PUBLIC ISSUES

Options for Raising Funds

Options for Raising Funds

Fund Raising Options
Debt Equity Hybrid

From Banks & FIs

IPO FPO

Various forms of Convertibles

In India

Public issue of Bonds/Debentures

Rights Issue Pref. Issue

outside India

ECB

ADR/GDR

FCCB & FCEB

Classification of Issues

IPO
Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuers securities.

Follow On Public Offer - FPO

A Further public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

RIGHTS ISSUE
Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.
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PRIVATE PLACEMENT
A private placement is an issue of shares or of convertible securities by a company to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. A private placement of shares or of convertible securities by a listed company is generally known by name of preferential allotment
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QIP
A Qualified Institutions Placement is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines. The Chapter contains provisions relating to pricing, disclosures, currency of instruments etc.

Qualified Institutional Buyers

In terms of clause 2.2.2B (v) of DIP Guidelines, a Qualified Institutional Buyer shall mean: "a) Public financial institution as defined in section 4A of the Companies Act, 1956; "b) Scheduled commercial banks;

"c) Mutual funds;

"d) Foreign institutional investor registered with SEBI;
(DISCLOSURE AND INVESTOR PROTECTION 9

e) Multilateral and bilateral development financial institutions; "f) Venture capital funds registered with SEBI. "g) Foreign Venture capital investors registered with SEBI.

"h) State Industrial Development Corporations.

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"i) Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA). "j) Provident Funds with minimum corpus of Rs.25 crores "k) Pension Funds with minimum corpus of Rs. 25 crores "These entities are not required to be registered with SEBI as QIBs.
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ECB
External Commercial Borrowings (ECB) refer to commercial loans [in the form of bank loans, buyers credit, suppliers credit, securitised instruments (e.g. floating rate notes and fixed rate bonds)] availed from non-resident lenders with minimum average maturity of 3 years

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FCCB
A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.
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American depositary receipt (ADR)

(ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage. ADRs were introduced as a result of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values.
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For this reason, U.S. banks simply purchase a bulk lot of shares from the company, bundle the shares into groups, and reissues them on either the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or the Nasdaq Global Depository Receipt (GDR): These are similar to the ADR but are usually listed on exchanges outside the U.S., such as Luxembourg or London. Dividends are usually paid in U.S. dollars

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Fund Raising History India

Capital Market Issues 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 FY-2004
Total Funds Raised Rs. 18,812 cr

FY-2005
Rs. 24,707 cr

FY-2006
Rs. 27,477 cr

FY-2007
Rs. 32,950 cr

FY-2008
Rs. 104,937 cr

IPO

FPO

Rights Issue

QIP
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Why IPO ?? for funding needs

Why IPO?? 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
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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

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For Non-funding Needs Enhancing Corporate Stature

Retention and incentive for Employees through stock options

Providing Investors exit options Provide liquidity to the shareholders

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IPO Requirements

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Eligibility Criteria for Unlisted Companies SEBI

Primary Criteria

Companies with 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

Companies without track record

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 Choice of Route: Fixed Price or Book Building

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: Book Building

Choice of Route: Fixed Price or Book Building

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Eligibility Criteria For IPO Stock Exchange (BSE)

BSE Eligibility Criteria

Large 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).

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. 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.

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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).

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

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

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.

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Government Cos & Infrastructure Cos

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.

Government Companies

Sebi (ICDR) regulations, 2009 Infrastructure Companies

Infrastructure Company means, a company wholly engaged in the business of developing, maintaining and operating infrastructure facility.

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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 Promoters 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

Promoters Contribution

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

Lock-in period

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.

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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.

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Issue Structure Book Building

Dilution = 25%
Of the Net Offer to Public Maximum 50% to QIBs At least 15% to HNIs At least 35% to retail

Dilution = 10% to 25%

Of the Net Offer to Public At least 60% to QIBs Maximum 10% to HNIs Maximum 30% to retail

Net Offer to Public

Net offer to the public shall mean the offer made to Indian public and does not include reservations/ firm allotments/ promoters contribution.

Reservations
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,

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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. 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. 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 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 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 to certify the financial statements and cash flow statements

Audit Committee

Investor Committee

Subsidiary Company Report on Corp. Governance CEO/CFO Certification

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Disclosures in the Offer Document

Capital Structure Objects of the Issue Business

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 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 Description about the Industry in which the Company operates Detailed description about the business of the Company Risks related to the Company External Risk Factors Details about the Board of Directors and various committees Details about key management persons

Risk Factors Company Management

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Disclosures in the Offer Document (Contd)

Financial Disclosures

MD&A

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 Detailed discussion on performance for the past 3 years Capital Expenditure Cash Flow and Liquidity 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.

Litigations and Defaults

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IPO Process Fixed Price Issue

Decision to go for IPO Appointment of BRLM and legal counsel

Funds transferred to issuer

Listing

Issuer
Allotment

Due diligence

Drafting of Draft Prospectus

Issue Closure

Filing with SEBI & Stock Exchanges Preparation / Approvals

Pre-Marketing

SEBI Clearance & ROC Filing of the Prospectus

Roadshows

Issue Open Launch & Completion

Filing the Prospectus and Marketing

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IPO Process Book Built Issue

Decision to go for IPO Appointment of BRLM and legal counsel

Funds transferred to issuer

Listing

Issuer
RoC filing of final Prospectus

Due diligence

Drafting of Draft Red Herring

Pricing & Allocation

Filing with SEBI & Stock Exchanges Preparation / Approvals

Pre-Marketing

SEBI Clearance & ROC Filing

Roadshows

Book building Launch & Completion

Marketing and Estimation of Price Range

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Minimum subscription.
NON UNDER WRITTEN PUBLIC ISSUES :If the company does not receive the minimum subscription of issue or if subscription falls below 90 % after the closure of the issue , the company will refund the entire subscriptions within 42 days after which interest has to be paid. UNDER WRITTEN PUBLIC ISSUES : if the company does not receive minimum subscription of 90 % of the net offer to public including devolvement of underwriters
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 within 60 days of closure of issue the company shall return the entire subscription within seventy days of the closure of the issue.

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Oversubscription
No allotment shall be made by the issuer in excess of the specified securities offered through the offer document: Provided that in case of oversubscription, an allotment of not more than ten per cent. of the net offer to public may be made for the purpose of making allotment in minimum lots.

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Intermediaries and their Roles

Overall Co-ordination

Lead Managers

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 Legal Due Diligence Drafting the offer document Guidance on any other incidental legal matters

Domestic & International Counsels

Legal

Assistance in complying with requirement for selling in international geographies

Acting as collecting agents Escrow Account & Refund account Acting as collecting agents for ASBA (Application Supported by Block Amount) process

Bankers Self Certified Syndicate Bank (SCSB)

Co-ordination with the Issuer and Bankers regarding collections, reconciliation, refunds etc

Registrars

Securing allocation approval from Stock Exchanges

Post issue co-ordination collation and reconciliation of information

Auditors Printers

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 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 Preparing and getting published all statutory notices Creating all advertisement materials

Advertisers

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Merchant Bankers to the issue or Book Running Lead Managers (BRLM) Syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company,

Underwriters to the issue,

Solicitors
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Lead Managers
Lead managers are independent financial institutions appointed by the company going public to manage the IPO. They are the main body responsible for most of the IPO processing. Their jobs include : Due diligence Write the Red Herring Prospectus and get it approved by SEBI.
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 Appointment of underwriters ( with the issuer help) In brief Lead Managers responsibilities include, initiate the IPO processing, write draft herring prospectus and get it approve by SEBI, help company in selling the IPO Shares and road shows, help company in finalize the issue price, issue opening & closing dates, listing date etc.
SBI Capital Markets, the investment banking arm of SBI, has been ranked as the top lead arranger and advisor in the Asia-Pacific region .
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ROLE OF INVESTMENT / MERCHANT BANK Managing IPO

Managing Right Issues

Managing Takeovers open offers Merger and Acquisitions Private Equity FCCB Corporate Advisory services Project Advisory and Finance
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SYNDICATE MEMBERS
The Book Running Lead Managers to the issue appoint the Syndicate Members, who enter the bids of investors in the book building system. Syndicate Members are intermediaries registered with SEBI who also carry on the activity of underwriting. Syndicate members are commercial or investment banks responsible for underwriting IPO's.
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REGISTRARS
IPO Registrars are independent financial institutions registered with stock exchanges and appointed by the company going public for mainly to keep record of the issue and ownership of company shares. Responsibility of a registrar at the time of IPO involves, processing of IPO applications, allocate shares to applicants, process refunds and transfer allocated shares to investors demat accounts.

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BANKERS TO THE ISSUE

They carry out all the activities of ensuring that the funds are collected and transferred to the Escrow accounts. The Lead Merchant Banker shall ensure that Bankers to the Issue are appointed in all the mandatory collection centres as specified in ICDR Guidelines. The LM also ensures follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures.
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Examples
Karvy Computershare Private Limited Registrar

Enam Securities Private Limited - Registrar

India Infoline Limited- lead manager

Hem Securities Ltd - IPO Lead Manager

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OFFER DOCUMENT
OFFER DOCUMENT, RED HERRING PROSPECTUS, A PROSPECTUS AND AN ABRIDGED PROSPECTUS. Offer document means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue, which is filed Registrar of Companies (ROC) and Stock Exchanges. An offer document covers all the relevant information to help an investor to make his/her investment decision.
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RED HERRING PROSPECTUS

Red Herring Prospectus is a prospectus, which does not have details of either price or number of shares being offered, or the amount of issue. This means that incase price is not disclosed, the number of shares and the upper and lower price bands are disclosed. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus.
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ABRIDGED PROSPECTUS
It contains all the salient features of a prospectus. It accompanies the application form of public issues.

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RETAIL INVESTOR
Retail individual investor means an investor who applies or bids for securities of or for a value of not more than Rs.2,00,000.

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PROMOTER
Person or persons who are in over-all control of the company, who are instrumental in the formulation of a plan or programme pursuant to which the securities are offered to the public and those named in the prospectus as promoters(s). 'Promoter Group' includes the promoter, an immediate relative of the promoter . In case promoter is a company, a subsidiary or holding company of that company

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ASBA
Application Supported by Blocked Amount (ASBA) means an application for subscribing to a public issue or rights issue, along with an authorisation to Self Certified syndicate Bank to block the application money in a bank account

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GREEN SHOE OPTION

Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size.
From an investors perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market.
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Anchor Investor
An Anchor Investor shall make an application of a value of at least Rs. 10 crore in the public issue. There shall be a lock-in of 30 days on the shares allotted to the Anchor Investor from the date of allotment in the public issue.

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ISSUE TYPE

OFFER PRICE

DEMAND

PAYMENT

RESERVATIONS

Price at which the Demand for the 100 % advance 50 % of the shares securities are securities offered is payment is required offered are reserved offered and would known only after the to be made by the for applications be allotted is made closure of the issue investors at the time below Rs. 1 lakh known in advance of application. and the balance for to the investors higher amount applications. Book BuildingIssue A 20 % price band Demand for the 10 % advance 50 % of shares s is offered by the securities offered , payment is required offered are reserved issuer within which and at various to be made by the for QIBS, 35 % for investors are prices, is available QIBs along with the small investors and allowed to bid and on a real time basis application, while the balance for all the final price is on the BSE website other categories of other investors. determined by the during the bidding investors have to issuer only after period.. pay 100 % advance closure of the along with the bidding. application.

Fixed Price Issues

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BOOK BUILDING
Book Building is essentially a process used by companies raising capital through Public Offerings-both Initial Public Offers (IPOs) or Follow-on Public Offers ( FPOs) to aid price and demand discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the issuer.

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The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the bid closure based on the demand generated in the process.

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The Process:
The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'. The Issuer specifies the number of securities to be issued and the price band for the bids.

The Issuer also appoints syndicate members with whom orders are to be placed by the investors. The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction.
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The book normally remains open for a period of 5 days. Bids have to be entered within the specified price band.

Bids can be revised by the bidders before the book closes.

On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels.

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The book runners and the Issuer decide the final price at which the securities shall be issued. Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share. Allocation of securities is made to the successful bidders. The rest get refund orders

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Guidelines for Book Building

Rules governing Book building are covered in Chapter XI of the Securities and Exchange Board of India ( ICDR) BSE's Book Building System BSE offers a book building platform through the Book Building software that runs on the BSE Private network.

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This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS. The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line realtime for the entire bidding period.

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In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals.

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The book-building system is part of Initial Public Offer (IPO) . It was introduced by SEBI on October 1995. Book Building involves sale of securities to the public and the institutional bidders on the basis of predetermined price range. It is an innovative method of marketing securities involving price determination and quantum of securities on the basis of the demand from the prospective shareholders.
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Illustration of Book Building

Illustration of Book Building and Price Discovery Process . Bidders can bid at any price within the price band.

For instance, assume a price band of Rs. 20 to Rs. 24 per share, an issue size of 3,000 equity shares and receipt of five bids from bidders out of which one bidder has bid for 500 shares at Rs. 24 per share while another has bid for 1,500 shares at Rs. 22 per share.
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A graphical representation of the consolidated demand and price would be made available at the bidding centres during the bidding period. The illustrative book as set forth below shows the demand for the shares of the company at various prices and is collated from bids from various investors.

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Company XYZ wants to issue 3000 shares through book building. Assume a price band of Rs. 20 to Rs. 24 per share, and receipt of five bids from bidders, details of which are shown in the table below.

Bid Quantity

Bid Price

Cumulative
Quantity

Subscription

500 1000

24 23

500 1500

16.67% 50%

1500
2000 2500

22
21 20

3000
5000 7500

100%
166.67% 250%

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The price discovery is a function of demand at various prices.

The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off, Rs. 22 in the above example. The issuer, in consultation with the BRLMs, will finalize the issue price at or below such cut off price, at or below Rs. 22. All bids at or above this issue price and cutoff bids are valid bids and are considered for allocation in respective category.
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Rights issue
Rights issue means an issue of capital under sub-section (1) of Section 81 of the Companies Act, 1956, to be offered to the existing shareholders of the company through a Letter of Offer.

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RIGHTS ISSUE
RECORD DATE : Company making a rights issue shall announce a record date for the purpose of determining the shareholders eligible to apply for specified securities in the proposed rights issue. LETTER OF OFFER :The abridged letter of offer, along with application form, shall be dispatched through registered post or speed post to all the existing shareholders at least three days before the date of opening of the issue
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PRICE : The issue price shall be decided before determining the record date which shall be determined in consultation with the designated stock exchange. PERIOD OF SUBSCRIPTION :A rights issue shall be open for subscription for a minimum period of fifteen days and for a maximum period of thirty days.

RENUNCIATION : shareholder has a right to renounce his entitlement of equity shares in full or part in favor of any other person(s) subject to approval of the board
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DISCLOSURES IN THE OFFER DOCUMENTS : The offer document shall contain all material disclosures which are true and adequate so as to enable the applicants to take an informed investment decision

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BONUS SHARES
What is Bonus Issue:

Capitalization of profits by issuing fully paid up shares Given free to the members; no cost Not taxable in the hands of receiver
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Compliance required for making bonus issue. Authority in the Articles of Association for issue of bonus shares. No default in payment of interest or principal in respect of fixed deposits or debt securities issued by it No default in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity and bonus The partly paid shares, if any outstanding on the date of allotment, are made fully paid up
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Bonus shares only against reserves

The bonus issue shall be made out of free reserves built out of the genuine profits or securities premium collected in cash only Reserves created by revaluation of fixed assets shall not be capitalised for the purpose of issuing bonus shares. The bonus share shall not be issued in lieu of dividend.

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PREFERENTIAL ISSUE
Issue of capital by listed companies by way of Equity shares

FCDs/PCDs
Any other convertible instrument to select group of persons.

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Compliance required for preferential issue:

a special resolution; all the equity shares, if any, held by the proposed allottees in the issuer are in dematerialised form; the issuer is in compliance with the conditions for continuous listing of equity shares as per the listing agreement; the issuer has obtained the Permanent Account Number of the proposed allottees.

The proposed allottee has not sold any equity shares of the issuer during the six months preceding the relevant date
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Indian Depository Receipts

A foreign company can access Indian securities market for raising funds through issue of Indian Depository Receipts (IDRs).
An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities markets.
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An issuing company making an issue of IDR is required to satisfy the following: (a) it should be listed in its home country. (b) it should not be prohibited to issue securities by any regulatory body.

(c) it should have a track record of compliance with securities market regulations in its home country. Home country means the country where the issuing company is incorporated and listed.
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Conditions for issue of IDR.

An issue of IDR is subject to the following conditions: (a) issue size should not be less than Rs.50 crore.

(b) procedure to be followed by each class of applicant for applying should be mentioned in the prospectus; (c) minimum application amount should be Rs.20,000;

(d) at least 50 %. of the IDR issued should be allotted to qualified institutional buyers on proportionate basis.
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e) the balance 50 % may be allocated among the categories of non-institutional investors and retail individual investors including employees at the discretion of the issuer and the manner of allocation has to be disclosed in the prospectus. Allotment to investors within a category will be on proportionate basis.

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Further, at least 30% of the IDRs issued will be allocated to retail individual investors and in case of under-subscription in retail individual investor category, spill over to other categories to the extent of under-subscription may be permitted. (f) At any given time, there will be only one denomination of IDR of the issuing company.

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BACK UP SLIDES

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FCCB
A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.
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FCEB
Foreign Currency Exchangeable Bond means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be denominated in any freely convertible foreign currency
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External Commercial Borrowings

ECB are defined to include

commercial bank loans,

buyer's credit, supplier's credit, securitised instruments such as floating rate notes, fixed rate bonds etc.,

credit from official export credit agencies,

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commercial borrowings from the private sector window of multilateral financial institutions such as IFC, ADB, AFIC, CDC etc. and Investment by Foreign Institutional Investors (FIIs) in dedicated debt funds

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BUYERS CREDIT
A financial arrangement in which a bank or financial institution, or an export credit agency in the exporting country, extends a loan directly to a foreign buyer or to a bank in the importing country to pay for the purchase of goods and services from the exporting country. Also known as financial credit. This term does not refer to credit extended directly from the buyer to the seller (for example, through advance payment for goods and services).

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Companies have been classified as large cap companies and small cap companies. A large cap company is a company with a minimum issue size of Rs. 10 crore and market capitalization of not less than Rs. 25 crore. A small cap company is a company other than a large cap company.

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Securitized debt instruments

Securitized debt instruments are created when the original holder (like a bank) sells its debt obligation to a third party, called a Special Purpose Vehicle (SPV). The SPV pays the original lender the balance of the debt sold, which gives it greater liquidity.

It then goes on to divide the debt into bonds, which are then sold on the open market.
These bonds are divided into "tranches," which represent different amounts of risk and correspondingly different yields for the bondholder

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Unlisted company IPO conditions

(a) The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (b) The company has a track record of distributable profits for at least three (3) out of immediately preceding five (5) years. (c) The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years

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(c) 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. (d) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size , does not exceed five (5) times its pre-issue net worth as per the audited balance sheet of the last financial year.

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the aggregate of the proposed issue and all previous issues made in the same financial year in terms of issue size does not exceed five times its pre-issue net worth as per the audited balance sheet of the preceding financial year;

ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 Securities Contracts (Regulation) Rules, 1957

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(a) if the issue price per equity share is five hundred rupees or more, the issuer shall have the option to determine the face value at less than ten rupees per equity share: Provided that the face value shall not be less than one rupee per equity share; (b) if the issue price per equity share is less than five hundred rupees, the face value of the equity shares shall be ten rupees per equity share

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OFS- OFFER FOR SALE

Offer For Sale of Shares by Promoters through the Stock Exchange Mechanism In order to facilitate promoters to dilute/offload their holding in listed companies in a transparent manner with wider participation, it has been decided to allow the offer for sale of shares by promoters of such companies through a separate window provided by the stock exchange(s).

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Eligibility-All companies that are eligible for trading and are required to increase public shareholding to meet the minimum public shareholding requirements and all top 100 companies based on market capitalization . Size of Offer for sale of share Floor price

Timeline
Allocation
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