On

A COMPREHENSIVE STUDY ON SEBI GUIDELINES

REGARDING INVESTOR PROTECTION

Partial Fulfillment of the requirement for the Degree of
Master of Business Administration (MBA)

ARMY INSTITUTE OF MANAGEMENT & TECHNOLOGY

(GREATER NOIDA)

Submitted by:
Sarvesh Kumar
MBA Batch(2009-11)
Fourth Semester

ACKNOWLEGMENT

Firstly I would like to thank Mr. ANAND RAI (Asst Professor) who provided me
great help in completing research report on SEBI GUIDLINES FOR THE
INVESTOR PROTECTION.
I acknowledge with gratitude the continued support and encouragement given by my
faculty members and Mr. S. MOHANTY possible by not only showing me the
direction but also laying light on it by sharing valuable insights and his vast
experience and knowledge on the subject.
I also thank to all people who helped me and in clearing my queries with regard to
project. They helped me out of the way giving a part of their precious time.
Lastly, I convey my gratitude to all those who are directly or indirectly related to this
project and helped me to complete this project report.
Thanks and Regards,
Sarvesh kumar
MBA (IV) SEM.

PREFACE
The importance of management is being increasingly realized in industrial and nonindustrial organizations, both in India and abroad. To cater to the needs of these giant
business corporations several institutions are performing the remarkable job of
imparting management education.
To provide the students an opportunity to see the management in action and get
adequate exposure regarding in this field. The Research Project has been made an inbuilt part of M.B.A.
Beside theoretical background of management concepts at the job practice
training is an essential part of M.B.A programmed. Every student has to undergo
research project in some field to have a practical exposure of the various functional
areas of the organization, i.e., Human Resource Development, Marketing, Finance,
Production and other related activities of business world. The purpose is to make
management students familiar with day to day functioning of market so as to blend
theory with practice of management.
I would like to mention that the project I have drawn upon the work of many
experts in the field of management and the management theory. Their names have
been included in bibliography at the end of the project report.
In addition to this I would also like to mention that it is not easy job to summarize
the whole concept of satisfaction in a report. The concept is very vast, however
assuming that the project has got something to say on this topic.
Indian security market is working to the challenges thrown in by Indian Economy. To
survive in this highly competitive scenario management Studies are going much
importance. MBA aims at developing manager for the business. Hence, study of a
statutory body is vital part of an MBA Program. Understanding of working aspect of
SEBI 1992 with a managerial Mind it is obviously to undergo a project specially the
field of management.

CHAPTER PLAN

1)

INTRODUCTION

SEBI
INVESTOR

2)

OBJECTIVES OF STUDY

3)

RESEARCH METHODOLOGY

4)

CHAPTER SCHEME

5)

6)

CONCLUSION

REFERENCES

INTRODUCTION
WHAT IS SEBI?
Securities and Exchange Board of India (SEBI) was established by the Government of
India through an executive resolution, and was subsequently upgraded as a fully
autonomous body (a statutory Board) in the year 1992 with the passing of the
Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In
place of Government Control, a statutory and autonomous regulatory board with
defined responsibilities, to cover both development & regulation of the market, and
independent powers has been set up. Paradoxically this is a positive outcome of the
Securities Scam of 1990-91.

The basic objectives of the SEBI are as

To protect the interests of investors in securities;

To promote the development of Securities Market;
To regulate the securities market and
For matters connected therewith or incidental thereto.

Since its inception SEBI has been working targeting the securities and is attending to
the fulfillment of its objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization requirements, margining,
establishment of clearing corporations etc. reduced the risk of credit and also reduced
the market.
SEBI has introduced the comprehensive regulatory measures, prescribed registration
norms, the eligibility criteria, the code of obligations and the code of conduct for
different intermediaries like, bankers to issue, merchant bankers, brokers and subbrokers, registrars, portfolio managers, credit rating agencies, underwriters and others.
It has framed bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made dealing in
securities both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like S&P CNX
Nifty & Sensex) in 2000. A market Index is a convenient and effective product
because of the following reasons:
It acts as a barometer for market behavior;
It is used to benchmark portfolio performance;
It is used in derivative instruments like index futures and index options;
It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national
level, and also to diversify the trading products, so that there is an increase in number
of traders including banks, financial institutions, insurance companies, mutual funds,

primary dealers etc. to transact through the Exchanges. In this context the introduction
of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD
is a real landmark.
SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory
framework for derivatives trading and suggest bye-laws for Regulation and Control of
Trading and Settlement of Derivatives Contracts. The Board of SEBI in its meeting
held on May 11, 1998 accepted the recommendations of the committee and approved
the phased introduction of derivatives trading in India beginning with Stock Index
Futures. The Board also approved the "Suggestive Bye-laws" as recommended by the
Dr LC Gupta Committee for Regulation and Control of Trading and Settlement of
Derivatives Contracts.
SEBI then appointed the J. R. Verma Committee to recommend Risk Containment
Measures (RCM) in the Indian Stock Index Futures Market. The report was submitted
in November 1998.
However the Securities Contracts (Regulation) Act, 1956 (SCRA) required
amendment to include "derivatives" in the definition of securities to enable SEBI to
introduce trading in derivatives. The necessary amendment was then carried out by
the Government in 1999. The Securities Laws (Amendment) Bill, 1999 was
introduced. In December 1999 the new framework was approved.
Derivatives have been accorded the status of `Securities'. The ban imposed on trading
in derivatives in 1969 under a notification issued by the Central Government was
revoked. Thereafter SEBI formulated the necessary regulations/bye-laws and
intimated the Stock Exchanges in the year 2000. The derivative trading started in
India at NSE in 2000 and BSE started trading in the year 2001.

WHO IS INVESTOR?

An individual who takes an ownership position in a company, thus assuming

risk of loss in exchange for anticipated returns.
A money source for a lender.
The holder of a mortgage or the permanent lender for whom the mortgage
banker services the loan. Any person or institutions that invest in mortgages.
One whose principal concern in making an investment is to maximize return
while minimizing risk, in contrast to the speculator who is prepared to accept
greater risk in the hopes of making better-than-average profits. top of page
An individual whose primary concerns in the purchase of a security are regular
dividend income, safety of the original investment, and if possible, capital
appreciation.
Due to the unusual nature of this type of investment, the State of California
requires that investors who participate in vertical or life settlement investments
fall within a specific set of investment criteria to protect people who may not
have the investment knowledge to fully comprehend the complexity of this type
of investment.
A person who makes investments.
A company that invests in mortgages that other company has originated. They
purchase the mortgage for a set amount and collect the payments. Ultimately, a
borrower's loan may be sold to an investor.
A person whose principal purpose is to invest money prudently and productively
over the longer term with the investment objectives being achievement of a
reasonable return and capital appreciation to preserve purchasing power.
An organization putting its money into the project (see also: Donor; Funder).
Individual who commits money in the hopes of earning a profit.
Any entity that invests in mortgages or mortgage backed securities.
The actual source of money for the mortgage.
The owner of a loan Tax Lien - A claim against property for unpaid taxes.
someone who commits capital in order to gain financial returns
Investment is a term with several closely-related meanings in finance and
economics. It refers to the accumulation of some kind of asset in hopes of
getting a future return from it.
Investor AB is a Swedish investment company, founded in 1916 and still
controlled by the Wallenberg family. The company owns a controlling stake in
several large Swedish companies. In 2001 it had a market value of 90 billion
kronor ($10 billion).

OBJECTIVES OF STUDY

The objectives of my research study are following:

To understand the functioning of SEBI in India.

To find out how SEBIS protects the interest of investor.

To study and evaluate the rules and regulations of SEBI.

To find out how SEBI control trading in security market.

RESEARCH METHODOLOGY

Research Methodology is a way by which the research problem can be solve

systematically in it. We study the various steps that are generally adopted by a
research problem along with the logic behind them.
Research is a search for knowledge with the help pf objective & systematic method
for finding a solution towards a specific problem.

PROBLEM DEFINITION:
Comprenshive study on SEBI Guidelines Regarding Investor protection

DATA SOURCES:
Primary data:
Retail investor, stock broker, investment consultants, Portfolio manager
Secondary data:
Books , Journals, Magazines ,websites.

MARKET RESEARCH DESIGN:

Conclusive (descriptive approach) will be adopted in the study

SCOPE OF RESEARCH:
Research is going to be done in the city of NOIDA,
GREATER NOIDA, DELHI

DATA COLLECTION:
Data will be collected by personal interview from Investor, portfolio managers,
student of MBA/IB, Employees of companies.

SAMPLING DESIGN:
It encompasses on the following design.

SAMPLING UNIT:
Stock broker ,retail investors ,managers, Student of MBA and employees of company.

SAMPLE SIZE:
The sample size will be 50 person.

SAMPLING PROCEDURE:
Judgmental sampling

HOW SEBI PROTECT THE INVESTORS INTEREST?

THE Committee set up under the Chairmanship of Dr N. L. Mitra submitted its study
report on investor protection to the Government. The following are the
recommendations:
There is a need for a specific Act for protecting investors' interest. The Act
should codify, amend and consolidate laws and practice for the purpose of
protecting investors' interest in corporate investments.
A judicial forum is needed for the redressal of investors' grievance for the
purpose of remedying the same with the award of compensation. The
consumer forum should be the redressal forum only for the purpose of
compensating the investors.
The provisions relating to investor education and protection fund should be
removed from the Companies Act, 1956 and included in the SEBI Act, 1992
and the fund should be administered by SEBI.
SEBI should be the only regulator for the entire capital market, both primary
and secondary. It should have powers for investigation and to attach the public
fund and all converted assets to prevent misappropriation. But it should not
have powers to award compensation, which is the job of a justice delivery
system.
The regulator may require all IPOs to be insured on the principle of third
party insurance with differential premium based on the risk study by the
insurance companies.
SEBI should have the power and function of an on-and-off-the-field regulator.
The report has listed a number of additional powers to be conferred on SEBI.
However, it cannot be an investigator, regulator and judge at the same time.
The SEBI Act, 1992 should be amended to provide for statutory standing
committees on investors' protection, market operation and standard setting.
The Securities Contract (Regulations) Act, 1956 should be amended to provide
for corporatisation and principles of good governance for stock exchanges.

CHAPTER I
PRELIMINARY
These Guidelines have been issued by the Securities and Exchange Board of
India under section 11 of the Securities and Exchange Board of India Act,
1992.
These Guidelines may be called the Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines, 2000.
These Guidelines shall come into force from the date specified by the Board.

Applicability of the Guidelines

(i) These guidelines shall be applicable to all public issues by listed and unlisted
companies, all offers for sale and rights issues by listed companies whose equity
share capital is listed, except in case of rights issues where the aggregate value of
securities offered does not exceed Rs. 50 lakhs :
1
[Provided that in case of the rights issue where the aggregate value of the
securities offered is less than Rs. 50 lakes, the company shall prepare the letter of
offer in accordance with the disclosure requirements specified in these guidelines
and file the same with the Board for its information and for being put on the
SEBI website.]
(ii) Unless otherwise stated, all provisions in these guidelines applicable to public
issues by unlisted companies shall also apply to offers for sale to the public by
unlisted companies.

CHAPTER II
ELIGIBILITY NORMS FOR COMPANIES ISSUING SECURITIES
Conditions for issue of securities
The companies issuing securities offered through an offer document, shall, satisfy the
following at the time of filing draft offer document with SEBI and also at the time of
filing the final offer document with the Registrar of Companies/Designated Stock
Exchange.]
Filing of offer document
No company shall make any issue of a public issue of securities, unless a draft
prospectus has been filed with the Board, through an eligible Merchant Banker, at
least 21 days prior to the filing of Prospectus with the Registrar of Companies (RoCs).
No listed company shall make any issue of security through a rights issue where the
aggregate value of securities, including premium, if any, exceeds Rs. 50 lacs, unless
the letter of offer is filed with the Board, through an eligible Merchant Banker, at least
21 days prior to the filing of the Letter of Offer with Regional Stock Exchange (RSE).
Companies barred not to issue security
No company shall make an issue of securities if the company has been prohibited
from accessing the capital market under any order or direction passed by the Board.
Application for listing
No company shall make any public issue of securities unless it has made an
application for listing of those securities in the stock exchange(s).
Initial Public Offerings by unlisted companies
An unlisted company may make an initial public offering (IPO) of equity shares or
any other security which may be converted into or exchanged with equity shares at a
later date.
Offer for sale
Offer for sale can also be made if provisions of clause 2.2.2 are complied with at the
time of submission of offer document with the Board.
Public Issue by Listed Companies
(a) A listed company shall be eligible to make a public issue of equity shares or any
other security which may be converted into or exchanged with equity shares at a
later date .
(b) A listed company which does not fulfil the conditions given in the provisos to
clause shall be eligible to make a public issue subject to complying with the
conditions specified.
Outstanding Warrants or Financial Instruments
No unlisted company shall make a public issue of equity share or any security
convertible at a later date into equity share, if there are any outstanding financial
instruments or any other right which would entitle the existing promoters or
shareholders any option to receive equity share capital after the initial public offering.

Partly Paid-up Shares

No company shall make a public or rights issue of equity share or any security
convertible at a later date into equity share, unless all the existing partly paid-up
shares have been fully paid or forfeited in a manner specifies.

CHAPTER III
PRICING BY COMPANIES ISSUING SECURITIES
The companies eligible to make public issue can freely price their equity shares or any
security convertible at a later date into equity shares in the following cases:
Public/Rights Issue by Listed Companies
A listed company whose equity shares are listed on a stock exchange, may freely price
its equity shares and any security convertible into equity at a later date, offered
through a public or rights issue.
Public Issue by Unlisted Companies
An unlisted company eligible to make a public issue and desirous of getting its
securities listed on a recognized stock exchange pursuant to a public issue, may freely
price its equity shares or any securities convertible at a later date into equity shares.
Infrastructure Company
An eligible infrastructure company shall be free to price its equity shares subject to
the compliance with the disclosure norms as specified by SEBI from time to time.
Initial Public Issue by Banks
The banks (whether public sector or private sector) may freely price their issue of
equity shares or any securities convertible at a later date into equity share subject to
approval by the Reserve Bank of India.
Differential Pricing
(a) Any unlisted company or a listed company making a public issue of equity
shares or securities convertible at a later date into equity shares, may issue
such securities to the applicants in the firm allotment category at a price
different from the price at which the net offer to the public is made provided
that the price at which the security is being offered to the applicants in the firm
allotment category is higher than the price at which securities are offered to
public.
(b) A listed company making a composite issue of capital may issue securities at
differential prices in its public and rights issue.
Price Band
(a) Issuer company can mention a price band of 20% (cap in the price band should
not be more than 20% of the floor price) in the offer documents filed with the
Board and actual price can be determined at a later date before filing of the
offer document with the ROCs.
(b) If the Board of Directors has been authorized to determine the offer price
within a specified price band such price shall be determined by a Resolution to
be passed by the Board of Directors.

(c) The Lead Merchant Bankers shall ensure that in case of the listed companies, a
48 hours notice of the meeting of the Board of Directors for passing resolution
for determination of price is given to the Designated Stock Exchange.
(d) In case of public issue by listed issuer company, issue price or price band may
not be disclosed in the draft prospectus filed with the Board.
(e) In case of a rights issue, issue price or price band may not be disclosed in the
draft letter of offer filed with the Board. The issue price may be determined
any time before fixation of the record date in consultation with the Designated
Stock Exchange.
(f) The final offer document shall contain only one price and one set of financial
projections, if applicable.
Payment of Discounts/Commissions, etc.
No payment, direct or indirect in the nature of a discount, commission, allowance or
otherwise shall be made either by the issuer company or the promoters in any public
issue, to the persons who have received firm allotment in such public issue.
Freedom to determine the denomination of shares for public/rights issues and to
change the standard denomination
An eligible company shall be free to make public or rights issue of equity shares in
any denomination determined by it in accordance with sub-section (4) of section 13 of
the Companies Act, 1956 and in compliance with the following and other norms as
may be specified by the SEBI from time to time.

CHAPTER IV
PROMOTERS CONTRIBUTION AND LOCK-IN
REQUIREMENTS
Promoters contribution in a Public Issue by Unlisted Companies
In a public issue by an unlisted company, the promoters shall contribute not less than
20% of the post-issue capital.
Promoters Shareholding in Case of Offers for Sale
The promoters shareholding after offer for sale shall not be less than 20% of the postissue capital.
Promoters Contribution in Case of Public Issues by Listed Companies
In case of public issues by listed companies, the promoters shall participate either to
the extent of 20% of the proposed issue or ensure post-issue shareholding to the extent
of 20% of the post-issue capital.
Promoters Contribution in Case of Composite Issues
(a) In case of composite issues of a listed company, the promoters contribution
shall at the option of the promoter(s) be either 20% of the proposed public
issue or 20% of the post-issue capital.
(b) Rights issue component of the composite issue shall be excluded while
calculating the post-issue capital.
Securities Ineligible for Computation of Promoters Contribution
(a) Where the promoters of any company making an issue of securities have
acquired equity during the preceding three years, before filing the offer
documents with the Board, such equity shall not be considered for
computation of promoters contribution if it is :
acquired for consideration other than cash and revaluation of assets or
capitalization of intangible assets is involved in such transaction(s); or
resulting from a bonus issue, out of revaluation reserves or reserves
without accrual of cash resources.
(b) In case of public issue by unlisted companies, securities which have been
issued to the promoters during the preceding one year, at a price lower than the
price at which equity is being offered to public shall not be eligible for
computation of promoters contribution.
(c) In respect of companies formed by conversion of partnership firms, where the
partners of the erstwhile partnership firm and the promoters of the converted
company are the same and there is no change in management, the shares
allotted to the promoters during previous one year out of the funds brought in
during that period shall not be considered eligible for computation of
promoters contribution unless such shares have been issued at the same price
at which the public offer is made.
(d) In respect of clauses 4.6.1, 4.6.2 and 4.6.3, such ineligible shares acquired in
pursuance to a scheme of merger or amalgamation approved by a High Court
shall be eligible for computation of promoters contribution.

(e) No securities forming part of promoters contribution shall consist of any

private placement made by solicitation of subscription from unrelated persons
either directly or through any intermediary.
(f) The securities for which a specific written consent has not been obtained from
the respective shareholders for inclusion of their subscription in the minimum
promoters contribution subject to lock-in shall not be eligible for promoters
contribution.
Computation of Promoters Contribution in Case of Issue of Convertible Security
(a) In case of any issue of convertible security by a company, the promoters shall
have an option to bring in their subscription by way of equity or by way of
subscription to the convertible security being offered through the proposed
issue so that the total promoters contribution shall not be less than the required
minimum contribution referred.
(b) In case of any issue of security convertible in stages either at par or premium
(conversion price being predetermined), the promoters contribution in terms of
equity share capital shall not be at a price lower than the weighted average
price of the share capital arising out of conversion.
(c) The promoters contribution shall be computed on the basis of post-issue
capital assuming full proposed conversion of such convertible security into
equity.

Promoters Participation in Excess of the Required Minimum Contribution to be

Treated as Preferential Allotment
In case of a listed company, participation by promoters in the proposed public issue in
excess of the required minimum percentage referred to in clauses 4.3.1 and 4.4.1 shall
attract the pricing provisions of Guidelines on preferential allotment, if the issue price
is lower than the price as determined on the basis of said preferential allotment
guidelines.
Promoters Contribution to be brought in before Public Issue Opens
(a) Promoters shall bring in the full amount of the promoters contribution
including premium at least one day prior to the issue opening date 1[which
shall be kept in an escrow account with a Scheduled Commercial Bank and the
said contribution/amount shall be released to the company along with the
public issue proceeds] :
(b) The companys board shall pass a resolution allotting the shares or convertible
instruments to promoters against the moneys received.
(c) A copy of the resolution along with a Chartered Accountants Certificate
certifying that the promoters contribution has been brought in shall be filed
with the Board before opening of the issue.
(d) The certificate of the Chartered Accountants shall also be accompanied by a
list of names and addresses of friends, relatives and associates who have
contributed to the promoters quota along with the amount of subscription
made by each of them.

CHAPTER V
PRE-ISSUE OBLIGATIONS
The lead merchant banker shall exercise due diligence
(a) The standard of due diligence shall be such that the merchant banker shall
satisfy himself about all the aspects of offering, veracity and adequacy of
disclosure in the offer documents.
(b) The liability of the merchant banker as referred to shall continue even after the
completion of issue process.
The lead merchant banker, shall pay requisite fee in accordance with regulation 24A
of the Securities and Exchange Board of India (Merchant Bankers) Rules and
Regulations, 1992, along with draft offer document filed with the Board.

Memorandum of Understanding (MOU)

(a) No company shall make an issue of security through a public or rights issue
unless a Memorandum of Understanding has been entered into between a lead
merchant banker and the issuer company specifying their mutual rights,
liabilities and obligations relating to the issue.
(b) The MOU shall contain such clauses as are specified at Schedule I and such
other clauses as considered necessary by the lead merchant banker and the
issuer company:
(c) The Lead Merchant Banker responsible for drafting of the offer documents
shall ensure that a copy of the MOU entered into with the issuer company is
submitted to the Board along with the draft offer document.

Inter se Allocation of Responsibilities

(a) In case a public or rights issue is managed by more than one merchant banker
the rights, obligations and responsibilities of each merchant banker shall be
demarcated as specified in Schedule II.
(b) In case of under subscription at an issue, the Lead Merchant Banker
responsible for underwriting arrangements shall invoke underwriting
obligations and ensure that the underwriters pay the amount of devolvement
and the same shall be incorporated in the inter se allocation of responsibilities
(Schedule II) accompanying the due diligence certificate submitted by the
Lead Merchant Banker to the Board.

Due Diligence Certificate

(a) The Lead Merchant Banker shall furnish to the Board a due diligence
certificate as specified in Schedule III along with the draft prospectus.
(b) In addition to the due diligence certificate furnished along with the draft offer
document, the Lead Merchant Banker shall also.
(c) The lead managers who are responsible for conducting due diligence exercise
with respect to contents of the offer document, as per inter se allocation of
responsibilities shall sign due diligence certificate.

(d) Certificates Signed by the Company Secretary or Chartered Accountant, in

case of Listed Companies Making Further Issue of Capital.
(e) The Lead Merchant Banker shall furnish the following certificates duly signed
by 5[Company Secretaries] or Chartered Accountants along with the draft offer
documents.

Undertaking
The issuer shall submit an undertaking to the Board to the effect that transactions in
securities by the promoter, the promoter group and the immediate relatives of the
promoters during the period between the date of filing the offer documents with the
Registrar of Companies or Stock Exchange as the case may be and the date of closure
of the issue shall be reported to the stock exchanges concerned within 24 hours of the
transaction(s).

Appointment of Intermediaries
o Appointment of Merchant Bankers
(a) A Merchant Banker shall not lead manage the issue if he is a promoter or a
director or associate of the issuer company :

o Appointment of Other Intermediaries

(a) Lead Merchant Bankers shall ensure that the other intermediaries being
appointed are duly registered with the Board, wherever applicable.
(b) Before advising the issuer on the appointment of other intermediaries, the
Lead Merchant Banker shall independently assess the capability and the
capacity of the various intermediaries to carry out assignments.
(c) The Lead Merchant Banker shall ensure that issuer companies enters into a
Memorandum of Understanding with the intermediary(ies) concerned
whenever required.
(d) The Lead Merchant Banker shall ensure that Bankers to the Issue are
appointed in all the mandatory collection centres as specified.
(e) The Lead Merchant Banker shall not act as a Registrar to an issue in which it
is also handling the post-issue responsibilities.
(f) The Lead Merchant Bankers shall ensure that,
o The Registrars to Issue registered with the Board are appointed in all
public issues and rights issues.
o In case where the issuer company is a registered Registrar to an Issue,
the issuer shall appoint an independent outside Registrar to process its
issue.
o Where the number of applications in a public issue is expected to be
large, the issuer company in consultation with the lead merchant banker
may associate one or more Registrars registered with the Board for the
limited purpose of collecting the application forms at different centres
and forward the same to the designated Registrar to the Issue as
mentioned in the offer document.
o The designated Registrar to the Issue shall be primarily and solely
responsible for all the activities as assigned to them for the issue
management.
Authorized Collection Agents

(a) The issuer company can also appoint authorized collection agents in
consultation with the Lead Merchant Banker subject to necessary disclosures
including the names and addresses of such agents made in the offer document.
(b) The modalities of selection and appointment of collection agents can be made
at the discretion of the Lead Merchant Banker.

Appointment of Compliance Officer

(a) An issuer company shall appoint a compliance officer who shall directly liaise
with the Board with regard to compliance with various laws, rules, regulations
and other directives issued by the Board and investors complaints related
matter.
(b) The name of the compliance officer so appointed shall be intimated to the
Board.

Abridged Prospectus
The Lead Merchant Banker shall ensure the following:
(a) Every application form distributed by the issuer Company or anyone else is
accompanied by a copy of the Abridged Prospectus.
(b) The application form may be stapled to form part of the Abridged Prospectus.
Alternatively, it may be a perforated part of the Abridged Prospectus.
(c) The Abridged Prospectus shall not contain matters which are extraneous to the
contents of the prospectus.
(d) Enough space shall be provided in the application form to enable the investors
to file in various details like name, address, etc.

Agreements with depositories

The lead manager shall ensure that the issuer company has entered into agreements
with all the depositories for dematerialisation of securities. He shall also ensure that
an option be given to the investors to receive allotment of securities in dematerialised
form through any of the depositories.]

Branding of securities
Securities may be branded describing their nature but not the quality.

CHAPTER VI
CONTENTS OF OFFER DOCUMENT
In addition to the disclosures specified in Schedule II of the Companies Act, 1956, the
prospectus shall contain the following:
The prospectus shall contain all material information which shall be true and adequate
so as to enable the investors to make informed decision on the investments in the
issue.
The prospectus shall also contain the information and statements specified in this
Chapter and shall as far as possible follow the order in which the requirements are
listed in this Chapter and summarized in Schedule VIIA:

Cover Pages
The cover page paper shall be of adequate thickness (preferably minimum 100 gcm.
quality).

Front Cover Pages

The front outside and inside cover pages of the prospectus shall be white and no
patterns or pictures shall be printed on these pages.
The front outside cover page of the prospectus shall contain the following details
only:
(a) Issue Details
(i) The word Prospectus.
(ii) The name of the issuer company, its logo, its previous name if any, the
address of its registered office, along with its telephone number, fax
number, contact person, website address and e-mail address.
(iii) The nature, number, price and amount of the instruments offered and the
issue size, as may be applicable.
(iv) The names, logos and addresses of all the Lead Merchant Bankers with their
titles who file the prospectus with the Board, along with their telephone
numbers, fax numbers, website addresses and e-mail addresses.
(v) The name, logo and address of the Registrar to the Issue, along with its
telephone number, fax number, website address and e-mail address.
(vi) Issue Schedule:
a. Date of opening of the issue.
b. Date of closing of the issue.
c. Date of earliest closing of the issue.
Back Cover Pages
The back inside cover page and back outside cover page shall be in white.
Table of Contents
Table of Contents shall appear immediately after the front inside cover page.
Risk Factors
(a) The Risk factors shall be classified as those which are specific to the project and
internal to the issuer company and those which are external and beyond the
control of the issuer company.
(b) The Risk factors shall be determined on the basis of their materiality.

 General Information
(a) The name, address of registered office and the registration number of the issuer
company, along with the address of the Registrar of Companies where the issuer
company is registered.
(b) The Board of Directors of the issuer company.
(c) Brief details of the Chairman, Managing Director, Whole Time Directors, etc. of
the issuer company.
(d) The names, addresses, telephone numbers, fax numbers and e-mail addresses of
the Company Secretary, Legal Advisor and Bankers to the Company.
(e) The name, address, telephone number, fax number and e-mail address of the
Compliance Officer.
(f) The names, addresses, telephone numbers, fax numbers, contact person, website
addresses and e-mail addresses of the Merchant Bankers, Co-Managers,
Registrars to the Issue, Bankers to the Issue, Brokers to the Issue, Syndicate
members, etc.
Capital Structure
The capital structure shall be presented in the following manner:
(a) Authorized, issued, subscribed and paid up capital (Number of instruments,
description and aggregate nominal value).
(b) Size of the present issue, giving separately promoters contribution, firm
allotment/reservation for specified categories and net offer to public (Number of
instruments, description, aggregate nominal value and issue amount shall be
given in that order; Name(s) of group companies to be given, in case reservation
has been made for shareholders of the group companies; Applicable percentages
may be given in case of book built issue).
(c) Paid-up Capital:
(i) After the issue.
(ii) After conversion of securities (if applicable).
(d) Share Premium Account (before and after the issue).
Funds Requirement
(a) The requirement for funds proposed to be raised through the issue shall be
disclosed clearly.
(b) Where the company proposes to undertake more than one activity, i.e.,
diversification, modernization, expansion, etc., the total project cost shall be
given activity-wise or project-wise as the case may be.
(c) Where the company is implementing the project in a phased manner, the cost of
each phase, including the phase, if any, which has already been implemented,
shall be separately given.
Funding Plan (Means of Finance)
(a) An undertaking shall be given in the prospectus by the issuer company
confirming firm arrangements of finance through verifiable means towards 75%
of the stated means of finance, excluding the amount to be raised through
proposed Public/Rights issue, have been made.
(b) The balance portion of the means of finance for which no firm arrangement has
been made shall be mentioned without specification.
Appraisal

(a) The scope and purpose of the appraisal, if any, along with the date of appraisal
shall be disclosed in the prospectus.
(b) The prospectus shall contain the cost of the project and means of finance as per
the appraisal report.
(c) The revision, if any, in the project cost and the means of finance after the date of
issue of the appraisal report shall be explained and disclosed.
(d) The weaknesses and threats, if any, given in the appraisal report, shall be
disclosed in the prospectus by way of risk factors.
Details of Balance Fund Deployment
(a) Year-wise break up of the expenditure proposed to be incurred on the said
project.
Interim Use of Funds
(a) Investment avenues in which the management proposes to deploy issue proceeds,
pending its utilization in the proposed project.
Details of the business of the issuer company
(a) Location of the project
(b) Plant, machinery, technology, process, etc.:
(i) Details in a tabular form to be given shall include the machines required to
be bought by the issuer company, cost of the machines, name of the
suppliers, the date of placement of order and the date/expected date of
supply.
(ii) In case of machines yet to be delivered, the date of quotations relied upon
for the cost estimates given, shall also be mentioned.
(iii) Percentage and value terms the plant and machinery for which orders are
yet to be placed shall be stated and also be given by way of a risk factor.
(iv) Details of second hand machinery bought/proposed to be bought, if any,
including the age of the machines, balance estimated life, etc. shall also be
given.
(c) Collaborations, any performance guarantee or assistance in marketing by the
collaborators:
(i) Following information regarding persons/entities with whom technical and
financial agreements have been entered into to be given:
a. place of registration and year of incorporation.
b. paid-up share capital.
c. turnover of the last financial year of operation.
d. general information regarding such persons relevant to the issuer.
(d) Infrastructure facilities for raw materials and utilities like water, electricity, etc.
(e) Products/services of the issuer company:
(i) Nature of the product/s - consumer/industrial and end users.
(ii) Market, including details of the competition, past production figures for the
industry, existing installed capacity, past trends and future prospects
regarding exports (if applicable), demand and supply forecasts (if given,
should be essentially with assumptions unless sourced from a market
research agency of repute), etc. to be given. Source of data used shall be
mentioned.
(iii) Approach to marketing and proposed marketing set up.

(iv) Export possibilities and export obligations, if any (in case of a issuer
company providing any service particulars, as applicable, be furnished).
Business strategy
(a) A brief statement about business strategy.
(b) A brief statement about future prospects, including the following:
(i) Capacity and Capacity Utilization:
a. A table shall be incorporated giving the existing installed capacities for
each product, capacity utilization for these products in the previous
three years, proposed capacities for existing as well as proposed
products and the assumptions for future capacity utilization for the next
three years (from the date of commencement of commercial
production) in respect of existing, as well as proposed products.
b. If the projected capacity utilization is higher than the actual average
capacity utilization by more than 25% during the previous three years,
how the issuer company proposes to achieve the projected levels of
capacity utilization in view of its failure to achieve levels of similar
capacity utilization in the past, shall be stated.
(ii) Projections:
No forecast of projections relating to financial performance of the issuer
company shall be given in the prospectus.
Capitalization statement
Pre-issue as (Figures in Rs. crores)
Short-Term Debt
Long Term Debt
Shareholders Funds
Share Capital
Reserves
Total Shareholders Funds
Long Term Debt/Equity
Capital Structure
1. Authorized, issued, subscribed and paid up capital (Number of instruments,
description, aggregate nominal value).
2. Size of present issue.
3. Paid-up Capital:
- Before the issue;
- After the issue (if the IDR issue involves issue of fresh equity shares); and
- share premium account (before and after the issue)
4. Detailed notes to Capital Structure
Capital Structure shall also contain details regarding holdings of major shareholders,
i.e., the person or persons who are in over-all control of the company.

CHAPTER VII
POST-ISSUE OBLIGATIONS
The post-issue obligations shall be as follows :
Post-issue Monitoring Reports
(a) Irrespective of the level of subscription, the post-issue Lead Merchant Banker
shall ensure the submission of the post-issue monitoring reports as per formats
specified in Schedule XVI.
(b) These reports shall be submitted within 3 working days from the due dates.
(c) The due date for submitting post-issue monitoring report in case of public
issues by listed and unlisted companies
a. 3-day monitoring report in the case of issue through book-building
route, for book-built portion.
(d) The due date of the report shall be third day from the date of allocation in the
book-built portion or one day prior to the opening of the fixed price portion,
whichever is earlier.
b. 3-day monitoring report in other cases, including fixed price portion of
book-built issue.
c. The due date for the report shall be the third day from the date of
closure of the issue.
(e) Final post-issue monitoring report for all issues.
(f) The due date for this report shall be the third day from the date of listing or 78
days from the date of closure of the subscription of the issue, whichever is
earlier.]
(g) The due dates for submitting post-issue monitoring report in case of rights
issues]
d. 3-Day Post-Issue Monitoring Report
(h) The due date for this report shall be the 3rd day from the date of closure of
subscription of the issue.
e. 50-Day Post-Issue Monitoring Report
(i) The due date for this report shall be the 50th day from the date of closure of
subscription of the issue.
Redressal of Investor Grievances
The Post-issue Lead Merchant Banker shall actively associate himself with post-issue
activities namely, allotment, refund and dispatch and shall regularly monitor redressal
of investor grievances arising there from.
Co-ordination with Intermediaries
(i) The Post-issue lead merchant banker shall maintain close co-ordination with the
Registrars to the Issue and arrange to depute its officers to the offices of various
intermediaries at regular intervals after the closure of the issue to monitor the flow of
applications from collecting bank branches, processing of the applications including
those accompanied by stock invest and other matters till the basis of allotment is
finalized, dispatch security certificates and refund orders completed and securities
listed.
(ii) Any act of omission or commission on the part of any of the intermediaries
noticed during such visits shall be duly reported to the Board.

[Omitted by SEBI/CFD/DIL/DIP/12/2004/8/4, dated 8-4-2004, w.e.f. 8-4-2004.]

Underwriters
(a) (i) If the issue is proposed to be closed at the earliest closing date, the lead
Merchant Banker shall satisfy himself that the issue is fully subscribed
before announcing closure of the issue.
(ii) In case there is no definite information about subscription figures, the issue
shall be kept open for the required number of days to take care of the
underwriters interests and to avoid any dispute, at a later date, by the
underwriters in respect of their liability.
(b) In case there is a devolvement on underwriters, the lead merchant banker shall
ensure that the underwriters honor their commitments within 60 days from the
date of closure of the issue.
(c) In case of undersubscribed issues, the lead merchant banker shall furnish
information in respect of underwriters who have failed to meet their underwriting
devolvement to the Board in the format specified in Schedule XVII.
Bankers to an issue
The post-issue Lead Merchant Banker shall ensure that moneys received pursuant to
the issue and kept in a separate bank (i.e. Bankers to an Issue), as per the provisions of
section 73(3) of the Companies Act, 1956, is released by the said bank only after the
listing permission under the said section has been obtained from all the stock
exchanges where the securities were proposed to be listed as per the offer document.
Post-issue Advertisements
The post-issue Lead Merchant Banker shall ensure that in all issues, advertisement
giving details relating to oversubscription, basis of allotment, number, value and
percentage of applications 2[***], number, value and percentage of successful
allottees 3[***], date of completion of dispatch of refund orders, date of dispatch of
certificates and date of filing of listing application is released within 10 days from the
date of completion of the various activities at least in an English National Daily with
wide circulation, one Hindi National Paper and a Regional language daily circulated
at the place where the registered office of the issuer company is situated.
(a) Post-issue
Lead
Merchant
Banker
shall
ensure
that
issuer
company/advisors/brokers or any other agencies connected with the issue do not
publish any advertisement stating that the issue has been oversubscribed or
indicating investors response to the issue, during the period when the public
issue is still open for subscription by the public.
(b) Advertisement stating that the subscription to the issue has been closed may
be issued after the actual closure of the issue.
Basis of Allotment
In a public issue of securities, the Executive Director/Managing Director of the
Designated Stock Exchange along with the post issue Lead Merchant Banker and the
Registrars to the Issue shall be responsible to ensure that the basis of allotment is
finalized in a fair and proper manner in accordance with the following guidelines:
Provided 1[that], in the book building portion of a book built public issue
notwithstanding the above clause, Clause 11.3.5 of Chapter XI of these Guidelines
shall be applicable.]
Proportionate allotment procedure

[Allotment shall be on proportionate basis within the specified categories, rounded off
to the nearest integer subject to a minimum allotment being equal to the minimum
application size as fixed and disclosed by the issuer.
Explanation: For the purposes of the aforesaid clause, the illustration given in
Schedule XVIII may be referred to.]
Reservation for 2[Retail Individual Investor]
(a) The above proportionate allotments of securities in an issue that is
oversubscribed shall be subject to the reservation for 4[retail individual
investors] as described below :
I. A minimum 50% of the net offer of securities to the public shall
initially be made available for allotment to retail individual investors,
as the case may be.
II. The balance net offer of securities to the public shall be made
available for allotment to:
III. individual applicants other than retail individual investors, and
IV. other investors including Corporate bodies/institutions irrespective of
the number of shares, debentures, etc. applied for.
V. The unsubscribed portion of the net offer to any one of the categories
specified in (a) or (b) shall/may be made available for allotment to
applicants in the other category, if so required.
Explanation.It is clarified that the words a minimum of 50% of the public offer
used in sub-clause (a) above means that if the category of retail individual investors
was to be entitled to get 70% of the public offer in accordance with proportionate
formula, the category should get 70%. If the category is entitled to get only 30% of
the public offer in accordance with the proportionate allotment formula, there should
be a reservation of a minimum of 50% of the net public offer.]
(a) The drawal of lots (where required) to finalize the basis of allotment, shall be
done in the presence of a public representative on the Governing Board of the
Designated Stock Exchange.
(b) The basis of allotment shall be signed as correct by the Executive
Director/Managing Director of the designated stock exchange and the public
representative (where applicable) in addition to the lead merchant banker
responsible for post issue activities and the Registrar to the Issue. The
designated stock exchange shall invite the public representative on a rotation
basis from out of the various public representatives on its governing board.]
Other Responsibilities
(a) The lead merchant banker shall ensure that the dispatch of share
certificates/refund orders 7[***] and demat credit is completed and the
allotment and listing documents submitted to the stock exchanges within 2
working days of finalization of the basis of allotment.
(b) The post-issue lead manager shall ensure that all steps for completion of the
necessary formalities for listing and commencement of trading at all stock
exchanges where the securities are to be listed are taken within 7 working days
of finalisation of basis of allotment.
(c) The Lead Merchant Banker shall ensure payment of interest to the applicants
for delayed despatch of allotment letters, refund orders, etc. as prescribed in
the offer document.

(d) The Post-issue Lead Merchant Banker shall ensure that the despatch of refund
orders/allotment letters/share certificates is done by way of registered
post/certificate of posting as may be applicable.
(e) In case of all issues, advertisement giving details relating to oversubscription,
basis of allotment, number, value and percentage of applications received
2
[***], number, value and percentage of successful allottees 3[***], date of
completion of despatch of refund orders, date of despatch of certificates and
date of filing of listing application.
(f) Such advertisement shall be released within 10 days from the date of
completion of the various activities.
(g) The post-issue lead merchant banker shall continue to be responsible for postissue activities till the subscribers have received the shares/debenture
certificates or refund of application moneys and the listing agreement is
entered into by the issuer company with the stock exchange and listing/trading
permission is obtained.

CHAPTER VIII
OTHER ISSUE REQUIREMENTS
The Lead Merchant Banker shall ensure compliance with the following :
Public issue and listing of non-convertible debt securities (hereinafter referred to
as NCDS) and Debt Securities convertible into equity after allotment (hereinafter
referred to as DSCE).
An unlisted company making a public issue of NCDS may, subject to other
applicable provisions of these guidelines, make a public issue and make an
application for listing its NCDS in the Stock Exchange/s without making a prior
public issue of equity and listing thereof, if the following conditions are fulfilled:
(a) The NCDS shall carry a credit rating not below investment grade at least from
one Credit Rating Agency registered with the Board. Where the issue size of the
NCDS is Rs. 100 crores or more, such rating shall be obtained from at least two
Credit Rating Agencies.
(b) A contribution of at least 20% of the project cost i.e., objects proposed to be inter
alia, financed through the issue, shall be brought in the form of equity. Such
equity participation may be brought by the promoter from his own funds or from
other sources, subject to the condition that at least 20% of the issue size is
brought by way of equity by the promoter from his own funds. In case, the
project is to be implemented in stages, the promoters contribution as per these
requirements shall be with respect to total equity participation till the respective
stage vis-a-vis the debt raised or proposed to be raised through the issue.
(c) The issuer company shall agree to comply with the requirements of continuing
disclosures as specified under the listing agreement to be entered into with
concerned stock exchanges as is applicable for listing of equity shares.
(d) The issuer company shall agree to obtain prior consent of the holders of the
NCDS through special resolution to be passed at the general meeting of the
NCDS holders for change in terms of issue, change in capital structure and
change in shareholding pattern.
(e) There shall be no partly paid-up shares/other securities at the time of filing of
draft offer document with the Board.
(f) The issuer company may come out with a public issue of equity/security
convertible into equity after allotment during the currency of the NCDS or
thereafter, only after complying with the guidelines applicable for an initial
public offering of such securities.
(g) The equity held by the promoters or others at the time of issue of NCDS may be
listed only when an initial public offer of equity/securities convertible into equity
after allotment is made after complying with the applicable provisions of these
Guidelines.
A Municipal Corporation which has no share capital may be subject to the
provisions of sub-clauses (a), (b) and (c) of clause 8.2.1, make a public issue of
NCDS and list the same on the stock exchange/s.
An unlisted company making a public issue of DSCE may, subject to other
applicable provisions of these Guidelines make a public issue and make an
application for listing on the stock exchanges without making a prior public issue
of its equity and listing thereof, if the following conditions are fulfilled :

(a) The provisions of sub-clauses (a) to (e) of clause 8.2.1 shall be mutatis mutandis
complied with.
(b) An issuer company making an initial public offer of DSCE may come out with a
subsequent public issue of equity/security convertible into equity after allotment
during the currency of the DSCE only after complying with the guidelines
applicable for an initial public offering of such securities:
Provided that the provisions of clause 2.6 shall not be applicable for an Initial
Public Offer of such securities if the floor price for conversion of DSCE is
determined and disclosed in the offer document for issue of DSCE.
(c) The equity held by the promoters and others may be listed along with the listing
of equity in initial public offering of equity/security convertible into equity after
allotment or at the time of listing if equity arising on conversion of the DSCE.
(d) If the equity shares held by the promoters is proposed to be listed on conversion
of DSCE, it shall be ensured that the number of equity shares allotted to the
public (after excluding the allotment of equity shares to holders of DSCE issued
on firm allotment/reservation basis) as a percentage of the total paid-up equity
capital after conversion and listing of the promoters equity, is not less than the
percentage specified in clause (b) of sub-rule (2) of rule 19 of Securities
Contracts (Regulation) Rules, 1957.
The lead merchant banker can mention a price band of 20% (cap in the coupon
rate/price band should not be more than 20% of the floor coupon rate/price) in the
offer document filed with the Board and the specific coupon rate/price can be
determined by an issuer in consultation with the lead manager at a later date
before filing of the offer document with the RoC/s.
The issuer may subject to the provisions of Chapter XI of these guidelines, make
the issue through book building process to ascertain and determine the coupon rate
and price/conversion price of the NCDS/DSCE.]
In case of a public issue by an unlisted company, the net offer to public shall be at
least 10 per cent or 25 per cent as the case may be, of the post-issue capital.
In case of a public issue by a listed company, the net offer to public shall be at
least 10 per cent or 25 per cent as the case may be, of the issue size.
The issuer company is free to make reservations and/or firm allotments to various
categories of persons mentioned hereafter for the remaining of the issue size
subject to other relevant provisions of these guidelines.
Explanation :
1. The expression reservation shall mean reservation on Competitive Basis
wherein allotment of shares is made in proportion to the shares applied for by the
concerned reserved categories.
2. Reservation on competitive basis can be made in a public issue to the following
categories :

Sr. No.
4

[(i)
(ii)

(iii)
(iv)
(v)
(vi)

Category of Persons
Employees of the company]
Shareholders of the promoting companies in the case of a new company and
shareholders of group companies in the case of an existing company
Indian Mutual Funds
Foreign Institutional Investors (including non-resident Indians and overseas
corporate bodies)
Indian and Multilateral Development Institutions
Scheduled Banks

[2A. In a public issue (not being a composite issue) by a listed company, the
reservation on competitive basis can be made for the shareholders who, on the record
date (date fixed for the purpose of determining the eligible shareholders), are holding
shares worth up to Rs. 50,000 determined on the basis of closing price as on the
previous day :
Provided that the allotment to such shareholders shall be on proportionate basis
as in case of allotment in public category.]
3. Specified Categories for Firm allotment in public issues can be made to the
following :
Sr.
Category of Persons
No.
(i)
(ii)
(iii)
(iv)
(v)

Indian and Multilateral Development Financial Institutions

Indian Mutual Funds
Foreign Institutional Investors (including non-resident Indians and overseas
corporate bodies)
Permanent/regular employees of the issuer company
Scheduled Banks

4. The Lead Merchant Banker(s) can be included in the category of persons entitled
to firm allotments subject to an aggregate maximum ceiling of 5% of the
proposed issue of securities.
5. The aggregate of reservations and firm allotments for employees in an issue,
shall not exceed 10% of the total proposed issue amount.
6. For the shareholders, the reservation shall not exceed 10% of the total proposed
issue amount.
7. In case of promoting companies are Designated Financial Institutions/State and
Central Financial Institutions, the employees and the shareholders of such
promoting companies, shall not be eligible for the said reservations.
8. The allotment of securities to the specified categories for firm
allotment/reservation shall be subject to such conditions as may be specified by
the Government and regulatory authorities.
Application to the Board for Relaxation from applicability of clause (b) to subrule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957, by an
unlisted company.

 An unlisted company may make an application to the Board for relaxation from
applicability of clause (b) to sub-rule (2) of rule 19 of the Securities Contracts
(Regulation) Rules, 1957, for listing of its shares without making an initial public
offer if it satisfies the following conditions :
(i) Shares have been allotted by the unlisted company (transferee-company) to the
holders of securities of a listed company (transferor-company) pursuant to a
scheme of reconstruction or amalgamation under the provision of the Companies
Act, 1956, and such scheme has been sanctioned by the High Court/s of
Judicature.
(ii) The listing of the shares of the unlisted transferee-company is in terms of scheme
of arrangement sanctioned by the High Court/s of the Judicature.
(iii) At least 25% of the paid-up share capital, post scheme, of the unlisted transfereecompany seeking listing comprises shares allotted to the public holders of shares
in the listed transferor-company.
(iv) The unlisted company has not issued/reissued any shares, not covered under the
scheme.
(v) There are no outstanding warrants/instruments/agreements which gives right to
any person to take the shares in the unlisted transferee-company at any future
date. If there are such instruments in the scheme sanctioned by the Court, the
percentage referred to in point (iii) above, shall be computed after giving effect
to the consequent increase of capital on account of compulsory conversions
outstanding as well as on the assumption that the options outstanding, if any, to
subscribe for additional capital will be exercised.
(vi) The share certificates have been dispatched to the allottees pursuant to the
scheme of arrangement or their names have been entered as beneficial owner in
the records of the depositories.
(vii) That the shares of the transferee-company issued in lieu of the locked-in-shares
of the transferor-company are subjected to the lock-in for the remaining period.
(viii) In addition to the requirements of clause (vii) above, the following conditions
are also to be complied with :
(a) in case of a hiving-off of a division of a listed company (say A) and its
merger with a newly formed company or existing company (say B) there
would not be any additional lock-in, if the paid-up share capital of company
B is only to the extent of requirement for incorporation purposes.
(b) in case of merger where the paid-up share capital of the company seeking
listing (company B) is more than the requirement for incorporation, the
promoters shares shall be locked-in to the extent of 20% of the post merger
paid-up capital of the unlisted company, for a period of 3 years from the
date of listing of the shares of the unlisted company. The balance of the
entire pre-merger capital of the unlisted company shall also be locked-in for
a period of 3 years from the date of listing of the shares of the unlisted
company.
An application to the Board under clause 8.3.5.1 shall be made through the
designated stock exchange of the listed company and the designated stock
exchange may recommend the application giving the reason therefor.
The unlisted company shall take steps for listing, simultaneously on all stock
exchanges where the shares of the (transferor) listed company are/were listed,
within 30 days of the date of the final order of the High Court/s approving the

scheme. The formalities for commencing of trading shall be completed within 45

days of the date of final order of the High Court/s.
Before commencement of trading, the company shall give an advertisement in one
English and one Hindi newspaper with nationwide circulation and one regional
newspaper with wide circulation at the place where the registered office of the
company is situated, giving details as specified in Schedule XXVIII.]
Capital Structure
For the purposes of presentation of the capital structure in the specified format, the
lead merchant banker shall take into account the following :
(a) Proposed issue amount = (Promoters contribution in the proposed issue) + (firm
allotment) + (offer through the offer document).
(b) Offer through the offer document shall include net offer to the public and
reservations to the permitted reserved categories and shall not include the
promoters contribution in the proposed issue and firm allotment.
(c) Net offer to the public shall mean the offer made to Indian public and does not
include reservations/firm allotments/promoters contribution.
Firm Allotments and Reservations
(a) (i) If any firm allotment has been made to any person(s) in the specified
categories, no further application for subscription to the public issue from
such person(s) [excepting application from employees category] shall be
entertained.
(ii) Where reservation has been made to specified category(ies), person(s)
belonging to category(ies) [except employees and shareholders categories]
shall not make an application in the net public offer category.
(b) (i) An applicant in the net public category cannot make an application for that
number of securities exceeding the number of securities offered to the
public.
(ii) In the case of reserved categories, a single applicant in the reserved
category can make an application for a number of securities which exceeds
the reservation.
(c) (i) Any unsubscribed portion in any reserved category may be added to any
other reserved category.
(ii) The unsubscribed portion, if any, after such inter se adjustments amongst
the reserved categories shall be added back to the net offer to the public.
(d) In case of under subscription in the net offer to the public portion, spill-over to
the extent of under subscription shall be permitted from the reserved category to
the net public offer portion.
(e) If any person to whom firm allotment is proposed to be made withdraws partially
or fully from the offer made to him after filing of the prospectus with the
Registrar of Companies, the extent of shares proposed to be allotted to such
person, shall be taken up by the promoters and the subscription amount shall be
brought in at least one day prior to the issue opening date.
(f) The shares so acquired by the promoters under sub-clause (e) above shall also be
subject to a lock-in for a period of 3 years.
(g) No buy-back or stand-by or similar arrangements shall be allowed with the
persons for whom securities are reserved for allotment on a firm basis.
Terms of the Issue

 Minimum application value

(i)The minimum application value shall be within the range of Rs. 5,000 to Rs. 7,000.
The issuer company, in consultation with the merchant banker, shall stipulate the
minimum application size (in terms of number of shares) falling within the
aforesaid range of minimum application value and make upfront disclosures in
this regard, in the offer document.
Explanation : For the purpose of this clause, the minimum application value shall
be with reference to the issue price of the shares and not with reference to the
amount payable on application.
Illustration : For the purpose of sub-clause (i), the following may be taken as
illustration.
The issue price of shares is Rs. 500. Out of the same, Rs. 100 is payable on
application and the balance on allotment and calls. In this instance, the
application value of Rs. 5,000 - Rs. 7,000 shall be arrived at with reference to the
issue price of Rs. 500. As such, the minimum application size, to be stipulated in
the offer document, would range from 10 shares to 14 shares and not 50 shares to
70 shares.
(ii) Applications can be made in multiples of the minimum size/value so stipulated in
the offer document by the issuer and merchant banker as at (i) and within the
range of Rs. 5,000 - Rs. 7,000, as stipulated at (i).
(iii) Schedule XVIIIA may be referred for illustration on sub-clause (ii) above.
(iv) The minimum application moneys to be paid by an applicant along with the
application money shall not be less than 25% of the issue price.
(v) In case of an offer for sale, the entire amount payable on each instrument shall be
brought in at the time of application.
Securities Issued to be made Fully Paid Up
(a) If the subscription money is proposed to be received in calls, the calls shall be
structured in such a manner that the entire subscription money is called within 12
months from the date of allotment.
(b) If the investor fails to pay call money within 12 months the subscription money
already paid may be forfeited.
(c) If the issue size is above Rs. 500 crores and is subject to monitoring requirement
as per Clause 8.17.1 of this Chapter, it shall not be necessary to call the entire
subscription money within 12 months.
Restriction on further Capital Issues
No company shall make any further issue of capital in any manner whether by way of
issue of bonus shares, preferential allotment, rights issue or public issue or otherwise,
during the period commencing from the submission of offer document to the Board
on behalf of the company for public or rights issues, till the securities referred to in
the said offer document have been listed or application moneys refunded on account
of non-listing or under subscription, etc. 1[unless full disclosures regarding the total
capital to be raised from such further issues are made in the draft offer document.]
a) No company shall, pending conversion of Fully Convertible Debentures (FCDs) or
Partly Convertible Debentures (PCDs), issue any shares by way of bonus or rights
unless similar benefit is extended to the holders of such FCDs or PCDs, through
reservation of shares in proportion to such convertible part of FCDs/PCDs.
(b) The share so reserved may be issued at the time of conversion(s) of such
debentures on the same terms on which the bonus or rights issue was made.

(a) An issuer company shall not withdraw rights issue after announcement of record
date in relation to such issue.
(b) In cases where the issuer has withdrawn the rights issue after announcing the
record date, the issuer company shall not make an application for listing of any
securities of the company for a minimum period of 12 months from the record date :
Provided that the shares resulting from the conversion of PCDs/FCDs/Warrants issued
prior to the announcing of the record date in relation to rights issue may be granted
listing by the concerned Stock Exchange(s).
Period of Subscription
Public Issues
(a) Subscription list for public issues shall be kept open for at least 3 working days
and not more than 10 working days.
(b) The public issue made by an infrastructure company, satisfying the requirements
in Clause 2.4.1(iii) of Chapter II may be kept open for a maximum period of 21
working days.
(c) The period of operation of subscription list of public issue shall be disclosed in
the prospectus.
Rights Issues
Rights issues shall be kept open for at least 30 days and not more than 60 days.
Price Band
If in a draft offer document submitted to the Board, a price band as per the provisions
of Clause 3.5.1 of Chapter III of these Guidelines is mentioned, suitable explanatory
notes indicating the financial implications, if the price were to be fixed at different
ranges within the price band approved by the company Board/General Body, shall be
disclosed in the offer document.
Retention of Oversubscription
The quantum of issue whether through a rights or a public issue, shall not exceed the
amount specified in the prospectus/letter of offer :
Provided that an oversubscription to the extent of 10% of the net offer to public is
permissible for the purpose of rounding off to the nearer multiple of 100 while
finalizing the allotment.
Underwriting
(a) The issuers have the option to have a public issue underwritten by the
underwriter.
(b) In respect of every underwritten issue, the lead merchant banker(s) shall
accept a minimum underwriting obligation of 5% of the total underwriting
commitment of Rs. 25 lakhs whichever is less.
Updation of Offer Document
(a) The Lead Merchant Banker shall ensure that the particulars as per the audited
statements contained in the offer document are not more than 6 months old from
the issue opening date.
(b) In respect of a Government company making a public issue, the auditors report
in the prospectus shall not be more than six months old as on the date of filing of
the prospectus with the Registrar of Companies or the Stock Exchange as the
case may be.
Compliance Officer to be Appointed by Lead Merchant Banker

(a) The merchant bankers shall appoint a senior officer as Compliance Officer to
ensure that all Rules, Regulations, Guidelines, Notifications etc., issued by the
Board, the Government of India, and other regulatory organizations are
complied with.
(b) The Compliance Officer shall co-ordinate with regulatory authorities in various
matters and provide necessary guidance as also ensure compliance internally.
(c) The Compliance Officer shall also ensure that observations made/deficiencies
pointed out by the Board do not recur.
Incentives to Prospective Shareholders
The issuer shall not offer any incentives to the prospective investors by way of
medical insurance scheme, lucky draw, prizes, etc.
New Financial Instruments
The lead manager shall ensure adequate disclosures in the offer document, more
particularly relating to the terms and conditions, redemption, security, conversion and
any other relevant features of any new financial instruments such as Deep Discount
Bonds, Debentures with Warrants, Secured Premium Notes etc.
Issue of Debentures Bearing Interest less than Bank Rate
Whenever FCDs are issued bearing interest at a rate less than the Bank Rate, the offer
document shall contain disclosures about the price that would work out to the
investor, taking into account the notional interest loss on the investment from the date
of allotment of FCDs to the date(s) of conversions.
Requirement of Monitoring Agency
(a) In case of issues exceeding Rs. 500 crores, the issuer shall make arrangements
for the use of proceeds of the issue to be monitored by one of the financial
institutions.
(b) A copy of the monitoring report as per the format specified at Schedule XIX,
shall be filed with the Board by the said monitoring agency, on a half yearly
basis, till the completion of project, for the purposes of record.
Safety Net or Buy-Back Arrangement
(a) Any safety net scheme or buy-back arrangements of the shares proposed in any
public issue shall be finalized by the issuer company with the lead merchant
banker in advance and disclosed in the prospectus.
(b) Such buy-back or safety net arrangements shall be made available only to all
original resident individual allottees.
(c) Such buy-back or safety net facility shall be limited upto a maximum of 1000
shares per allottee and the offer shall be valid at least for a period of 6 months
from the last date of despatch of securities.
(d) The financial capacity of the person making available buy-back or safety net
facility shall be disclosed in the draft prospectus.
Utilization of funds in case of Rights Issues
The issuer company may utilize funds collected against rights issues after satisfying
designated stock exchange that minimum 90% subscription has been received.
Option to Receive Securities in Dematerialized Form
The lead merchant banker shall incorporate a statement in the offer document and in
the application form to the effect that the investors have an option to either receive
securities in the form of physical certificates or hold them in a dematerialized form.

 Issue Opening Date

An issue shall open within 3 months from the date of issuance of the observation
letter by the Board, if any or within 3 months from the 22nd day from the date of
filing of the draft offer document with the Board, if no observation letter is issued .
Presentation of financials in case of change of denomination
In case of change in standard denomination of equity shares, the compliance with the
following shall be ensured while making disclosure in the offer document :
(i) All the financial data affected by the change in denomination of shares shall be
clearly and unambiguously presented in the offer document;
(ii) Comparison of financial ratios representing value per share and comparison of
stock market data in respect of price and volume of securities shall be clearly and
unambiguously presented in the offer document;
(iii) The capital structure incorporated in the offer document shall be clearly
presented giving all the relevant details pertaining to the change in denomination
of the shares.

CHAPTER IX
GUIDELINES ON ADVERTISEMENT
The Lead Merchant Banker shall ensure compliance with the guidelines on
Advertisement by the issuer company.
Guidelines on Advertisements
An issue advertisement shall be truthful, fair and clear and shall not contain any
statement which is untrue or misleading.
Any advertisement reproducing or purporting to reproduce any information contained
in an offer document shall reproduce such information in full and disclose all relevant
facts and not be restricted to select extracts relating to that item.
An issue advertisement shall be considered to be misleading, if it contains
(a) Statements made about the performance or activities of the company in the
absence of necessary explanatory or qualifying statements, which may give an
exaggerated picture of the performance or activities, than what it really is.
(b) An inaccurate portrayal of past performance or its portrayal in a manner which
implies that past gains or income will be repeated in the future.
(a) An advertisement shall be set forth in a clear, concise and understandable
language.
(b) Extensive use of technical, legal terminology or complex language and the
inclusion of excessive details which may distract the investor, shall be avoided.
An issue advertisement shall not contain statements which promise or guarantee rapid
increase in profits.
An issue advertisement shall not contain any information that is not contained in the
offer document.
No models, celebrities, fictional characters, landmarks or caricatures or the likes shall
be displayed on or form part of the offer documents or issue advertisements.
Issue advertisements shall not appear in the form of crawlers (the advertisements
which run simultaneously with the programme in a narrow strip at the bottom of the
television screen) on television.
In case of issue of advertisement on television screen:
(a) the risk factors shall not be scrolled on the screen; and
(b) the advertisement shall advise the viewers to refer to the red herring prospectus
or other offer document for details.
No advertisement shall include any issue slogans or brand names for the issue except
the normal commercial name of the company or commercial brand names of its
products already in use.
No slogans, expletives or non-factual and unsubstantiated titles shall appear in the
issue advertisements or offer documents.
If any advertisement carries any financial data, it shall also contain data for the past
three years and shall include particulars relating to sales, gross profit, net profit, share
capital, reserves, earnings per share, dividends and the book values.
(a) All issue advertisements in newspapers, magazines, brochures, pamphlets
containing highlights relating to any issue shall also contain risk factors giving equal
importance in all respects including the print size.

(b) The print size of highlights and risk factors in issue advertisements shall not be
less than point 1[seven] size.
(c) Subject to section 66 of the Companies Act, 1956, any advertisement made by an
issuer in respect of opening or closure of the issue shall be in the format and contain
the minimum disclosures as given in the relevant part of Schedule XX-A.
(d) Any pre-issue advertisement made under clause 5.6A or advertisement made in
connection with opening or closing of an issue by the issuer, which is displayed in a
billboard shall not contain any information apart from that mentioned in the relevant
part of Schedule XX-A.]
No issue advertisement shall be released without giving Risk Factors in respect of
the concerned issue :
Provided that an issue opening/closing advertisement which does not contain the
highlights need not contain risk factors.
All public communications and publicity material, including corporate and product
advertisements of the issuer company interviews by its promoters, directors, duly
authorized employees or representatives of the issuer company, documentaries about
the issuer company or its promoters, periodical reports and press releases, issued or
published in any media during the period commencing from the date of the meeting of
the Board of Directors of the issuer company in which the public or rights issue, as
the case may be, is approved till the date of filing draft offer document with SEBI,
shall be consistent with its past practices :
Provided that where such public communication or publicity material is not consistent
with the past practices of the issuer company, it shall be prominently displayed or
announced in such public communication or publicity material that the issuer
company is proposing to make a public or rights issue of securities, as the case may
be, in the near future and is in the process of filing a draft offer document with SEBI.
{A}All public communications and publicity material, including corporate and
product advertisements of the issuer company interviews by its promoters, directors,
duly authorized employees or representatives of the issuer company, documentaries
about the issuer company or its promoters, periodical reports and press releases,
issued or published in any media during the period commencing from the date of
filing draft offer document with SEBI till the date of allotment of securities offered in
the issue, shall comply with the following :
(a) It shall be prominently displayed or announced in such public
communication or publicity material that the issuer company is proposing to
make a public or rights issue of securities, as the case may be and has filed a
draft offer document with SEBI or has filed the Red Herring
Prospectus/Prospectus with the Registrar of Companies or the Letter of Offer
with the Designated Stock Exchange, as the case may be.
(b) It shall further be stated in such public communication or publicity material
that the draft offer document, Red Herring Prospectus or final offer
document, as the case may be, is available on SEBI website at
www.sebi.gov.in as well as on the Lead Managers websites <urls to be
given>.
(c) Such public communication or publicity material shall contain only factual
information and shall not contain projections, estimates, conjectures, etc.
(d) Such public communication or publicity material shall also not contain any
information which is extraneous to the draft offer document filed with SEBI

or the Red Herring Prospectus/Prospectus filed with the Registrar of

Companies or the Letter of Offer filed with Designated Stock Exchange, as
the case may be.
{B}The issuer company shall make prompt, true and fair disclosure of all material
developments taking place during the period mentioned hereunder, relating to its
business and securities and also relating to the business and securities of its
subsidiaries, group companies, etc., which may have a material effect on the issuer
company, by issuing public notices in all the newspapers in which the issuer company
had issued pre-issue advertisement under
(a) In case of a fixed price public issues, between the date of filing final
prospectus with the Registrar of Companies and the date of allotment of
securities offered in the public issue.
(b) In case of a book built issue, between the date of filing the Red Herring
Prospectus with the Registrar of Companies and the date of allotment of the
securities offered in the issue.
(c) In case of a rights issue, between the date of filing the Letter of Offer with
the Designated Stock Exchange and the date of allotment of the securities
offered in the rights issue.]
No product advertisement of an issuer company shall contain any reference, directly
or indirectly, to the performance of the issuer company during the periods mentioned
in it.
(a) No advertisement shall be issued stating that the issue has been fully subscribed
or oversubscribed during the period the issue is open for subscription, except to the
effect that the issue is open or closed.
(b) No announcement regarding closure of the issue shall be made except on the last
closing date.
(c) If the issue is fully subscribed before the last closing date as stated in the offer
document, the announcement should be made only after the issue is fully subscribed
and such announcement is made on the date on which the issue is to be closed.
Announcement regarding closure of issue shall be made only after the Lead Merchant
Banker is satisfied that at least 90% of the issue has been subscribed and a certificate
has been obtained to that effect from the Registrar to the Issue.
No incentives, apart from the permissible underwriting commission and brokerage,
shall be offered through any advertisement to any one associated with marketing the
issue.
In case there is a reservation for the NRIs, the issue advertisement shall specify the
same and indicate the place in India from where the individual NRI applicant can
procure application forms.
The Lead Merchant Banker shall also comply with the following:
(a) to obtain undertaking from the issuer as part of Memorandum of Understanding
to be entered into by the Lead Merchant Banker with the issuer company to the
effect that the issuer company shall not directly or indirectly release, during any
conference or at any other time, any material or information which is not
contained in the offer documents,
(b) to ensure that the issuer company obtains approval in respect of all issue
advertisements and publicity materials from the Lead Merchant Banker
responsible for marketing the issue and also ensure availability of copies of all

issue-related materials with the Lead Merchant Banker at least till the allotment
is completed.
Research reports
The lead merchant banker shall ensure that the following are complied with in respect
of research reports
(i) the research report is prepared only on the basis of published information as
contained in the offer document.
(ii) no selective or additional information or information extraneous to the offer
document shall be made available by the issuer or any member of the issue
management team/syndicate to any particular section of the investors or to any
research analyst in any manner whatsoever including at road shows,
presentations, in research or sales reports or at bidding centres etc.
(iii) No research report shall be circulated by the issuer or any member of the issue
management team/syndicate or their associates, commencing from a date 45 days
immediately preceding the filing of draft offer document with SEBI and till 45
days after commencement of trading in the relevant securities.
(iv) The advertisement code is observed while circulating the research reports, and
that the risk factors are reproduced wherever highlights are given, as in the case
of an advertisement.

CHAPTER X
GUIDELINES FOR ISSUE OF DEBT INSTRUMENTS
A company offering Convertible/Non-Convertible debt instruments through an offer
document, shall comply with the following provisions in addition to the relevant
provisions contained in the other Chapter of these guidelines.
Requirement of credit rating
(a) No company shall make a public issue or rights issue of debt instruments
(whether convertible or not), unless credit rating of not less than investment
grade is obtained from not less than two registered credit rating agencies and
disclosed in the offer document.
(b) Where credit ratings are obtained from more than two credit rating agencies, all
the credit rating/s, including the unaccepted credit ratings, shall be disclosed.
(c) All the credit ratings obtained during the three (3) years preceding the public or
rights issue of debt instrument (including convertible instruments) for any listed
security of the issuer company shall be disclosed in the offer document.
Requirement in respect of Debenture Trustee
(a) No company shall issue a prospectus or a letter of offer to the public for
subscription of its debentures, unless the company has appointed one or more
debenture trustees for such debentures in accordance with the provisions of the
Companies Act, 1956.
(b) The names of the debenture trustees shall be stated in the Offer Documents and
also in all the subsequent periodical communications sent to the debenture
holders.
(c) A trust deed shall be executed by the issuer company in favour of the debenture
trustees within three months of the closure of the issue.
(d) Trustees to the debenture issue shall be vested with the requisite powers for
protecting the interest of debenture-holders including a right to appoint a
nominee director on the Board of the company in consultation with institutional
debenture-holders.
(e) The merchant banker shall, along with the draft offer document, file with the
Board, certificates from the bankers of the Company that the assets on which the
security is to be created are free from any encumbrances and the necessary
permissions to mortgage the assets have been obtained or No Objection
Certificate from the Financial Institutions or Banks for a second or pari passu
charged in cases where assets are encumbered.
(f) The merchant banker shall also ensure that the security created is adequate to
ensure 100% asset cover for the debentures.
The debenture trustee shall ensure compliance of the following:
(a) It shall obtain reports from the lead bank, regarding monitoring progress of the
project.
(b) It shall monitor utilization of funds raised in the debenture issue.
(c) The trustees shall obtain a certificate from the companys auditors:
(i) in respect of utilization of funds during the implementation period of
projects.
(ii) in the case of debentures for working capital, certificate shall be obtained at
the end of each accounting year.

(d) Debenture issues by companies belonging to the groups for financing

replenishing funds or acquiring shareholding in other companies shall not be
permitted.
Explanation : The expression replenishing of funds or acquiring shares in other
companies shall mean replenishment of funds or acquiring shareholdings of
other companies in the same group. In other words, the company shall not issue
debentures for acquisition of shares/providing loan to any company belonging to
the same group. However, the company may issue equity shares for purposes of
repayment of loan to or investment in companies belonging to the same group.
(e) The debenture trustees shall supervise the implementation of the conditions
regarding creation of security for the debentures and debenture redemption
reserve.
Creation of Debenture Redemption Reserve (DRR)
For the redemption of the debentures issued, the company shall create debenture
redemption reserve in accordance with the provisions of the Companies Act, 1956.]
Distribution of Dividends
(a) In case of the companies which have defaulted in payment of interest on
debentures or redemption of debentures or in creation of security as per the terms
of issue of the debentures, any distribution of dividend shall require approval of
the Debenture Trustees and the Lead Institution, if any.]
(b) In the case of existing companies prior permission of the lead institution for
declaring dividend exceeding 20% or as per the loan covenants is necessary if
the company does not comply with institutional condition regarding interest and
debt service coverage ratio.
(c) (i) Dividends may be distributed out of profit of particular years only after
transfer of the requisite amount in DRR.
(ii) If residual profits after transfer to DRR are inadequate to distribute
reasonable dividends, company may distribute dividend out of general
reserve.
Redemption
The issuer company shall redeem the debentures as per the offer document.
[Disclosure and] Creation of Charge
(a) The offer document shall specifically state the assets on which security shall be
created and shall also state the ranking of the charge/s. In case of second or
residual charge or subordinated obligation, the offer document shall clearly state
the risks associated with such subsequent charge. The relevant consent for
creation of security such as pari passu letter, consent of the lessor of the land in
case of leasehold land, etc., shall be obtained and submitted to the debenture
trustee before opening of issue of debenture.
(b) The offer document shall state the security/asset cover to be maintained. The
basis for computation of the security/asset cover, the valuation methods and
periodicity of such valuation shall also be disclosed. The security/asset cover
shall be arrived at after reduction of the liabilities having a first/prior charge, in
case the debentures are secured by a second or subsequent charge.
(c) The issue proceeds shall be kept in an escrow account until the documents for
creation of security as stated in the offer document, are executed.

(d) If the issuing company proposes to create a charge for debentures of maturity of
less than 18 months, it shall file with the Registrar of Companies particulars of
charge under the Companies Act :
(e) Provided that, where no charge is to be created on such debentures, the issuer
company shall ensure compliance with the provisions of the Companies
(Acceptance of Deposits) Rules, 1975, as, unsecured debentures/bonds are
treated as deposits for purposes of these rules.
(f) The proposal to create a charge or otherwise in respect of such debentures, may
be disclosed in the offer document along with its implications.
Requirement of letter of option
(a) Filing of letter of option.Where the company desires to roll over the
debentures issued by it, it shall file with SEBI a copy of the notice of the
resolution to be sent to the debenture-holders for the purpose, through a
merchant banker prior to dispatching the same to the debenture-holders. The
notice shall contain disclosures with regard to credit rating, necessity for
debenture-holders resolution and such other terms which SEBI may specify.
Where the company desires to convert the debentures into equity shares in
accordance with clause 10.7.2, it shall file with SEBI a copy of the letter of
option to be sent to debenture-holders with the Board, through a merchant
banker, prior to dispatching the same to the debenture-holders. The letter of
option shall contain disclosures with regard to option for conversion,
justification for conversion price and such other terms which SEBI may specify.
(b) Roll over of Non-Convertible Portions of Partly Convertible Debentures
(PCDs)/Non-convertible Debentures (NCDs), by company not being in default.
(c) The non-convertible portions of PCDs or the NCDs issued by a listed company,
the value of which exceeds Rs. 50 lacs, can be rolled over without change in the
interest rate subject to section 121 of the Companies Act, 1956 and subject to the
following conditions, if the company is not in default:
(a) A resolution to this effect is passed by postal ballot, having the assent from
not less than 75% of the debenture-holders.
(b) The company shall redeem the debentures of all the dissenting debentureholders, who have not assented to the resolution.
(c) Before roll over of any NCDs or non-convertible portion of the PCDs, at
least two credit ratings of not less than investment grade, shall be obtained
within a period of six months prior to the due date of redemption and
communicated to debenture-holders before roll over.
(d) Fresh trust deed shall be executed at the time of such roll over.
(e) Fresh security shall be created in respect of such debentures to be rolled
over :
Provided that if the existing trust deed or the security documents provide for
continuance of the security till redemption of debentures, fresh trust deed or fresh
security need not be created.
The non-convertible portions of PCDs and the NCDs issued by a listed company, the
value of which exceeds Rs.50 lacs, can be rolled over without change in the interest
rate subject to section 121 of the Companies Act, 1956 and subject to the following
conditions, where the company is in default:
(a) A resolution to this effect is passed by postal ballot, having the assent from not
less than 75% of the debenture-holders.

(b) The company shall send an Auditors certificate on the cash flow of the company
with comments on the liquidity position of the company to all debenture-holders,
along with the notice for passing the said resolution.
(c) The company shall redeem the debentures of all the dissenting debentureholders, who have not assented to the resolution.
(d) The debenture trustee shall decide on whether the company is required to create
fresh security and execute fresh trust deed in respect of such debentures to be
rolled over :
Provided that if the existing trust deed or the security documents provide for
continuance of the security till redemption of debentures, fresh security and fresh trust
deed need not be created.
In case of conversion of instruments (PCDs/FCDs, etc.), into equity capital
(i) In case the convertible portion of any instrument such as PCDs, FCDs, etc.
issued by a listed company, the value of which exceeds Rs. 50 lakhs and whose
conversion price was not fixed at the time of issue, the holders of such
instruments shall be given a compulsory option of not converting into equity
capital.
(ii) Conversion shall be done only in cases where the instrument-holders have sent
their positive consent and not on the basis of the non-receipt of their negative
reply :
Provided that where issues are made and cap price with justification thereon is
fixed beforehand in respect of any instruments by the issuer and disclosed to the
investors before issue, it will not be necessary to give an option to the
instrument-holder for converting the instruments into equity capital within the
cap price.
(iii) In cases where an option is to be given to such instrument-holders and if any
instrument-holder does not exercise the option to convert the debentures into
equity at a price determined in the general meeting of the shareholders, the
company shall redeem that part of the debenture at a price which shall not be less
than its face value, within one month from the last date by which option is to be
exercised.
(iv) The provision of sub-clause (iii) above shall not apply if such redemption is to be
made in accordance with the terms of the issue originally stated.
(a) The debenture trustee shall submit a certificate of compliance with clause
10.7.1.1, 10.7.1.1A or 10.7.1.2, as the case may be, to the merchant banker
which shall be filed with the Board within 15 days of the closure of the roll
over or conversion.
(b) Companies may issue unsecured/subordinated debt instruments/obligations
(which are not public deposits as per the provisions of section 58A of the
Companies Act, 1956 or such other notifications, guidelines, circulars, etc.,
issued by RBI, DCA or other authorities) :
Provided that such issue shall be subscribed by Qualified Institutional buyers or other
investor who has given positive consent for subscribing to such
unsecured/subordinated debt instruments/obligation.]
Other requirements
(a) No company shall issue FCDs having a conversion period of more than 36
months, unless conversion is made optional with put and call option.

(b) If the conversion takes place at or after 18 months from the date of allotment,
but before 36 months, any conversion in part or whole of the debenture shall be
optional at the hands of the debenture-holder.
(a) No issue of debentures by an issuer company shall be made for acquisition
of shares or providing loan to any company belonging to the same group.
(b) Sub-clause (a) shall not apply to the issue of fully convertible debentures
providing conversion within a period of eighteen months.
The premium amount and time of conversion shall be determined by the issuer
company and disclosed.
The interest rate for debentures can be freely determined by the issuer company.
Additional disclosures in respect of debentures.
The offer document shall contain :
(a) The premium amount on conversion, time of conversion.
(b) In case of PCDs/NCDs, redemption amount, period of maturity, yield on
redemption of the PCDs/NCDs.
(c) Full information relating to the terms of offer or purchase including the name(s)
of the party offering to purchase the khokhas (non-convertible portion of PCDs).
(d) The discount at which such offer is made and the effective price for the investor
as a result of such discount.
(e) The existing and future equity and long-term debt ratio.
(f) Servicing behaviour on existing debentures, payment of due interest on due dates
on term loans and debentures.
(g) That the certificate from a financial institution or bankers about their noobjection for a second or pari passu charge being created in favour of the trustees
to the proposed debenture issues has been obtained.

CHAPTER XI
GUIDELINES ON BOOK BUILDING
An issuer company proposing to issue capital through book building shall comply
with the following :
(A) 75% Book-Building Process
In an issue of securities to the public through a prospectus the option for 75% book
building shall be available to the issuer company subject to the following:
(i) The option of book-building shall be available to all bodies corporate which are
otherwise eligible to make an issue of capital to the public.
(ii) (a) The book-building facility shall be available as an alternative to, and to the
extent of the percentage of the issue which can be reserved for firm
allotment, as per these Guidelines.
(b) The issuer company shall have an option of either reserving the securities
for firm allotment or issuing the securities through book-building process.
(iii) The issue of securities through book-building process shall be separately
identified/indicated as placement portion category, in the prospectus.
(iv) (a) The securities available to the public shall be separately identified as net
offer to the public.
(b) The requirement of minimum 25% of the securities to be offered to the
public shall also be applicable.
(v) In case the book-building option is availed of, underwriting shall be mandatory
to the extent of the net offer to the public.
(vi) The draft prospectus containing all the information except the information
regarding the price at which the securities are offered shall be filed with the
Board.
(vii) One of the lead merchant bankers to the issue shall be nominated by the issuer
company as a Book Runner and his name shall be mentioned in the prospectus.
(viii) (a) The copy of the draft prospectus filed with the Board may be circulated by
the Book Runner to the institutional buyers who are eligible for firm
allotment and to the intermediaries eligible to act as underwriters inviting
offers for subscribing to the securities.
(b) The draft prospectus to be circulated shall indicate the price band within
which the securities are being offered for subscription.
(ix) The Book Runner on receipt of the offers shall maintain a record of the names
and number of securities ordered and the price at which the institutional buyer or
underwriter is willing to subscribe to securities under the placement portion.
(x) The underwriter(s) shall maintain a record of the orders received by him for
subscribing to the issue out of the placement portion.
(xi) (a) The underwriter(s) shall aggregate the offers so received for subscribing to
the issue and intimate to the Book Runner the aggregate amount of the
orders received by him.
(b) The institutional investor shall also forward its orders, if any, to the book
runner.
(xii) On receipt of the information, the Book Runner and the issuer company shall
determine the price at which the securities shall be offered to the public.

(xiii) The issue price for the placement portion and offer to the public shall be the
same.
(xiv)On determination of the price, the underwriter shall enter into an underwriting
agreement with the issuer indicating the number of securities as well as the price
at which the underwriter shall subscribe to the securities :
Provided that the Book Runner shall have an option of requiring the underwriters
to the net offer to the public to pay in advance all monies required to be paid in
respect of their underwriting commitment.
(xv) On determination of the issue price within two days thereafter the prospectus
shall be filed with the Registrar of Companies.
(xvi)The issuer company shall open two different accounts for collection of
application moneys, one for the private placement portion and the other for the
public subscription.
(xvii) One day prior to the opening of the issue to the public, the Book Runner shall
collect from the institutional buyers and the underwriters the application forms
along with the application moneys to the extent of the securities proposed to be
allotted to them/subscribed by them.
(xviii)(a) Allotments for the private placement portion shall be made on the second
day from the closure of the issue.
(b) However, to ensure that the securities allotted under placement portion and
public portion are pari passu in all respects, the issuer company may have
one date of allotment which shall be deemed date of allotment for the issue
of securities through book building process.
(xix)In case the Book Runner has exercised the option of requiring the underwriter to
the net offer to the public to pay in advance all moneys required to be paid in
respect of their underwriting commitment by the eleventh day of the closure of
the issue the shares allotted as per the private placement category shall be
eligible to be listed.
(xx) (a) Allotment of securities under the public category shall be made as per the
Guidelines.
(b) Allotment of securities under the public category shall be eligible to be
listed.
(xxi) (a) In case of under subscription in the net offer to the public spillover to the
extent of under subscription shall be permitted from the placement portion
to the net offer to the public portion subject to the condition that preference
shall be given to the individual investors.
(b) In case of under subscription in the placement portion spillover shall be
permitted from the net offer to the public to the placement portion.
(xxii) The issuer company may pay interest on the application moneys till the date of
allotment or the deemed date of allotment provided that payment of interest is
uniformly given to all the applicants.
(xxiii)(a) The Book Runner and other intermediaries associated with the bookbuilding process shall maintain records of the book-building process.
(b) The Board shall have the right to inspect such records.
(B) [Offer to Public through Book Building Process]
An issuer company may, subject to the requirements specified in this Chapter, make
an issue of securities to the public through a prospectus in the following manner :

(a) 100% of the net offer to the public through book building process, or
(b) 75% of the net offer to the public through book building process and 25% at the
price determined through book building.]
(ii) Reservation or firm allotment to the extent of the percentage specified in these
Guidelines shall not be made to categories other than the categories mentioned in subclause (iii) below.
(iii) Book-Building shall be for the portion other than the promoters contribution and
the allocation made to :
(a) Permanent employees of the issuer company and in the case of a new company
the permanent employees of the promoting companies;
(b) 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;
(c) 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, provided that allotment to such
persons shall not exceed 5% of the issue size :
Provided further that no reservation shall be made for the issue management
team, syndicate members, their promoters, directors and employees and for the
group/associate companies of issue management team and syndicate members
and their promoters, directors and employees.
(iv) The issuer company shall appoint an eligible Merchant Banker(s) as book
runner(s) and their name(s) shall be mentioned in the draft prospectus.
1
[(iv)(a) The issuer company shall enter into an agreement with one or more of the
Stock Exchange(s) which have the requisite system of on-line offer of securities. The
agreement shall specify inter alia, the rights, duties, responsibilities and obligations of
the company and stock exchange(s) inter se. The agreement may also provide for a
dispute resolution mechanism between the company and the stock exchange.
(iv)(b) The company may apply for listing of its securities on an exchange other than
the exchange through which it offers its securities to public through the on-line
system.]
(v) The Lead Merchant Banker shall act as the Lead Book Runner.
(v)(a) In case the issuer company appoints more than one merchant banker, the names
of all such merchant banker who have submitted the due diligence certificate to SEBI,
may be mentioned on the front cover page of the prospectus. A disclosure to the effect
that the investors may contact any of such merchant banker, for any complaint
pertaining to the issue shall be made in the prospectus, after the risk factors.
(v)(b) The lead book runner/issuer may designate, in any manner, the other Merchant
Banker(s), subject to the following:
1. The inter se allocation of responsibilities amongst the merchant bankers shall be
disclosed in the prospectus on the page giving the details of the issue
management team;
2. a co-coordinator shall be appointed amongst the lead book runners, for the
purpose of co-ordination with SEBI
The names of only those merchant bankers who have signed the inter se allocation of
responsibilities shall be mentioned in the offer document on the page where the details
of the issue management team is given.

(vi) The primary responsibility of building the book shall be that of the Lead Book
Runner.
(vii) The Book Runner(s) may appoint those intermediaries who are registered with
the Board and who are permitted to carry on activity as an Underwriter as syndicate
members.
(vii)(a) The Book Runner(s)/syndicate members shall appoint brokers of the
exchange, who are registered with SEBI, for the purpose of accepting bids,
applications and placing orders with the company and ensure that the brokers so
appointed are financially capable of honouring their commitments arising out of
defaults of their clients/investors, if any.
(vii)(b) For the purposes of this Chapter, the brokers, so appointed accepting
applications and application monies, shall be considered as bidding/collection
centres.
(vii)(c) The broker/s so appointed, shall collect the money from his/their client for
every order placed by him/them and in case the client/investors fails to pay for shares
allocated as per the Guidelines, the broker shall pay such amount.
(vii)(d) The company shall pay to the broker/s a commission/fee for the services
rendered by him/them. The exchange shall ensure that the broker does not levy a
service fee on his clients/investors in lieu of his services.]
(viii) The draft prospectus containing all the disclosures as laid down in Chapter VI
except that of price and the number of securities to be offered to the public shall be
filed by the Lead Merchant Banker with the Board :
Provided that the total size of the issue shall be mentioned in the draft prospectus.
(viii)(a) The red-herring prospectus shall disclose, either the floor price of the
securities offered through it or a price band along with the range within which the
price can move, if any
Provided that in case of a further public issue of a class of securities which is already
listed on a recognised stock exchange, it shall not be necessary to disclose the floor
price or price band in the red-herring prospectus if the same is disclosed by way of an
announcement made by the issuer or the merchant banker at least one day before the
opening of the bid in all those newspapers where pre-issue advertisement was released
:
Provided further that where the issuer opts not to make the disclosure of the price
band or floor price in the red-herring prospectus in terms of the foregoing proviso, the
following shall be additionally disclosed in the red-herring prospectus :
(a) A statement that the floor price or price band, as the case may be, shall be
disclosed one before the opening of the bid;
(b) A statement that the investors may be guided in the meantime by the secondary
market prices;
(c) Names and editions of the newspapers where the announcement of the floor price
or price band would be made;
(d) Names of websites (with address), journals or other media in which the said
announcement will be made.
(viii)(b) In case the red-herring prospectus discloses the price band, the lead book
runner shall ensure compliance with the following conditions:
(a) The cap of the price band should not be more than 20% of the floor of the band,
i.e. cap of the price band shall be less than or equal to 120% of the floor of the
price band.

(b) The price band can be revised during the bidding period in which case the
maximum revision on either side shall not exceed 20% i.e., floor of price band
can move up or down to the extent of 20% of floor of the price band disclosed in
the red-herring prospectus and the cap of the revised price band will be fixed in
accordance with clause (a) above.
(c) Any revision in the price band shall be widely disseminated by informing the
stock exchanges, by issuing press release and also indicating the change on the
relevant website and the terminals of the syndicate members.
(d) In case the price band is revised, the bidding period shall be extended for a
further period of three days, subject to the total bidding period not exceeding
thirteen days.
(e) The manner in which the shortfall, if any, in the project financing, arising on
account of lowering of price band to the extent of 20% will be met shall be
disclosed in the red-herring prospectus. It shall also be disclosed that the
allotment shall not be made unless the financing is tied up.
(ix) (a) In case of appointment of more than one Lead Merchant Banker or Book
Runner for book building, the rights, obligations and responsibilities of each should
be delineated.
(b) In case of an undersubscription in an issue, the shortfall shall have to be made
good by the Book Runner(s) to the issue and the same shall be incorporated in the
inter se allocation of responsibility given in Schedule II.
(x) (a) The Board within 21 days of the receipt of the draft prospectus may suggest
modifications to it.
(b) The Lead Merchant Banker shall be responsible for ensuring that the
modifications/final observations made by the Board are incorporated in the
prospectus.
(xi)(b) The issuer company shall circulate the application forms to the brokers.
(xiii) The pre-issue obligations and disclosure requirements as specified in Chapters
V and VI respectively of these Guidelines, shall be applicable to issue of securities
through book building unless stated otherwise in this Chapter.
(xiv) The Book Runner(s) and the issuer company shall determine the issue price
based on the bids received through the syndicate members.
(xiv)(a) Retail individual investors may bid at cut off price instead of their writing
the specific bid prices in the bid forms.
(xv) On determination of the price, the number of securities to be offered shall be
determined (issue size divided by the price which has been determined).
(xvi) Once the final price (cut-off price) is determined all those bidders whose bids
have been found to be successful (i.e., at and above the final price or cut-off price)
shall become entitle for allotment of securities.
(xvii) No incentive, whether in cash or kind, shall be paid to the investors who have
become entitled for allotment of securities.
(xvii)(a) The broker may collect an amount to the extent of 100% of the application
money as margin money from the clients/investors before he places an order on their
behalf. The margin collected from categories other than Qualified Institutional Buyers
shall be uniform across the book runner(s)/syndicate members, for each such
category.

(xvii) (aa) The broker/syndicate member shall collect an amount of not less than ten
per cent of the application money as margin money in respect of bids placed by
qualified institutional buyers.
(xvii)(b) Bids for securities beyond the investment limit prescribed under relevant
laws shall not be accepted by the syndicate members/brokers from any category of
clients/investors
(xvii)(c) The lead book runner may reject a bid placed by a qualified institutional
buyer for reasons to be recorded in writing provided that such rejection shall be made
at the time of acceptance of the bid and the reasons therefor shall be disclosed to the
bidders. Necessary disclosures in this regard shall also be made in the offer document.
(xviii) On determination of the entitlement under sub-clause (xvi), the information
regarding the same (i.e., the number of securities to which the investor becomes
entitled) shall be intimated immediately to the investors.
(xix) The final prospectus containing all disclosures as per these Guidelines including
the price and the number of securities proposed to be issued shall be filed with the
Registrar of Companies.
(xx) Arrangement shall be made by the issuer for collection of the applications by
appointing mandatory collection centres as per these Guidelines.
(xxa) The online, real time graphical display of demand and bid prices at the bidding
terminals, shall be made. The book running lead manager shall ensure the availability
of adequate infrastructure for data entry of the bids on a real time basis.
(xxi) The investors who had not participated in the bidding process or have not
received intimation of entitlement of securities may also make an application.
Additional Disclosures
Apart from meeting the disclosure requirements as specified in these Guidelines, the
following disclosures shall be suitably made :
(i)The particulars of syndicate members, brokers, registrars, bankers to the issue, etc.
(ii) The following statement shall be given under the basis for issue price :
The issue price has been determined by the Issuer in consultation with the Book
Runner(s), on the basis of assessment of market demand for the offered securities
by way of book building.
(iii) The following accounting ratios shall be given under the basis for issue price for
each of the accounting periods for which the financial information is given:
1. EPS, pre-issue, for the last three years (as adjusted for changes in capital).
2. P/E pre-issue.
3. Average return on net worth in the last three years.
4. Net Asset Value per share based on last balance sheet.
5. Comparison of all the accounting ratios of the issuer company as mentioned
above with the industry average and with the accounting ratios of the peer
group i.e. companies of comparable size in the same industry. (Indicate the
source from which industry average and accounting ratios of the peer group
has been taken).
6. The accounting ratios disclosed in the offer document shall be calculated
after giving effect to the consequent increase of capital on account of
compulsory conversions outstanding, as well as on the assumption that the
options outstanding, if any, to subscribe for additional capital shall be
exercised.

(v) The proposed manner of allocation among respective categories of investors, in

the event of under subscription.]
Underwriting
(i) In case the issuer company is making an issue of securities
(a) under sub-clause (a) of clause 11.3, 100% of the net offer to the public;
(b) under sub-clause (b) of clause 11.3, the book built portion - 75% of the net offer
to the public,
shall be compulsorily underwritten by the syndicate members/book runner(s) :
Provided that nothing contained in sub-clause (i) shall apply to 50% of the net offer to
the public, mandatory to be allotted to the Qualified Institutional Buyers under
proviso to clause 2.2.2 or clause 2.3.2 of these guidelines, in case the company is
making an issue of securities under clause 2.2.2 or clause 2.3.2, as the case may be.
(ii) (a) The syndicate members shall enter into an underwriting agreement with the
Book Runner(s) indicating the number of securities to which they would subscribe at
the predetermined price.
(b) The Book Runner(s) shall in turn enter into an underwriting agreement with the
Issuer company.
(iii) In the event of the syndicate members not fulfilling their underwriting obligations
the Book Runner(s) shall be responsible for bringing in the amount devolved.
Procedure for bidding:
(a) The method and process of bidding shall be subject to the following :
i) Bid shall be open for at least 3[three working days] and not more than 4[seven
working days, which may be extended to a maximum of 5[ten working days] in case
the price band is revised in accordance.
(ii) The advertisement mentioned at Clause 11.3.1 (xi) shall also contain the
following:
(a) the date of opening and closing of the bidding (not less than 5 days);
(b) the names and addresses of the syndicate members as well as the bidding
terminals for accepting the bids;
(c) the method and process of bidding.
(iii) Bidding shall be permitted only if an electronically linked transparent facility is
used.
(iv) The syndicate members shall be present at the bidding centres so that at least
one electronically linked computer terminal at all the bidding centres is available for
the purpose of bidding.
(v)(a) 6[The number of bidding centres, in case 75% of the net offer to the public is
offered through the book building process, shall not be less than the number of
mandatory collection centres as specified in these regulations. In case 100% of
the net offer to the public is made through book building process, the bidding
centres shall be at all the places, where the recognized stock exchanges are
situated.
(b) The same norms as applicable for collection centres shall be applicable for the
bidding centres also.
(vi) Individual as well as qualified institutional buyers shall place their bids only
through the brokers who shall have the right to vet the bids. The applicant shall
enclose the proof of DP ID and Client ID along with the application, while making
bid.

(vi)(a) During the period the issue is open to the public for bidding, the applicants
may approach the brokers of the stock exchange/s through which the securities are
offered under on-line system, to place an order for bidding to the securities. Every
broker shall accept orders from all clients/investors who place orders through him.
(vi)(b) The broker shall collect the client registration form duly filled up and signed
from the applicants before placing the order in the system as per Know your client
rule as specified by SEBI and as may be modified from time to time.
(vi)(c) The broker shall, thereafter, enter the buy order in the system, on behalf of the
clients and enter important details including the name, address, telephone number and
category of the applicant, the number of shares applied for, amount paid, beneficiary
ID, DP code and Bid-cum-Application Form number, Bid price, etc., and give an
order number/order confirmation slip to the investor.
(vi)(d) The broker shall open a separate bank account [Escrow Account] with the
clearing house bank for primary market issues and the amount collected by the broker
from his clients/investors as margin money shall be deposited in this account.
(vii) The investors shall have the right to revise their bids provided that Qualified
Institutional Buyers shall not be allowed to withdraw their bids after the closure of the
bidding
(viii) Bidding Form :
(a) There shall be a standard bidding form to ensure uniformity in bidding and
accuracy.
(b) The bidding form shall contain information about the investor, the price and
the number of securities that the investor wishes to bid.
(c) The bidding form before being issued to the bidder shall be serially
numbered at the bidding centres and date and time stamped.
(d) The serial number may be system generated or stamped with an automatic
numbering machine.
(e) The bidding form shall be issued in duplicate signed by the investor and
countersigned by the syndicate member, with one form for the investor and
the other for the syndicate member(s)/Book Runner(s).
(ix) At the end of each day of the bidding period the demand shall be shown
graphically on the terminals for information of the syndicate members as well as
the investors.
[(x) The identities of the Qualified Institutional Buyers making the bidding, shall not
be made public.
(xi) The Stock Exchange shall, by the end of each day while the issue is open for
subscription, send the order data to the Registrar to the Issue and Lead
Managers/Book Runners. This data shall consist of only valid orders (excluding those
that are cancelled). On the date of closure of the issue, the final status of orders
received shall be sent to the Registrar to the issue and Lead Managers/Book Runners.
(xii) The stock exchanges shall display data pertaining to book built issues in a
uniform format, inter alia, giving category-wise details of bids received Indicative
format is given in Schedule XXX. The data pertaining to an issue shall be displayed
on the site for a period of at least three days after closure of bids.
Allocation/Allotment Procedure
(i) In case an issuer company makes an issue of 100% of the net offer to public
through 100% book building process

(a) not less than 6[35%] of the net offer to the public shall be available for
allocation to retail individual investors ;
(b) not less than 1[15%] of the net offer to the public shall be available for
allocation to non-institutional investors i.e. investors other than retail
individual investors and Qualified Institutional Buyers;
(c) not more than 50% of the net offer to the public shall be available for
allocation to Qualified Institutional Buyers:
Provided that, 50% of 2[net offer to public] shall be mandatorily allotted to the
Qualified Institutional Buyers, in case the issuer company is making a public
issue under clauses 2.2.2 and 2.3.2 of these guidelines :
3
[Provided further that, in respect of issues made under rule 19(2)(b) of
Securities Contracts (Regulation) Rules, 1957, with 60% mandatory allocation to
Qualified Institutional Buyers, the percentage allocation to retail individual
investors and non-institutional investors in terms of clause 11.3.5(i)(a) shall be
30% and 10% respectively.
(ii) In case an issuer company makes an issue of 75% of the net offer to public
through book building process and 25% at the price determined through book
building
(a) in the book built portion, not less than 25% of the net offer to the public,
shall be available for allocation to non-Qualified Institutional Buyers and
not more than 50% of the net offer to the public shall be available for
allocation to Qualified Institutional Buyers;
(b) the balance 25% of the net offer to the public, offered at a price determined
through book building, shall be available only to retail individual investors
who have either not participated or have not received any allocation, in the
book built portion :
Provided that, 50% of 2[net offer to public] shall be mandatorily allotted to the
Qualified Institutional Buyers, in case the issuer company is making a public
issue under clauses 2.2.2 and 2.3.2 of these guidelines.
(iia) Out of the portion available for allocation to Qualified Institutional Buyers under
sub-clause (i) or (ii) or any proviso thereof, as the case may be, 5% shall be
allocated proportionately to mutual funds. Mutual fund applicants shall also be
eligible for proportionate allocation under the balance available for Qualified
Institutional Buyers as illustrated in Schedule XIX-A.
(iii) Allotment to retail individual investors, non-institutional investors and Qualified
Institutional Buyers shall be made proportionately as illustrated in Schedule
XVIII.
(iv) In the event of under subscription in any category, the undersubscribed portion
shall be allocated to the bidders as per disclosures made in terms of clause
11.3.2(v):
Provided that, the unsubscribed portion in the Qualified Institutional Buyer
category, shall not be available for subscription to other categories, in case the
issuer company has made an issue of securities under clause 2.2.2 or clause 2.3.2
of these guidelines.
(v) (a)
(b
(vi) After finalisation of basis of allocation, the Registrar to the Issue/company shall
send the computer file containing the allocation details i.e. the allocation

numbers, allocated quantity of successful applicants, etc. along with broker-wise

funds pay-in obligation, to the Broker to the Issue and the stock exchange(s).
(vii) The Company, Lead Manager/Book Runner shall announce the pay-in day and
intimate the same to Brokers and stock exchange. It shall be responsibility of the
broker to deposit the amount in the Escrow Account to the extent of allocation to
his clients on the pay-in date.
(viii) On receipt of the basis of allocation data, the brokers shall immediately
intimate the fact of allocation to their client/applicant. The broker shall ensure
that each successful client/applicant pays submits the duly filled-in and signed
application form to him along with the amount payable towards the application
money by the pay-in date. Amount already paid by the applicant as margin
money shall be adjusted towards the total allocation money payable. The broker
shall, thereafter, hand over the application forms of the successful applicants who
have paid the application money, to the exchange, which shall submit the same to
the Registrar to Issue/company for their records.
(ix)The broker shall refund the margin money collected earlier, within 3 days of
receipt of basis of allocation, to the applicants who did not receive allocation.]
(x)The brokers shall give details of the amount received from each client/investors
and the names of clients/investors who have not paid the application money to
Registrar/Book Runner the exchange. The brokers shall also give soft copy of
this data to the exchange.
(xi) In the event of the successful applicants failing to pay the application money, the
broker through whom such client placed orders, shall bring in the funds to the
extent of the clients default. If the broker does not bring in the funds, he shall be
declared as a defaulter by the stock exchange and action as prescribed under the
Bye-Laws of the stock exchange shall be initiated against him. In such an event,
the Book Runners in case of issues through book building process, who have
underwritten the issue, shall bring-in the shortfall.
(xii) On pay-in date, the clearing house shall, without any instruction from the broker,
debit the escrow account of each broker to the extent of allocation made to his
clients/investors and credit the amount so collected from each broker to the
Issue Account.
(xiii) The concerned Exchange shall not use the Settlement/Trade Guarantee Fund
of the Exchange for honouring brokers commitments in case of failure of broker
to bring in the funds.
(xiv)The broker shall open an Escrow Securities Account with any depository for
the purpose of receiving credit of securities on behalf of the clients.
(xv) On payment and receipt of the sum payable on application for the amount
towards minimum subscription, the company shall allot the shares to the
applicants as per these Guidelines.
(xvi)After the allotment, the Registrar to the issue shall post the share certificates to
the investors or, instruct the depository to credit the Escrow Securities Account
of each Broker, as the case may be.
(xvii) On receipt of the credit of securities to the Escrow Securities Account, the
Broker shall transfer the shares to the clients/applicants depository account,
after receipt of confirmation of full payment from the clients/applicants. For this
purpose broker shall be considered as Agent of the client/applicant. Broker shall
confirm to the Book-runner/Registrar to the issue that shares have been credited

to the account of clients/applicants not later than the day of commencement of

trading, in case full payment had been received.
(xviii) Any cases of dispute, amongst the broker and the clients, would be referred to
arbitration as per the bye-laws/regulations of the stock exchange.
(xix)The Allotment details shall be put on the website (if available) of the Registrar to
the issue and the issuer. Further, online messaging facility of NSDL/CDSL or of
stock exchanges may be used to communicate the Allotment details to Brokers,
as an alternative of physical Confirmation of Allocation Note.
(xx) Trading shall commence within 6 days from the closure of the issue failing
which interest at the rate of 15% p.a. shall be paid to the investors.
(xxi)Schedule XX may be referred to for Clarificatory Examples for issue size and
allocation has been specified in Schedule XX.
(xxii) Model Time Frame for Book Building is specified in Schedule XXI.
(xxiii) In case the issuer company has made an issue of 75% of the net offer to public
through book building process and 25% at the price determined through book
building
(a) the offer of 25% of the net offer to the public, made at a price determined
through book building, shall open within 15 days from the date of closure of
bidding ;
(b) the offer for subscription to the public, shall remain open for a period of at
least 3 working days after completing all the requirements of advertisement
and despatch of issue material to all the stock exchanges ;
(c) during the time when the offer is open, the investors who have received an
intimation of entitlement of securities under sub-clause (xviii) of clause
11.3.1, shall submit the application forms along with the application moneys
;
(d) the other retail individual investors who had not participated in the bidding
process or have not received intimation of entitlement of securities under
sub- clause (xviii) of clause 11.3.1 may also make an application.]
Maintenance of Books and Records
(i) A final book of demand showing the result of the allocation process shall be
maintained by the book runner/s.
(ii) The Book Runner/s and other intermediaries in the book-building process
associated shall maintain records of the book-building prices.
(iii) The Board shall have the right to inspect the records, books and documents
relating to the book-building process and such person shall extend full co-operation.

CHAPTER XIA
GUIDELINES ON INITIAL PUBLIC OFFERS THROUGH THE
STOCK EXCHANGE ON-LINE SYSTEM (E-IPO)
A company proposing to issue capital to public through the on-line system of the
stock exchange for offer of securities shall comply with the requirements as contained
in this Chapter in addition to other requirements for public issues as given in these
Guidelines, wherever applicable.
Agreement with the Stock Exchange
(a) The company shall enter into an agreement with the Stock Exchange(s) which
have the requisite system of on-line offer of securities.
(b) The agreement mentioned in the above clause shall specify inter alia, the
rights, duties, responsibilities and obligations of the company and stock
exchange(s) inter se. The agreement may also provide for a dispute resolution
mechanism between the company and the stock exchange.
Appointment of Brokers
(a) The stock exchange, shall appoint brokers of the exchange, who are registered
with SEBI, for the purpose of accepting applications and placing orders with
the company.
(b) For the purposes of this Chapter, the brokers, so appointed accepting
applications and application monies, shall be considered as collection
centres.
(c) The broker/s so appointed, shall collect the money from his/their client for
every order placed by him/them and in case the client fails to pay for shares
allocated as per the Guidelines, the broker shall pay such amount.
(d) The company/lead manager shall ensure that the brokers having terminals are
appointed in compliance with the requirement of mandatory collection centres,
as specified in clause 5.9 of Chapter V of the Guidelines.
(e) The company/lead manager shall ensure that the brokers so appointed are
financially capable of honoring their commitments arising out of defaults of
their clients, if any.
(f) The company shall pay to the broker/s a commission/fee for the services
rendered by him/them. The exchange shall ensure that the broker does not levy
a service fee on his clients in lieu of his services.
Appointment of Registrar to the Issue
The company shall appoint a Registrar to the Issue having electronic connectivity
with the Stock Exchange/s through which the securities are offered under the system.
Listing
The company may apply for listing of its securities on an exchange other than the
exchange through which it offers its securities to public through the on-line system.
Responsibility of the Lead Manager
(a) The Lead Manager shall be responsible for co-ordination of all the activities
amongst various intermediaries connected in the issue/system.

(b) The names of brokers appointed for the issue along with the names of the
other intermediaries namely Lead Managers to the Issue and Registrars to the
Issue shall be disclosed in the prospectus and application form.
Mode of Operation
(a) The company shall, after filing the offer document with ROC and before
opening of the issue, make an issue advertisement in one English and one
Hindi daily with nationwide circulation, and one regional daily with wide
circulation at the place where the registered office of the issuer company is
situated.
(b) The advertisement shall contain the salient features of the offer document as
specified in Form 2A of the Companies (Central Governments) General Rules
and Forms, 1956. The advertisement in addition to other required information,
shall also contain the following:
(h) the date of opening and closing of the issue;
(ii)
the method and process of application and allotment;
(iii)
the names, addresses and the telephone numbers of the
stock brokers and centres for accepting the applications.
(c) During the period the issue is open to the public for subscription, the
applicants may :
(a) approach the brokers of the stock exchange/s through which the securities
are offered under on-line system, to place an order for subscribing to the
securities. Every broker shall accept orders from all clients who place
orders through him;
(b) directly send the application form along with the cheque/demand draft for
the sum payable towards application money to the Registrar to the Issue or
place the order to subscribe through a stock-broker under the on-line
system.
(d) In case of issue of capital of Rs. 10 crores or above the Registrar to the Issue
shall open centres for collection of direct applications at the four metropolitan
centres situated at Delhi, Chennai, Kolkata and Mumbai.
(e) The broker shall collect the client registration form duly filled up and signed
from the applicants before placing the order in the system as per Know your
client rule as specified by SEBI and as may be modified from time to time.
(f) The broker shall, thereafter, enter the buy order in the system, on behalf of the
clients and enter details including the name, address, telephone number and
category of the applicant, the number of shares applied for, beneficiary ID, DP
code etc. and give an order number/order confirmation slip to the applicant.
(g) The applicant may withdraw applications in terms of the Companies Act,
1956.
(h) The broker may collect an amount to the extent of 100% of the application
money as margin money from the clients before he places an order on their
behalf.
(i) The broker shall open a separate bank account (Escrow Account) with the
clearing house bank for primary market issues and the amount collected by the
broker from his clients as margin money shall be deposited in this account.

(j) The broker shall, at the end of each day while the issue is open for
subscription, download/forward the order data to the Registrar to the Issue on
a daily basis. This data shall consist of only valid orders (excluding those that
are cancelled). On the date of closure of the issue, the final status of orders
received shall be sent to the Registrar to the issue/company.
(k) On the closure of the issue, the Designated Stock Exchange, along with the
Lead merchant banker and Registrars to the Issue shall ensure that the basis of
allocation is finalized in fair and proper manner on the lines of the norms with
respect to basis of allotment as specified in Chapter VII of the Guidelines, as
may be modified from time to time.
(l) After finalisation of basis of allocation, the Registrar to the Issue/company
shall send the computer file containing the allocation details i.e. the allocation
numbers, allocated quantity etc., of successful applicants to the Exchange. The
Exchange shall process and generate the broker-wise funds pay-in obligation
and shall send the file containing the allocation details to member brokers.
(m)On receipt of the basis of allocation data, the brokers shall immediately
intimate the fact of allocation to their client/applicant. The broker shall ensure
that each successful client/applicant submits the duly filled-in and signed
application form to him along with the amount payable towards the
application money. Amount already paid by the applicant as margin money
shall be adjusted towards the total allocation money payable. The broker shall,
thereafter, hand over the application forms of the successful applicants who
have paid the application money, to the exchange, which shall submit the same
to the Registrar to Issue/company for their records.
(n) The broker shall refund the margin money collected earlier, within 3 days of
receipt of basis of allocation, to the applicants who did not receive allocation.
(o) The brokers shall give details of the amount received from each client and the
names of clients who have not paid the application money to the exchange.
The brokers shall also give soft copy of this data to the exchange.
(p) On the pay-in day, the broker shall deposit the amount collected from the
clients in the separate bank account opened for primary issues with the
clearing house/bank. The clearing house shall debit the primary issue account
of each broker and credit the amount so collected from each broker to the
Issue Account.
(q) In the event of the successful applicants failing to pay the application money,
the broker through whom such client placed orders, shall bring in the funds to
the extent of the clients default. If the broker does not bring in the funds, he
shall be declared as a defaulter by the exchange and action as prescribed under
the Bye-Laws of the Stock Exchange shall be initiated against him. In such a
case, if the minimum subscription as disclosed in the prospectus is not
received, the issue proceeds shall be refunded to the applicants.
(r) The subscriber shall have an option to receive the security certificates or hold
the securities in dematerialized form as specified in the Guidelines.
(s) The concerned Exchange shall not use the Settlement/Trade Guarantee Fund
of the Exchange for honoring brokers commitments in case of failure of broker
to bring in the funds2.
(t) On payment and receipt of the sum payable on application for the amount
towards minimum subscription, the company shall allot the shares to the

applicants as per these Guidelines. The Registrar to the issue shall post the
share certificates to the investors or, instruct the depository to credit the
depository account of each investor, as the case may be.
(u) Allotment of securities shall be made not later than 15 days from the closure
of the issue failing which interest at the rate of 15% shall be paid to the
investors.
(v) In cases of applicants who have applied directly or by post to the Registrar to
the issue, and have not received allocation, the Registrar to the issue shall
arrange to refund the application monies paid by them within the time
prescribed.
(w) The brokers and other intermediaries engaged in the process of offering shares
through the on-line system shall maintain the following records for a period of
5 years :
(j) orders received;
(ii)
applications received;
(iii)
details of allocation and allotment;
(iv)
details of margin collected and refunded;
(v)
details of refund of application money.
(x) SEBI shall have the right to carry out an inspection of the records, books and
documents relating to the above, of any intermediary connected with this
system and every intermediary in the system shall at all times co-operate with
the inspection by SEBI. In addition the stock exchange have the right of
supervision and inspection of the activities of its member brokers connected
with the system.

CHAPTER XII
GUIDELINES FOR ISSUE OF CAPITAL BY DESIGNATED
FINANCIAL INSTITUTIONS
The following guidelines shall be applicable to the Designated Financial Institutions
(DFIs) approaching the capital market for funds through an offer document.
Promoters contribution
(a) There shall be no requirement of minimum promoters contribution in respect
of any issue by DFIs.
(b) In case any DFI proposes to make a reservation for promoters, such
contribution from the promoters shall come only from actual promoters and
not from directors, friends, relatives, associates, etc.
Reservation for employees
(a) The DFIs may make a reservation out of the proposed issues for allotment
only to their permanent employees including their Managing Director(s) or
any Whole-Time Director.
(b) Such reservation shall be restricted to the number of permanent employees on
the pay rolls of the DFIs as on the date of the offer document multiplied by
200 shares of Rs. 10 each or 20 shares of Rs. 100 each as the case may be per
employee, subject to a maximum of 5% of the issue size.
(c) The shares allotted under the reserved category shall be subject to a lock in for
a period of 3 years.
(d) In case of public issue, unsubscribed portion, if any, in the reserved category
shall be added back to the public offer.
(e) In case of rights issue, the unsubscribed portion if any, shall lapse.
(f) Where the Managing Director or the Whole-Time Director represents the
promoters, he may acquire securities as part of the promoters contribution but
not under the reservation made for the employees in the proposed issue.
Pricing of issues
The DFIs may freely price their issues subject to the following conditions:
(a) (i) The DFIs have 3 years track record of consistent profitability with profits
shown in their respective audited profit and loss accounts after providing for
interest, tax and depreciation in 3 out of immediately preceding 5 years with
profit during the last 2 years prior to the issue.
(ii) Where interest charged on debts outstanding for more than three years has
been taken into the Profit & Loss Account, the same shall be excluded for
reckoning the net profit.
(b) (i) DFI determines the issue price in consultation with the lead manager;
(ii) The issue price shall be authorized by a resolution passed at a duly
convened meeting of the shareholders/companys Board.
(c) The offer document shall contain justification for the premium disclosing the
following :
(i) Mode of calculation of the parameters including selection of any particular
capitalization rate and reasons therefore.

(ii) Whether revaluation reserves have been taken into account for determining
book value; if so, the date of revaluation and whether such revaluation was
done by an approved valuer and certified by the auditors.
(iii) Revaluation reserves shall be excluded if such revaluation has been done
within 3 years from the close of the previous financial year.
(iv) Past performance with reference to the earnings per share and book value
for the past 5 years.
(v) Projected earning per share/book value for the next 3 years as per DFIs
own assessment.
(vi) Stock market data covering average high and low price of the share for the
last 2 years and monthly high and low for the last 6 months, wherever
applicable.
(vii) All other factors which have been taken into account by the issuer for
determining the premium.
Specific disclosures
The offer document of the DFI shall contain specific disclosures in respect of the
following :
(a) The present equity and equity after conversion in the case of FCDs/PCDs.
(b) Actual Debt Equity Ratio (DER) vis--vis the desirable DER of 12:1.
(c) Notional Debt Service Coverage Ratio (NDSCR) vis--vis the desirable
minimum ratio of 1:2 to be maintained for each year.
Explanation: 1. (i) NDSCR in any year would be the ratio of 2 numbers where
the numerator is the sum of net profit after tax, interest on loans, non-cash profits
like depreciation and repayments received out of resending.
(ii) While the denominator is the sum of interest on borrowings, principal
installments on loans to be repaid and the apportioned principal installments
during the year on debentures.
2. While the DFI may have the discretion to make its own apportionment, a
minimum of 10% of redemption value shall be apportioned each year.
3. In the case of PCDs/FCDs convertible beyond 18 months and optional at the
hands of debenture-holders, at least 50% of the debenture value shall be
reckoned as probable redeemable debt and apportioned accordingly.
(d) Servicing behavior on existing debentures, payment of interest or principal on
due dates on term loans, debentures, bonds and fixed deposits.
(e) Outstanding principal or interest or lease rentals, etc., due from borrowing
companies.
(f) (i) The assets representing loan and other assistance portfolios may be
classified into four broad groups as Standard Assets, Sub-standard Assets,
Doubtful Assets and Loss Assets, and provisions made accordingly, as
specified by the Reserve Bank of India;
(ii) The accounting policies and the aggregate of provisions made for bad and
doubtful debts;
(iii) The classification of assets and the provisioning for bad and doubtful debts
has been duly certified by the statutory auditors of the DFIs.
Issue of debentures including bonds

Credit rating of debentures or bonds shall be compulsory, if conversion or redemption

falls after 18 months.
(a) Premium amount on conversion, time of conversion, in stages, if any, shall be predetermined and stated in the offer document.
(b) Redemption amount, period of maturity, yield on redemption for the PCDs/NCDs
shall be indicated in the offer document.
(a) Issue of debentures/bonds with maturity of 18 months or less are exempt from the
requirement of appointment of Trustee.
(b) In case of debenture/bonds with maturity beyond 18 months, a trustee or an agent,
by whatever name called shall be appointed to take care of the interest of
debenture/bond holders irrespective of whether or not the debentures/bonds are
secured.
(c) Where the debentures/bonds are unsecured, the issuing DFIs, incorporated as
companies, shall ensure compliance with the provisions of the Companies
(Acceptance of Deposits) Rules, 1975, as unsecured debentures/bonds are treated as
deposits for purposes of these rules.
(d) The name of the trustee/agent shall be stated in the offer document and the trust
deed or any other documents for the purpose shall be executed within six months of
the closure of the issue.
(a) Any conversion in part or whole of the debentures shall be optional at the hands
of the debenture-holder, if the conversion takes place after 18 months from the date of
allotment.
(b) In case of debentures with conversion period beyond 36 months, the issuer
designated DFI may exercise call option provided disclosure to this effect has been
made in the offer document.
The interest rate for the debentures shall be freely determinable by the issuer DFI.
The discount on the non-convertible portion of the PCD, where arrangements for their
buy-back have been made and the procedure for their purchase on spot trading basis
shall be disclosed in the offer document.
Roll over of debentures/bonds
(a) In case non-convertible portion of PCDs or Non-Convertible
Bonds/Debentures are to be rolled over with or without change in the interest
rate(s), an option shall be given to those debenture/bond-holders, who desire
to withdraw from the scheme.
(b) Roll over may be given effect to only in cases, where debenture/bond holders
have sent their positive consent and not on the basis of the non-receipt of their
negative reply.
(c) Before roll over of any non-convertible bonds or debentures or nonconvertible portion of the PCDs, fresh credit rating shall be obtained within a
period of six months prior to the due date for redemption and communicated
to the bond/debenture-holders before roll over.
(d) The letter of option regarding roll over shall be filed containing disclosure
with regard to the credit rating, bond/debenture-holder resolution, option for
conversion and such other terms which the Board may stipulate from time to
time.
Protection of the interest of debenture/bond holders

1 Trustees to the debenture/bond issue shall be vested with the requisite powers for
protecting the interest of bond/debenture-holders including a right to appoint a
nominee director on the Board of the DFI in consultation with other institutional
debenture-holders in the event of default and such events of defaults should be
specified in the offer document:
Provided that the right to appoint a nominee on the Board of the DFIs may not be
insisted upon in cases where the composition of the Board of such DFI is determined
by the statute incorporating such DFI.
2 Trustees shall obtain a certificate annually from the DFIs auditors in respect of
maintenance of DER and NDSCR as per the norms mentioned in Clause 12.4.1 (b &
c) and with regard to provisioning as per Clause 12.4.1(f) above :
Provided that if a DFI fails to meet such criteria, no dividend shall be declared by
such DFI for the relevant year except with the approval of the trustees and the rate of
dividend shall not exceed 10%.
New financial instruments
DFI issuing any new financial instruments such as Deep Discount Bonds, Debentures
with Warrants, Secured Premium Notes, etc., shall make adequate disclosures, more
particularly relating to the terms and conditions, redemption, security, conversion and
any other relevant features of such instruments.
Bonus issues by DFIs
1 The issuer DFI shall forward a certificate duly signed by itself and duly countersigned by its statutory auditor or by a company secretary in practice to the effect that
the terms and conditions for issue of bonus shares as laid down below have been
complied with:
(a) The bonus issue is made out of free reserves built out of the genuine profits or
share premium collected in cash only.
(b) Reserves created by revaluation or sale of fixed assets are not capitalized.
(c) Any special reserve created for the purpose of seeking tax benefits, capital
reserves created as a result of sale of assets, any reserve created without accrual
of cash resources and any other reserve not being in the nature of free reserves,
even though such reserves cannot be capitalized, can be considered as free
reserve for the purpose of calculation of residual reserves only.
(d) All contingent liabilities disclosed in the audited accounts, which have a bearing
on the net profits, shall be taken into account in the calculation of the residual
reserves.
(e) The residual reserves after the proposed capitalization shall be at least 40 per
cent of the increased paid-up capital.
(f) 30 per cent of the average profits before tax of the DFI for the previous three
years shall yield a rate of dividend on the expanded capital base of the DFI at
10%.
(g) The DFI has not failed in the maintenance of required DER, NDSCR during the
last 3 years.
(h) No bonus issue shall be made
(i) in lieu of dividend;
(ii) unless the partly-paid shares, if any, are fully paid-up;

(iii) if there is default in payment of interest or principal in respect of fixed

deposits and interest on existing debentures/bonds or principal on
redemption thereof; and
(iv) if there is default in payment of statutory dues of the employees such as
contribution to provident fund, gratuity, bonus etc.
(i) Any proposal for issue of bonus shall be given effect to within a period of six
months from the date of approval of such proposal by the Board of the DFI or,
the general body, as the case may be, whichever is later.
(j) The shareholder shall be informed about the ability of the DFI about the
estimated rate of dividend payable by the DFI during the year or the next
following year after issue of bonus shares.
(k) (i) No DFI shall, pending conversion of FCDs/PCDs, issue any shares by way
of rights or bonus unless similar benefit is extended to the holders of such
FCDs/PCDs through reservation of shares in proportion to such convertible
part of FCDs/PCDs falling due for conversion within a period of 12 months
from the date of rights/bonus issue.
(ii) The shares so reserved may be issued at the time of such conversions on the
same terms on which the rights or bonus issues were made.
Other requirements
1 Where a DFIs shareholding is held by various merchant bankers, the appointment
of any one of them as a lead manager shall be on the basis of least shareholding.
2 Subscription list for public issues shall be kept open for minimum of at least 3
working days and maximum 21 working days and the same shall be disclosed in the
offer document.
3 Rights issues shall be kept open for a minimum of 15 days but not exceeding 60
days.
4 (a) The prospectus shall specify the minimum and maximum target amount
proposed to be raised through the issue.
(b) The maximum target amount shall not exceed twice the minimum target :
1
[Provided that the aforesaid clause shall not be applicable to the information
memorandum/prospectus in respect of issues made under the shelf prospectus :
Provided further that the issue size and over subscription limits disclosed in the
information memorandum/prospectus (in respect of issues made under a shelf
prospectus) shall not exceed the respective limits disclosed in the shelf prospectus.
(c) After disclosing the issue size and over subscription limits in the shelf prospectus,
the DFI can raise and retain any amount through tranche issues subject to the limits
specified in shelf prospectus :
Provided that DFI has disclosed the minimum amount proposed to be raised and the
maximum oversubscription proposed to be retained in the information
memorandum/prospectus issued in respect of issues under shelf prospectus.
(d) The aggregate amount collected through one or more trenches shall not exceed the
maximum target amount specified in the shelf prospectus.]
5 (a) The requirement as to the minimum subscription of 90% applicable to the issues
made by companies shall not apply to an issue made by DFI.
(b) DFI is free to retain any amount received by it even if it is less than the minimum
target amount.

6 Where in terms of the consent issued by the Controller of Capital Issues, the
price/time of conversion of PCDs/FCDs is to be determined at a later date by the
Controller, such price and the timing of conversion shall be determined at a general
meeting of the shareholders subject to
(a) the consent of the holders of PCDs/FCDs for the conversion terms shall be
obtained individually and conversion shall be given effect to only if the concerned
debenture-holders send their positive consent and not on the basis of non-receipt of
their negative reply.
7 Such holders of debentures, who do not give such consent, shall be given an option
to get the convertible portion of debentures redeemed or repurchased by the DFI at a
price, which shall not be less than the face value of the debentures.
8 Where the consent from the Controller of Capital Issues stipulates a cap price for
conversion of FCDs/PCDs and the cap price has been disclosed to the investors before
subscription is made, the Board of the DFI may determine the price at which the
debentures may be converted and in such cases an option may not be given to
debenture-holders.
9 The provisions of the Companies Act, 1956, and other applicable laws/listing
requirements of the stock exchange, etc., wherever applicable, shall be complied with
by the DFIs in connection with issue of shares, debentures and bonds, etc.
Utilization of money before allotment
1 DFIs may utilise the moneys raised by them out of the public issues of debt
instruments before allotment and/or listing of the instruments, provided that:
(i) the DFI pays interest to the investors from a date not later than the date from
which such permission to utilize the funds is granted;
(ii) the DFI undertakes to refund the entire money to the investors in the event of its
inability to obtain listing permission from any of the stock exchanges where
application for listing of such instruments has been made; and
(iii) the DFI has complied with the provisions of the Companies Act, 1956, wherever
applicable.

CHAPTER XII-A
SHELF PROSPECTUS
Applicability
(a) This Chapter shall apply to issues of debt securities to be made by public sector
banks, scheduled commercial banks and public financial institutions pursuant to
a shelf prospectus proposed to be issued in terms of section 60A of the
Companies Act, 1956.
(b) Unless otherwise specified in this Chapter, the provisions of these Guidelines
relating to public issues shall apply in respect of such issues.
Procedure
1 A public sector bank, scheduled commercial bank or public financial institution
proposing to issue a shelf prospectus shall file a draft shelf prospectus with the Board.
2 Where a draft shelf prospectus is filed with the Board, the provisions of Chapter V
of these Guidelines shall apply as if it were a draft prospectus filed under clause 2.1.1.
3 The shelf prospectus shall, in addition to other requisite disclosures as per these
Guidelines, also disclose the aggregate amount proposed to be raised through all the
stages of offers of securities made under the shelf prospectus.
4 The observation letter issued by the Board shall be valid for a period of 365 days
from the date of issuance.
Information memorandum
1 A public sector bank, scheduled commercial bank or public financial institution
shall file the shelf prospectus after incorporating the updations in terms of information
memorandum in respect of the second or any subsequent offer of securities with the
Board.
2 The shelf prospectus as updated in terms of clause 12A.3.1 shall be uploaded on the
website of SEBI and on the website of the lead merchant banker.
3 The public sector bank, scheduled commercial bank or public financial institution
shall open the particular stage of offer of securities after filing the information
memorandum/shelf prospectus as updated in terms of clause 12A.3.1 with the
Registrar of Companies and with the Board.]

CHAPTER XIII
GUIDELINES FOR PREFERENTIAL ISSUES
(a) The preferential issue of equity shares/Fully Convertible Debentures
(FCDs)/Partly Convertible Debentures (PCDs) or any other financial
instruments which would be converted into or exchanged with equity shares at
a later date, by listed companies whose equity share capital is listed on any
stock exchange, to any select group of persons under section 81(1A) of the
Companies Act, 1956, on private placement basis shall be governed by these
guidelines.
(b) Such preferential issues by listed companies by way of equity shares/Fully
Convertible Debentures (FCDs)/Partly Convertible Debentures (PCDs) or any
other financial instruments which would be converted into/exchanged with
equity shares at a later date, shall be made in accordance with the pricing
provisions mentioned below:
Pricing of the issue
The issue of shares on a preferential basis can be made at a price not less than the
higher of the following :
(i) The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the six months preceding the
relevant date; or
(ii) The average of the weekly high and low of the closing prices of the related
shares quoted on a stock exchange during the two weeks preceding the relevant
date. Explanation:
(a) relevant date for the purpose of this clause means the date thirty days prior to
the date on which the meeting of the general body of shareholders is held, in
terms of section 81(1A) of the Companies Act, 1956, to consider the proposed
issue.
(b) Stock exchange for the purpose of this clause means any of the recognized
stock exchanges in which the shares are listed and in which the highest trading
volume in respect of the shares of the company has been recorded during the
preceding six months prior to the relevant date.

Pricing of shares arising out of warrants, etc.

1 (a) Where warrants are issued on a preferential basis with an option to apply for and
be allotted shares, the issuer company shall determine the price of the resultant shares
in accordance with Clause 13.1.1.1 above.
(b) The relevant date for the above purpose may, at the option of the issuer be either
the one referred to in Explanation (a) to Clause 13.1.1.1 above or a date 30 days prior
to the date on which the holder of the warrants becomes entitled to apply for the said
shares.
2 The resolution to be passed in terms of section 81(1A) shall clearly specify the
relevant date on the basis of which price of the resultant shares shall be calculated.
3 (a) An amount equivalent to at least ten per cent of the price fixed in terms of Clause
13.1.1.1 above shall become payable for the warrants on the date of their allotment.
(b) The amount referred to in sub-clause (a), shall be adjusted against the price
payable subsequently for acquiring the shares by exercising an option for the purpose.

(c) The amount referred to in sub-clause (a) shall be forfeited if the option to acquire
shares is not exercised.

Pricing of shares on conversion

1 Where PCDs/FCDs/other convertible instruments, are issued on a preferential basis,
providing for the issuer to allot shares at a future date, the issuer shall determine the
price at which the shares could be allotted in the same manner as specified for pricing
of shares allotted in lieu of warrants as indicated in Paras 13.1.2.1 and 13.1.2.2 above.
The explanatory statement to the notice for the general meeting in terms of section
173 of the Companies Act, 1956 shall contain
(i) The object/s of the issue through preferential offer,
(ii) Intention of promoters/directors/key management persons to subscribe to the
offer,
(iii) Shareholding pattern before and after the offer,
(iv) proposed time within which the allotment shall be complete,
(v) The identity of the proposed allottees and the percentage of post preferential
issue capital that may be held by them.
A listed company shall not make any preferential issue of equity shares, Fully
Convertible Debentures, Partly Convertible Debentures or any other instrument which
may be converted into or exchanged with equity shares at a latter date if the same is
not in compliance with the conditions for continuous listing.

Currency of financial instruments

1 In case of warrants/PCDs/FCDs/or any other financial instruments with a provision
for the allotment of equity shares at a future date, either through conversion or
otherwise, the currency of the instruments shall not exceed beyond 18 months from
the date of issue of the relevant instrument.

Non-transferability of financial instruments

(a) The instruments allotted on a preferential basis to the promoter/promoter
group as defined in Chapter VI in 1[Explanation I, II and III to clause
6.8.3.2] of these guidelines, shall be subject to lock-in of 3 years from the
date of their allotment.
(c) In any case, not more than 20% of the total capital of the company,
including capital brought in by way of preferential issue, shall be subject
to lock-in of three years from the date of allotment.
1
1. [(c) In addition to the requirements for lock-in of instruments allotted on
preferential basis to promoters/promoter group as per Clause 13.3.1(a) and (b),
the instruments allotted on preferential basis to any person including
promoters/promoters group shall be locked-in for a period of one year from the
date of their allotment.
2. 3[(d)] The lock-in on shares acquired by conversion of the convertible
instrument/exercise of warrants, shall be reduced to the extent the convertible
instrument warrants have already been locked-in.
3. 4[(e) The lock-in-period in respect of the shares issued on preferential basis
pursuant to a scheme approved under Corporate Debt Restructuring framework
specified by the Reserve Bank of India, shall commence from the date of
allotment and shall continue for a period of one year and in case of allotment of
partly paid up shares the lock-in-period shall commence from the date of

allotment and continue for a period of one year from the date when shares
become fully paid up.
(e) No listed company shall make preferential issue of equity shares, warrants,
PCDs, FCDs or any other financial instruments convertible into or exchanged
with equity shares at a later date, to any person unless the entire shareholding
if any, of such person in the company is held by him in dematerialized form.
(f) Where the shares, warrants, PCDs, FCDs or any other financial instruments
convertible into or exchanged with equity shares at a later date, are issued on
preferential basis, the entire pre-preferential allotment shareholding of such
allottees shall be under lock-in from the relevant date upto a period of six
months from the date of preferential allotment.
(g) Where the shares, warrants, PCDs, FCDs or any other financial instruments
convertible into or exchanged with equity shares at a later date, are issued on
preferential basis, the shareholders who have sold their shares during the six
months period prior to the relevant date, as applicable, shall not be eligible for
allotment of shares on preferential basis.
4. Explanation : (a) For the purpose of this clause total capital of the company
shall mean
(h) equity share capital issued by way of public/rights issue including equity
shares emerging at a later date out of any convertible securities/exercise of
warrants; and
(ii)
Equity shares or any other security convertible at a later date into
equity issued on a preferential basis in favour of
promoter/promoter groups.
5. (b)(i)
For computation of 20% of the total capital of the company, the
amount of minimum promoters contribution held and locked-in, in the past as
per guidelines shall be taken into account.
(ii)
The minimum promoters contribution shall not again be put
under fresh lock-in, even though it is considered for computing
the requirement of 20% of the total capital of the company, in
case the said minimum promoters contribution is free of lockin at the time of the preferential issue.
6. These locked in shares/instruments may be transferred to and amongst
promoter/promoter group or to a new promoter(s) or person(s) in control of the
company, subject to continuation of lock-in in the hands of transferee(s) for the
remaining period and compliance of Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as
applicable.
Currency of shareholders resolutions
1. Allotment pursuant to any resolution passed at a meeting of shareholders of a
1
[company] granting consent for preferential issues of any financial instrument,
shall be completed within a period of 2[fifteen days] from the date of passing of
the resolution:
2. 3[Provided that where the allotment on preferential basis is pending on account
of pendency of any approval of such allotment by any regulatory authority or the
Central Government, the allotment shall be completed within 15 days from the
date of such approval.]

3. The equity shares and securities convertible into equity shares at a later date,
allotted in terms of the above said resolution shall be made fully paid up at the
time of their allotment :
4. Provided that payment in case of warrants shall be made in terms of Clause
13.1.2.3 above.]
5. Nothing contained in clauses 13.4.1 and 13.4.2 shall apply in case of allotment
of shares and securities convertible into equity shares at a later date on
preferential basis pursuant to a scheme of corporate debt restructuring as per the
Corporate Debt Restructuring framework specified by the Reserve Bank of
India.]
6. If allotment of instruments and dispatch of certificates is not completed within
6
[fifteen days] from the date of such resolution, a fresh consent of the
shareholders shall be obtained and the relevant date referred to in Explanation
(a) in paragraph 13.1.1.1 above will relate to the new resolution.

Other requirements
(a) In case of every issue of shares/warrants/FCDs/PCDs/or other financial
instruments having conversion option, the statutory auditors of the issuer 8[company]
shall certify that the issue of the said instruments is being made in accordance with
the requirements contained in these guidelines.
(b) Copies of the auditors certificate shall also be laid before the meeting of the
shareholders convened to consider the proposed issue.
(c) In case of preferential allotment of shares to promoters, their relatives, associates
and related entities, for consideration other than cash, valuation of the assets in
consideration for which the shares are proposed to be issued shall be done by an
independent qualified valuer and the valuation report shall be submitted to the
exchanges on which shares of the issuer company are listed.
Explanation.For the purpose of this clause the word valuer shall have the same
meaning as assigned to the term under clause (r) of sub-regulation (1) of regulation 2
of the SEBI (Issue of Sweat Equity) Regulations, 2002.
The details of all monies utilized out of the preferential issue proceeds shall be
disclosed under an appropriate head in the balance sheet of the company indicating
the purpose for which such monies have been utilized. The details of unutilized
monies shall also be disclosed under a separate head in the balance sheet of the
company indicating the form in which such unutilised monies have been invested.

Preferential allotments to FIIs

Preferential allotments, if any to be made in case of Foreign Institutional Investors,
shall also be governed by the guidelines issued by the Government of
India/Board/Reserve Bank of India on the subject.

Non-Applicability of the guidelines

Clauses 13.1 to 13.5 shall not be applicable in the following cases:
(i) Where the further shares are allotted in pursuance to the merger and
amalgamation scheme approved by the High Court;

(ii) (a) where further shares are allotted to a person/group of persons in accordance
with the provisions of rehabilitation packages approved by BIFR;
(b) in case such persons are promoters or belong to a promoter group as defined
in 2[Explanations I and II, 3[clause 6.8.3.2]] of Chapter VI of these
Guidelines, the lock-in provisions shall continue to apply unless otherwise
stated in the BIFR order;
(iii) where further shares are allotted to All India Public Financial Institutions in
accordance with the provisions of the loan agreements signed prior to August 4,
1994.

CHAPTER XIII-A
GUIDELINES FOR QUALIFIED INSTITUTIONS PLACEMENT
(QIP)
Applicability
This Chapter shall apply to any issue of equity shares/fully convertible debentures
(FCDs)/partly convertible debentures (PCDs) or any securities other than warrants,
which are convertible into or exchangeable with equity shares at a later date
(hereinafter referred to as specified securities), made to Qualified Institutional
Buyers (QIBs) pursuant to this chapter, by a listed company which fulfils the
following conditions:
(a) its equity shares of the same class are listed on a stock exchange having nation
wide trading terminals; and
(b) it is in compliance with the prescribed minimum public shareholding
requirements of the listing agreement.
Explanation:
(i) The term Qualified Institutional Buyers shall have the same meaning as
assigned to it in clause 2.2.2B(v).
(ii) For the purpose of sub-clause (a) of clause 13A.1.1, securities that are
convertible into or exchangeable with securities which are listed on a stock
exchange having nation wide trading terminals, shall be deemed to be securities
of the class into which they are convertible or with which they are exchangeable.

Investors
1. Only QIBs shall be eligible for allotment of specified securities issued
pursuant to this Chapter.
2. Minimum of 10 per cent of specified securities issued pursuant to this chapter
shall be allotted to mutual funds.
3. If no mutual fund is agreeable to take up the minimum portion mentioned in
clause 13A.2.2 or any part thereof, such minimum portion or part thereof may
be allotted to other QIBs.
4. No allotment shall be made under this chapter, either directly or indirectly, to
any QIB being a promoter or any person related to promoter/s.
5. Explanation: For the purpose of this clause, QIB who has all or any of the
following rights shall also be deemed to be a person related to promoter/s:
(a) rights under a shareholders agreement or voting agreement entered into
with promoters or persons related to the promoters;
(b) veto rights; or
(d) right to appoint any nominee director on the board of the issuer:
6. Provided that a QIB who does not hold any shares in the issuer and who has
acquired the aforesaid rights in the capacity of a lender shall not be deemed to
be a person related to promoter/s.
7. Investors shall not be allowed to withdraw their bids after the closure of issue.
Pricing

An issue of specified securities made under this Chapter shall be made at a price not
less than the higher of the following:
(i) The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the six months preceding the
relevant date;
OR
(ii) The average of the weekly high and low of the closing prices of the related
shares quoted on the stock exchange during the two weeks preceding the relevant
date.
Explanation:
(a) relevant date for the purpose of this clause means the day which is thirty
days prior to the date on which the meeting of general body of shareholders
is held, in terms of sub-section (1A) of section 81 of the Companies Act,
1956 or other applicable provision to consider the proposed issue.
(b) stock exchange for the purpose of this clause means any of the recognised
stock exchanges in which the equity shares of the issuer of the same class
are listed and in which the highest trading volume in such shares has been
recorded during the six months immediately preceding the relevant date.
Pricing of shares on conversion
1. Where securities which are convertible into or exchangeable with equity
shares at a later date are issued pursuant to this Chapter, the issuer shall
determine the price of the resultant shares in terms of clause 13A.3.1 above,
subject to clause 13A.3.2.2.
2. The relevant date for the above purpose may, at the option of the issuer, be
either the one referred in Explanation (a) to clause 13A.3.1 or a day thirty days
prior to the date on which the holder of the securities which are convertible
into or exchangeable with equity shares at a later date becomes entitled to
apply for the said shares.
3. The specified securities allotted pursuant to this Chapter shall be made fully
paid up at the time of their allotment.
Adjustments in price
The prices considered for determination of issue price of specified securities as
provided in clause 13A.3.1 and 13A.3.2.1 shall be subject to appropriate adjustments
if the issuer company:
a. makes an issue of shares by way of capitalization of profits or reserves (other
than by way of a dividend on shares);
b. makes an issue of shares on rights basis
c. consolidates its outstanding shares into a smaller number of shares;
d. divides its outstanding shares (including by way of stock split);
e. re-classifies any of its shares into other securities of the company;
f. is involved in such other similar events or circumstances, which in the opinion of
the concerned Stock Exchange, requires adjustments.
Currency of the Security
In case of a security which is convertible into or exchangeable with equity shares at a
later date, the same may be converted/exchanged into equity shares at any time after

the date of allotment of the security, not later than sixty months from the date of
allotment.
Shareholders Resolution
1 Allotment of specified securities issued pursuant to this Chapter shall be completed
within twelve months from the date of passing of the resolution in terms of subsection (1A) of section 81 of the Companies Act, 1956 or any other applicable
provision.
2 The resolution passed at the meeting of shareholders referred to in clause 13A.6.1
above shall specify that the allotment is proposed to be made to QIBs pursuant to this
Chapter and shall also specify the relevant date on the basis of which price of the
resultant shares as specified under clause 13A.3.2.2 shall be determined.
3 The placements made pursuant to authority of the same shareholders resolution
shall be separated by at least six months between each placement.
Placement Document
1 Specified securities shall be issued pursuant to this Chapter on the basis of a
placement document.
2 The placement document shall contain all material information, including the
information specified in Schedule XXIA.
3 The placement document shall be a private document provided to select investors,
through serially numbered copies.
4 The placement document shall also be placed on the website of the concerned stock
exchange and of the issuer with a disclaimer to the effect that it is in connection with
an issue to QIBs under this Chapter and that no offer is being made to the public or to
any other category of investors.
5 A copy of the placement document shall be filed with the Board for record purpose
within 30 days of the allotment of specified securities.
Number of allottees
The minimum number of allottees for each placement of specified securities made
pursuant to this Chapter shall not be less than:
(a) two, where the issue size is less than or equal to Rs. 250 corers;
(b) five, where the issue size is greater than Rs. 250 corers:
Provided that no single allottee shall be allotted more than 50% of the issue size:
Provided further that QIBs belonging to the same group or those who are under
common control shall be deemed to be a single allottee for the purpose of this clause.
Explanation: For the purpose of this clause
(i) The expression QIBs belonging to the same group shall derive meaning from
the concept of companies under the same group as provided in sub-section (11)
of section 372 of the Companies Act, 1956;
(ii) Control shall have the same meaning as is assigned to it by clause (c) of
regulation 2 of the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.
Restrictions on amount raised

The aggregate of the proposed placement and all previous placements made in the
same financial year pursuant to this Chapter shall not exceed five times the net worth
of the issuer as per the audited balance sheet of the previous financial year.
Transferability of specified securities
Specified securities allotted pursuant to this Chapter shall not be sold by QIB for a
period of one year from the date of allotment, except on a recognized stock exchange.
Explanation: For the purpose of this clause, it is clarified that any sale by way of a
bulk or block transaction in accordance with the procedures prescribed by the Board
and the stock exchange, shall also be treated as a sale on a recognized stock exchange.
Obligations of Merchant Bankers
1 Any issue and allotment of specified securities pursuant to this Chapter shall be
managed by Merchant Banker(s) registered with SEBI.
2 The merchant banker shall exercise due diligence.
3 The merchant banker shall furnish to each stock exchange on which the same class
of shares or other securities are listed, a due diligence certificate stating that the issue
is being made pursuant to this Chapter and complies with its requirements, along with
the application made for seeking in-principle approval for listing of the specified
securities.
4 The merchant banker shall also furnish to each stock exchange on which the same
class of shares or other securities are listed, the documents, undertakings, etc., if any,
specified in the listing agreement for the purpose of seeking in-principle approval and
final permission from Stock Exchanges for listing of the specified securities.
Issuer Certification
1 The issuer shall furnish a copy of the placement document to each stock exchange
on which the same class of shares or other securities are listed.
2 The issuer shall also furnish to each stock exchange on which the same class of
shares or other securities are listed, a certificate stating that the issue is being made
pursuant to this Chapter and complies with its requirements, along with the
application made for seeking in-principle approval for listing of the specified
securities.
3 The issuer shall also furnish to each stock exchange on which the same class of
shares or other securities are listed, the documents, undertakings, etc., if any, specified
in the listing agreement for the purpose of seeking in-principle approval and final
permission from Stock Exchanges for listing of the specified securities.
Non-applicability of Chapter XIII
Nothing contained in Chapter XIII shall apply to an issue of specified securities made
pursuant to this Chapter.

CHAPTER XIV
GUIDELINES FOR OTCEI ISSUES
Any company making an initial public offer of equity shares or any other security
convertible at a later date into equity shares and proposing to list them on the Over the
Counter Exchange of India (OTCEI) shall comply with all the requirements specified
in these guidelines:
Eligibility norms
1.1 Any company making an initial public offer of equity share or any other security
convertible at a later date into equity shares and proposing to list them on the OTCEI,
is exempted from the eligibility norms specified in Clause 2.2 of Chapter II of these
guidelines subject to its fulfilling the following besides the listing criteria laid down
by the OTCEI:
(i) it is sponsored by a member of the OTCEI ; and
1.2 Any offer for sale of equity share or any other security convertible at a later date
into equity shares resulting out of a Bought out Deal (BOD) registered with the
OTCEI is exempted from the eligibility norms specified in Clause 2.2 of Chapter II of
these guidelines subject to the fulfillment of the listing criteria laid down by the
OTCEI:
Provided that the issuer company which has made issue of capital under Clauses
14.1.1 and 14.1.2 above, shall not delist its securities from the OTCEI for a minimum
period of three years from the date of admission to dealing of such securities on the
OTCEI.
Pricing Norms
2.1 Any offer for sale of equity share or any other security convertible at a later date
into equity shares resulting out of a Bought out Deal (BOD) registered with OTCEI is
exempted from the pricing norms specified in Clause 3.2 of Chapter III of these
guidelines subject to the following conditions:
(i) The promoters after such issue shall retain at least 20% of the total issued capital
with the lock-in of three years from the date of the allotment of securities in the
proposed issue; and
(ii) At least two market makers (One Compulsory and one additional market maker)
are appointed in accordance with the Market Making guidelines stipulated by the
OTCEI.
Projections
.3.1 In case of securities proposed to be listed on OTCEI, for the purpose of Clause
6.12.1 of Chapter VI of these guidelines, projections based on the appraisal done by
the sponsor who undertakes to do Market Making activity in the securities offered in
the proposed issue can be included in the offer document subject to compliance with
other conditions contained in the said clause.

CHAPTER XV
GUIDELINES FOR BONUS ISSUES
A listed company proposing to issue bonus shares shall comply with the following
:
(a) No company shall, pending conversion of FCDs/PCDs, issue any shares by way
of bonus unless similar benefit is extended to the holders of such FCDs/PCDs,
through reservation of shares in proportion to such convertible part of the FCDs or
PCDs.
(b) The shares so reserved may be issued at the time of conversion(s) of such
debentures on the same terms on which the bonus issues were made.
1 The bonus issue shall be made out of free reserves built out of the genuine profits or
share premium collected in cash only.
2 Reserves created by revaluation of fixed assets are not capitalized.
3 The declaration of bonus issue, in lieu of dividend, is not made.
4 The bonus issue is not made unless the partly paid shares, if any existing, are made
fully paid-up.
5 The Company
(a) has not defaulted in payment of interest or principal in respect of fixed deposits
and interest on existing debentures or principal on redemption thereof ; and
(b) Has sufficient reason to believe that it has not defaulted in respect of the payment
of statutory dues of the employees such as contribution to provident fund,
gratuity, bonus, etc.
6 A company which announces its bonus issue after the approval of the Board of
Directors must implement the proposal within a period of six months from the date of
such approval and shall not have the option of changing the decision.
7 (i) The Articles of Association of the company shall contain a provision for
capitalization of reserves, etc.
(ii) If there is no such provision in the Articles the company shall pass a Resolution at
its general body meeting making provisions in the Articles of Association for
capitalization.
8 Consequent to the issue of bonus shares if the subscribed and paid-up capital
exceeds the authorized share capital, a resolution shall be passed by the company at
its general body meeting for increasing the authorized capital.
9 A certificate duly signed by the issuer company and countersigned by statutory
auditor or by Company Secretary in practice to the effect that the provision of clauses
15.1.1 to 15.1.9 have been complied with shall be forwarded to the Board.

CHAPTER XVI
OPERATIONAL GUIDELINES
The eligible merchant bankers shall ensure compliance with the following:
Submission of draft and final offer document.
(a) The offer documents of size up to Rs. 20 corers shall be filed by lead merchant
bankers with the concerned regional office of the Board under the jurisdiction of
which the registered office of the issuer company falls.
(b) The jurisdiction of regional offices/head office shall be as per Schedule XXII.
(a) As per Clause 5.6 of Chapter V of the Guidelines, the draft offer document filed
with the Board shall be made public.
1
[(b) The lead merchant banker shall make ten (10) copies of the draft offer document
available to the dealing office of the Board, three (3) copies to the Primary Market
Department, SEBI, Head Office and 25 copies to the stock exchange(s) where the
issue is proposed to be listed.]
(c) Copies of the draft offer document shall be made available to the public by the
lead merchant bankers/stock exchange.
(d) The lead merchant banker and the stock exchange(s) may charge such reasonable
charge for providing a copy of the draft offer document.
(a) The lead merchant banker shall submit the draft offer document on a computer
floppy to the dealing office of the Board and to the Primary Market Department,
SEBI, and Head Office, as specified in Schedule XXIII.
(b) In case of book built issues the lead merchant banker shall submit a printed and
soft copy on a computer floppy, of the draft offer document incorporating the Boards
observations and a printed copy of bid cum application form to the Primary Market
Department, SEBI, and Head Office at least five days before opening of bidding.]
(a) The Lead Merchant Bankers shall submit two copies of final printed copy of the
final offer document to dealing offices of the Board 2[within three (3) days of filing
offer document with Registrar of Companies/concerned stock exchange(s) as the case
may be].
3
[(b) The lead merchant banker shall submit one final printed copy of the final offer
document to Primary Market Department, SEBI, Head Office, within three (3) days of
filing the offer document with the Registrar of Companies/concerned stock
exchange(s) as the case may be.]
4
[(c) The lead merchant banker shall submit a computer floppy containing the final
prospectus/letter of offer to Primary Market Department, SEBI, Head Office, as
specified in Schedule XXIII within three (3) days of filing the final prospectus/letter
of offer with the Registrar of Companies/concerned stock exchange(s). Along with the
floppy, the lead manager shall submit an undertaking to SEBI certifying that the
contents of the floppy are in HTML format and are identical to the printed version of
prospectus/letter of offer filed with the Registrar of Companies/concerned stock
exchange as the case may be.]
Dispatch of issue material
(a) Lead Merchant Bankers shall ensure that whenever there is a reservation for
NRIs, 10 copies of the prospectus together with 1000 application forms are dispatched
in advance of the issue opening date directly along with a letter addressed in person to

Adviser (NRI), Indian Investment Centre, Jeevan Vihar Bldg., Sansad Marg, New
Delhi - 110001.
(b) Twenty copies of the prospectus and application forms shall be dispatched in
advance of the issue opening date to various Investors Associations.
Underwriting
(a) While selecting underwriters and finalizing underwriting arrangements, lead
merchant bankers shall ensure that the underwriters do not overexpose themselves so
that it may become difficult to fulfill underwriting commitments.
(b) The overall exposure of underwriter(s) belonging to the same group or
management in an issue shall be assessed carefully by the Lead Merchant Banker.
(c) OTC dealers registered with the Board under the Securities and Exchange Board
of India (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992, shall be
treated at par with the brokers of other stock exchanges in respect of underwriting
arrangement.
Instructions on post-issue obligations
The merchant banker shall ensure compliance with the following post-issue
obligations:
Redressal of investor grievances
(a) The merchant bankers shall assign high priority to investor grievances and take all
preventive steps to minimize the number of complaints;
(b) The lead merchant banker shall set up proper grievance monitoring and redressal
system in co-ordination with the issuers and the Registrars to the issue, and take all
necessary measures to resolve the grievances quickly.
The merchant bankers shall actively associate with the post-issue refund and
allotment activities and regularly monitor investor grievances arising there from.
Submission of post-issue monitoring reports
(a) The concerned lead merchant banker shall submit, in duplicate, the Post-Issue
Monitoring Reports specified in Clause 7.2 of Chapter VII of these Guidelines, within
3 working days from the due dates either by registered post or deliver at respective
regional offices/head office at the addresses given in Schedule XXII.
(b) Where the offer document has been dealt with by any of the regional offices of the
Board, a copy of the report shall be sent to the Boards Head Office, Mumbai.
The Lead Merchant Banker(s) shall inform the Board on important developments
about the particular issues being lead managed by them during the intervening period
of the reports.
Issue of No Objection Certificate (NOC)
(a) As per the Listing Agreement of the Stock Exchanges, the issuer companies shall
deposit 1% of the amount of securities offered to the public and/or to the holders of
the existing securities of the company, as the case may be, with the designated Stock
Exchange, which can be released by the concerned stock exchange only after
obtaining an NOC from the Board.
(b) An application for NOC shall be submitted by Issuer Company to the Board in the
format specified in Schedule XXIV.
The following conditions shall be complied before submitting the application for issue
of NOC:
(a) Completion of 4 months from the date of obtaining the listing permission from
the concerned Designated Stock Exchange or the last date when the listing

permission was obtained from any of the other stock exchanges, where the
securities are proposed to be listed, whichever is later.
(b) Satisfactory redressal of all complaints received at the Board against the
Company.
(c) Certificate from the Designated Stock Exchange to the issuer company to the
effect that underwriting/brokerage commission as well as Registrars/Lead
merchant bankers fees have been duly paid by the company.
Merchant Bankers
Registration and renewal of registration of Merchant Bankers
(a) Application for renewal of Certificate of Registration shall be made by the
Merchant Bankers as per regulation 9 of the Securities and Exchange Board of India
(Merchant Bankers) Rules and Regulations, 1992;
(b) While filing the renewal application for the certificate of registration as merchant
banker, it shall provide a statement highlighting the changes that have taken place in
the information that was submitted to the Board for the earlier registration and a
declaration stating that no other changes other than as mentioned in the above
statement have taken place;
(c) Merchant Bankers while forwarding the renewal application in Form A as per the
Securities and Exchange Board of India (Merchant Bankers) Rules and Regulations,
1992, shall also forward the additional information as specified in Schedule XXVI.
Reporting requirements in respect of merchant banking activities
(a) In terms of regulation 28 of the Securities and Exchange Board of India
(Merchant Bankers) Regulations, 1992, the merchant bankers shall send the halfyearly report in the format specified at Schedule XXVII relating to their merchant
banking activities;
(b) The report referred to in sub-clause (a) shall be submitted twice a year, as on
March 31 and September 30 and it should reach the Board within three months from
the close of the period to which it relates.
Registration with Association of Merchant Bankers of India (AMBI)
Registered Merchant Bankers shall inform the Board of their having become a
member of the AMBI with relevant details.
Issue of Penalty Points
(a) Penalty points may be imposed on the merchant banker for violation of any of the
provisions of operational guidelines under these chapters;
(b) The Merchant Banker, on whom penalty points of four or more have been imposed
may be restrained from filing any offer document or associating with or managing any
issues for a particular period;
(c) The Board may initiate action under the SEBI (Merchant Bankers) Regulations
against the Merchant Bankers, irrespective of whether any penalty point is imposed or
not;
(d) Imposition of penalty points is not a condition precedent for initiation of
proceeding against the Merchant Banker under the Securities and Exchange Board of
India (Merchant Bankers) Regulations.

Conclusion

After completing the above analysis it can be concluded that SEBI is playing a role of
watch dog. The Guidelines issued by the SEBI for protection of the interest of
investors are really doing their role efficiently. These Guidelines make it compulsory
for different parties to make proper disclosure to the BOARD and these disclosures
make the investors informed.

REFERENCES
WEB SITES:
www.sebi.gov.in

 www.google.com
security analysis and portfolio management - Chandra prasanna

JOURNALS:
ICFAI Journal of applied finance (IIAF) Editor, EN Murthy.
ICFAI Journal financial economies Editor, EN Murthy.
ICFAI Journal of financial risk management-EN Murthy-editor.
The global journal of Finance and Economies.

(Editor- M.KABIR HASSAN, PhD)

Harvard Business review.
ICFAI Research journal.

BOOKS AND MAGAZINES:

BOOKS:
Tata McGraw- hill (New Delhi) Third Edition
New age publication House ; (NEW DELHI) Second Eition.
Capital Market (Rise of the rupees)

MAGAZINES:
ICICI Prudential Company Magazines.
Economic Survey.