1. Presented By CA Swatantra Singh, B.Com , FCA, MBA
ID:
New Delhi , ,

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

3. Rajput Jain & Associates

4. 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

5. 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

6. 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

7. 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

8. Rajput Jain & Associates
IPO Requirements
Rajput Jain & Associates

9. 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

10. 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

11. 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 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. Rajput Jain & Associates
Intermediaries Involved
Rajput Jain & Associates

22. 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

23. Rajput Jain & Associates
Process & Timeline
Rajput Jain & Associates

24. 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

25. 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

26. Execution Process Timeline
Rajput Jain & Associates

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

28. Rajput Jain & Associates

29. Rajput Jain & Associates
Thank You
Rajput Jain & Associates