Sebi and Ipo

7/31/2019 Sebi and Ipo

1/22

SEBI

SECURITIES &

EXCHANGE BOARD OF

INDIA


2/22

CONTENTS

INTRODUCTION

OBJECTIVES

FUNCTIONS

POWERS

GUIDELINES FOR IPO (INITIAL PUBLICOFFER)


3/22

INTRODUCTION

Securities and Exchange Board ofIndia (SEBI) was first established inyear 1988 as a non-statutory bodyfor regulating the securities market.


4/22

INTRO. CONT.

It become an autonomous body inaccordance with the provisions of theSecurities and Exchange Board of IndiaAct, 1992 and more powers where given

through an ordinance. Since then itregulates the market through itsindependent powers.

An Act to provide for the establishment of aBoard to protect the interests of investors insecurities and to promote the development of,and to regulate, the securities market and formatters connected therewith or incidentalthereto.


5/22

OBJECTIVES

The primary objective of SEBI is to promotehealthy and orderly growth of the securitiesmarket and secure investors protection.

The objectives of SEBI as follows:

To protect the interest of investors, so that,there is a steady flow of savings into capitalmarket.

To regulate the securities market and ensure

fair practices. It makes rules and regulations for the market.

To promote efficient services by brokers,merchant bankers and other intermediaries, sothat, they become competitive and

professional.


6/22

FUNCTIONS

The SEBI Act, 1992 has entrustedwith two functions, they are:

Regulatory functions.

Developmental functions.


7/22

REGULATORY FUNCTIONS

Regulation of stock exchange, self regulatoryorganizations and any other securities market.

Registration and regulation of stock brokers, sub-brokers, Registrars to all issues, merchant

bankers, underwriters, portfolio mangers etc. Registration and regulation of the working of

collective investment schemes including mutualfunds.

Prohibition of fraudulent and unfair tradepractices relating to securities market.

Prohibition of insider trading.

Regulating substantial acquisition of shares andtakeover of companies.


8/22

DEVELOPMENTALFUNCTIONS

Promoting investors education.

Training of intermediaries.

Conducting research and publishinginformation useful to all marketparticipants.

Promotion of fair practices. Promotion of self regulatory

organizations.


9/22

POWERS

Call periodical returns from stock exchanges.

Call information or explanation from stockexchanges or their members.

Direct enquiries of the affairs of stockexchanges or their members..

Power to compel listing of securities by publiccompanies.

Power to grant approval to bye-laws of

recognized stock exchanges. Power to make or amend bye-laws of

recognized stock exchanges.


10/22

POWERS

Power to regulate and control stockexchanges.

Power to grant registration to market

intermediaries. Power to levy fees or other charges for

carrying out the purpose of regulation.

Power to declare applicability of Section17 of the Securities Contract (Regulation)Act 1956, in any State or area, to grantlicenses to dealers in securities.


11/22

ABOUT IPO

Initial public offering (IPO), referred tosimply as an "offering" or "flotation", iswhen a company makes either a fresh

issue of securities or on offer for sale ofexisting securities or both for the first timeto the public.

This paves way for listing and trading ofthe issuers securities.


12/22

IPO CONT..

The main objectives are to use theproceeds from the issue to fund thecompanys plans for the expansion of

operations and to meet the expensesof the issue.

IPO in India is done through differentmethods like fixed price method,book building method, or a mixtureof both.


13/22

SEBI GUIDELINES FOR IPO

Eligibility Norms of the Issuer.

Size of the Public Issue.

Promoter Contribution.

Prospectus.

IPO Grading.

Collection centers for receiving application.

Regarding allotment of shares.

Timeframes for the Issue and Post-Issueformalities.

Dispatch of Refund Orders.

Other regulations pertaining to IPO.

Restrictions on other allotments.


14/22

GUIDELINES CONT..

Eligibility Norms of the Issuer:

The company shall meet the followingrequirements

Net Tangible Assets is greater than /equal to 3 crores (for 3 full years).

Net worth is greater than / equal to 1crore in 3 years.

If change in name, atleast 50% revenuefor preceding 1 year should be from theactivity under new name.


15/22

GUIDELINES CONT..

Size of the Public Issue:

Issue of shares to public is greaterthan / equal to 25% of the total issue.

The issue size should not be more that5 times the pre-issue net worth.

Promoter contribution:

Minimum Promoters contribution is 20-

25% of public issue. Minimum Lock in period for Promoters

contribution is 5 years.


16/22

GUIDELINES CONT..

Prospectus:

Abridged prospectus must be attached withevery application form.

Risk factors must be highlighted.

Objectives of the issue and the cost of theproject should be disclosed.

Companys management, past history, andpresent business of the firm should be

disclosed. Particulars of the company and other listed

companies under the same management whohave made public issues during the past 3

years are to be disclosed.


17/22

GUIDELINES CONT..

IPO Grading:A company which has filed the draft

offer document for its IPO with SEBI isrequired to obtain a grade from atleast

one CRA registered with SEBI like :

CARE (Credit Analysis and Research)

ICRA (Investment Information and Credit

Rating Agency of India) CRISIL (Credit Rating and Information

Services of India Ltd.)


18/22

GUIDELINES CONT..

Collection centers for receiving applications:There should be atleast 30 mandatory

collection centers.For issues less than / equal to 10 crores,

the collection centers shall be situated at:-

The 4 metropolitan centers viz. Mumbai,Delhi, Madras, Kolkata;

At all such centers where stock exchangesare located in the region in which theregistered office of the company is situated.


19/22

GUIDELINES CONT..

Regarding allotment of shares:

In an issue of more than 25 crores theissuer is allowed to place the whole issue

by Book - building. Minimum of 50% of the Net offer to the

Public has to be reserved for Investorsapplying for less than 1000 shares.

There should be atleast 5 investors forevery 1 lakh of equity offered.


20/22

GUIDELINES CONT..

Timeframes for the Issue and Post-Issue formalities: The min. period = 3 working days and max. = 10

working days. A public issue is effected if the issue is able to

procure 90% of the Total issue size within 60 daysfrom the date of earliest closure of the Public Issue.

In case of over-subscription the company may havethe right to retain the excess application moneyand allot shares more than the proposed issue,which is referred to as the green-shoe option.

Allotment has to be made within 30 days of theclosure of the Public Issue.

All the listing formalities for a public issue has to becompleted within 70 days from the date of closureof the subscription list.


21/22

GUIDELINES CONT..

Dispatch of Refund Orders:

Refund orders have to be dispatchedwithin 30 days of the closure of thePublic Issue.

Refunds of excess application moneyi.e. for un-allotted shares have to bemade within 30 days of the closureof the Public Issue.


22/22

GUIDELINES CONT..

Other regulations pertaining to IPO: Underwriting is not mandatory but 90%

subscription is mandatory for each issue ofcapital to public except in disinvestment.

If the issue is undersubscribed then the collectedamount should be returned back (not valid fordisinvestment issues).

If the issue size is more than 500 crores,voluntary disclosure should be made regardingthe deployment of the funds and an adequatemonitoring mechanism to be put in place toensure compliance.

Code of advertisement specified by SEBI shouldbe adhered to.

Sebi and Ipo

Documents

Transcript of Sebi and Ipo