held in the form of monetary assets (Proposed IPO + Previous Issues in the same financial year) < 5 times the pre-issue net worth In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name Prospective allottees in the IPO should not be less than 1000 in number 50% of the net offer to public being allotted to QIBs In case of project funding, 15% participation by Financial Institutions / Scheduled Commercial Banks 10% of this must come from appraiser 10% of issue size to be allotted to QIBs + + Minimum post-issue face value capital must be Rs. 10 Crores OR Compulsory market making for at least 2 years from the date of listing of shares Minimum post-issue face value capital must be Rs. 10 Crores OR Compulsory market making for at least 2 years from the date of listing of shares Choice of Route: Fixed Price or Book Building Choice of Route: Book Building Choice of Route: Fixed Price or Book Building Rajput Jain & Associates

Eligibility Criteria For IPO – Stock Exchange (BSE) BSE Eligibility Criteria Large Companies Small Companies The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and The minimum issue size shall be Rs. 3 crore; and The minimum market capitalization of the Company shall be Rs. 5 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). The minimum income/turnover of the Company shall be Rs. 3 crore in each of the preceding three 12 – months period; and The minimum number of public shareholders after the issue shall be 1000 A due diligence study may be conducted by an independent team of CAs or Merchant Bankers appointed by BSE. Rajput Jain & Associates

Minimum Public Shareholding ‘Promoter’ includes: The person or persons who are in over-all control of the company; The person or persons who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public; The persons or persons named in the prospectus as promoters(s). Promoter Group Defined under clause 6.8.3.2 of SEBI DIP Public Implies all investors other than Promoter and Promoter Group In case of PSUs, the Promoter is Government of India (represented by President 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. Rajput Jain & Associates

Government Cos & Infrastructure Cos Government Companies Section 617 of the Companies Act, 1956 Government company, means any company in which not less than fifty one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary of a Government company as thus defined. Infrastructure Companies Clause 1.2.1(xv) of the SEBI (DIP) Guidelines, 2000 “Infrastructure Company” means, a company wholly engaged in the business of developing, maintaining and operating infrastructure facility. Rajput Jain & Associates

Minimum Promoters Contribution and Lock-in Minimum of 20% of the post issue capital of the Company for unlisted companies; for listed companies, either to extent of 20% in issue or to ensure post issue holding of 20% Following shares are ineligible for the computation of Promoter’s contribution Issued in last one year at a price lower than issue price, unless topped up Issued in last three years out of bonus issue or revaluation reserve for consideration other than cash Lock-in period For Promoters: Lock-in for a period of 3 years from the date of allotment or from the date of commencement of commercial production, whichever is later Balance pre-issue capital, other than held by Indian and Foreign Venture Funds (registered with SEBI) and shares held for at least one year and being offered for sale in the issue Must be locked-in for a period of 1 year from the date of allotment Shares issued last will be locked-in first Exemption In case of public issue of securities by a company which has been listed on a stock exchange for at least 3 years and has a track record of dividend payment for at least 3 immediately preceding years. In case of companies where no identifiable promoter or promoter group exists. In case of rights issues. Rajput Jain & Associates

Rajput Jain & Associates 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 investor categories (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. Rajput Jain & Associates

Issue Structure – Book Building Of the Net Offer to Public Maximum 50% to QIBs At least 15% to HNIs At least 35% to retail Dilution = 25% Dilution = 10% to 25% At least 60% to QIBs Maximum 10% to HNIs Maximum 30% to retail Net offer to the public shall mean the offer made to Indian public and does not include reservations/ firm allotments/ promoters’ contribution. Net Offer to Public Reservations / Firm Allotment shall not be made to categories other than: ‘Permanent employees of the issuer company and in the case of a new company the permanent employees of the promoting companies'; ‘Shareholders of the promoting companies in the case of a new company and shareholders of group companies in the case of an existing company’ either on a ‘competitive basis’ or on a ‘firm allotment basis’. Persons who, on the date of filing of the draft offer document with the Board, have business association, as depositors, bondholders and subscribers to services, with the issuer making an initial public offering, Reservations Rajput Jain & Associates

Corporate Governance Requirements Composition of the Board Optimum number of executive and non executive directors with at least 50% being non-executive. If the chairman, has executive powers then 50% of Board comprises of Independent directors. While if chairman has non-executive powers then 1/3 of the Board comprises of Independent directors. Audit Committee Mandatory constitution of Audit Committee with minimum three directors and headed by an Independent director. All members shall be financially literate (should be able to understand financial statements) and at least one member should have accounting and financial management expertise. Investor Committee Shareholder/Investor Grievances Committee to be formed under the chairmanship of a non executive director to look into the redressing of shareholder and investor complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends Subsidiary Company At least one director on the Board of the holding company shall be a director on the Board of a material non listed Indian subsidiary Company - Material non-listed subsidiary means a subsidiary whose turnover or net worth exceeds 20% of the consolidated turnover or net worth in the preceding accounting year Audit committee of the listed holding company shall also review the financial statements, in particular, the investments by the unlisted subsidiary Company Report on Corp. Governance A separate section on Corporate Governance to be included in the Annual Reports with disclosures on compliance of mandatory and non-mandatory requirements Submission of quarterly compliance report to the stock exchanges CEO/CFO Certification CEO/CFO to certify the financial statements and cash flow statements Rajput Jain & Associates

Disclosures in the Offer Document Capital Structure Shareholding Pattern (pre-issue and post-issue) Securities Premium Account (pre-issue and post-issue) Holding of the promoter and promoter group Disclosure about ESOPs if any Objects of the Issue Total requirements of funds Means of Financing Undertaking by the issuer company confirming firm arrangements of finance through verifiable means towards 75% of the stated means of finance (excluding proposed IPO) Details about the appraisal of the project Interim use of funds Business Description about the Industry in which the Company operates Detailed description about the business of the Company Risk Factors Risks related to the Company External Risk Factors Company Management Details about the Board of Directors and various committees Details about key management persons Rajput Jain & Associates

Disclosures in the Offer Document (Cont’d) Financial Disclosures Auditors Report to have five year restated financials for the Issuer Company, and All Subsidiaries of the Issuer Company or Consolidated Financials of the Issuer Company Audited financials presented should not be more than six months old at the time of filing DRHP with SEBI and must be updated to be not more than six months old on the date of filing the prospectus with the ROC All financials should be presented based on Indian GAAP MD&A Detailed discussion on performance for the past 3 years Capital Expenditure Cash Flow and Liquidity Litigations and Defaults All pending litigations in which the Company/Promoters / Promoter Group / Directors / Group companies are involved. Both, litigations filed by or against the Company/Promoters / Promoter Group / Directors / Group companies Outstanding litigations, defaults, etc., pertaining to matters likely to affect operations and finances of the company. The pending proceedings initiated for economic offences against the directors, the promoters, companies and firms promoted by the promoters indicating their present status. Rajput Jain & Associates

Special dispensation to PSU - Precedents Only restated Audited Financial Statements needs to be disclosed in the DRHP. However, SEBI has granted exemption on case to case basis to PSU Banks whereby, even limited review figures were disclosed in DRHP, so as to comply with the criteria of financial statements being not more than six months old. * Obtained relaxation from SEBI and issue structure is 50% to QIB, 15% to HNI and 35% Retail # Based on DRHP filed with SEBI Rajput Jain & Associates

Special dispensation to PSU SEBI guidelines do not allow limited review or unaudited numbers in prospectus Limited review allowed Disclosure of promoter and promoter group Need to comply with Corporate governance norms Promoter’s contribution and lock-in Bank of Baroda Has 2689 branches + subsidiaries in India (BOB Caps, BOB Cards, BOB AMC) + foreign subsidiaries Limited Review for June 2005 numbers allowed. Limited Review done for only select (around 20 branches) by auditors and rest were relied on by auditors. Limited review of foreign subsidiary for June 2005 allowed. NTPC Promoter is president of India Relaxation in disclosure of promoter and promoter group in offer document Rajput Jain & Associates

Rajput Jain & Associates Intermediaries Involved Rajput Jain & Associates

Intermediaries and their Roles Lead Managers Overall Co-ordination Conduct due diligence and finalize disclosure in Offer Document Assist the legal counsel in drafting of Offer Document Interface / ensure compliance protocol with SEBI / NSE / BSE Domestic & International Legal Counsels Legal Due Diligence Drafting the offer document Guidance on any other incidental legal matters Assistance in complying with requirement for selling in international geographies Bankers Acting as collecting agents Escrow Account & Refund account Self Certified Syndicate Bank (SCSB) Acting as collecting agents for ASBA (Application Supported by Block Amount) process Registrars Co-ordination with the Issuer and Bankers regarding collections, reconciliation, refunds etc Securing allocation approval from Stock Exchanges Post issue co-ordination collation and reconciliation of information Auditors Reviewing and auditing financials and preparing financial statements for inclusion in the Offer Document Verify/audit various financial and other data used in the Offer document and provide Comfort Letter Printers Bulk printing of the Red Herring Prospectus Bid Forms, final Prospectus, CAN, Refund orders etc. Ensure timely dispatch and distribution of stationery to all centers Advertisers Preparing and getting published all statutory notices Creating all advertisement materials Rajput Jain & Associates

Rajput Jain & Associates Process & Timeline Rajput Jain & Associates

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 Rajput Jain & Associates

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 Filing Pre-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 Rajput Jain & Associates

Execution Process Timeline Rajput Jain & Associates

Email ID: singh.swatantra@gmail.com New Delhi , 9811322785, Presented By CA Swatantra Singh, B.Com , FCA, MBA Email ID: singh.swatantra@gmail.com New Delhi , 9811322785, www.caindelhiindia.com, www.carajput.com

Rajput Jain & Associates

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