- What is listing?
Listing means admission of the securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or state government, quasi government or other financial institution/corporation, municipalities, etc.
- What are the requirements for a PSU to get listed on BSE?
A company will have to meet the conditions prescribed under SEBI ICDR Regulations 2009 as well as minimum listing requirements prescribed by the exchange for seeking listing of its equity shares on BSE
- What is an Offer Document? Is it compulsory to issue an Offer Document?
An 'Offer Document' is a document which contains all the relevant information about the company, promoters, projects, financial details, objects of raising the money, terms of the issue etc, which is issued for the benefit of prospective investors, and is required to be filed with SEBI and the exchanges(s). A company coming out with a Public Offer has to compulsorily issue an Offer Document.
- What is the time taken for preparation of an Offer Document?
The time taken for preparation of the DRHP depends upon the size of the company, and the industry to which it relates. The period varies between 2 to 6 months.
- Please explain DRHP/RHP/Prospectus
DRHP stands for Draft Red Herring prospectus, which is filed with SEBI and the Exchanges. SEBI makes the DRHP filed by companies available on its website for inviting comments from the public.
RHP stands for Red Herring Prospectus. It does not have details of either price or number of shares being offered or the amount of issue. The price band is normally disclosed in the RHP. It incorporates all the changes suggested by SEBI. It is filed with ROC before the issue opens.
Prospectus is an Offer Document which contains all the relevant details including the final price and the number of shares issued. This is also required to be filed with ROC after the issue closes.
- What is book building?
It is a process of price discovery, where the price band for the issue has to be disclosed before opening of the issue. The investor is free to make an offer within the price band. The final price is arrived at after the closure of the issue, based on the demands received at various price levels.
- Is book building compulsory?
Book building may be optional or compulsory. In case of compulsory book built issues at least 50% of net offer to public needs to be allotted to QIBs failing which the full subscription monies has to be refunded. Further, if the issue to the public is between 10% and 24.99%, then the company will have to meet the requirements of Rule 19(2) (b) which, inter alia, requires that the issue is made through book built route and at least 60% of the issue size is allocated to QIB's. However, infrastructure companies are exempt from this requirement.
- Does a company have the option to decide whether to come out with a fixed price issue or through book building issue?
A company has the option to come out with a fixed price issue or book built issue. However, if the company does not satisfy any of the conditions stipulated in Chapter III Part I Clause 26 (I) of the SEBI ICDR REGULATIONS 2009, then it has to compulsorily go through the book built route.
- Is appointment of a merchant banker compulsory?
Appointment of a merchant banker is compulsory for a Public Offer.
- Does BSE vet the Offer Document?
BSE does not vet the Offer Document. However, the exchange may suggest certain changes/disclosures etc. to be made in the Offer Document.
- Is SEBI approval compulsory for Public Offer?
Any company coming out with a Public Offer or a rights issue of securities of more than Rs. 50 lakhs in value is required to file a draft Offer Document with SEBI for its observations. SEBI issues an observations letter if the Offer Document contains all the necessary material information and the disclosure requirement is meeting the SEBI ICDR Regulations 2009.
- Are any exemption/concessions given to PSU at the time of listing?
Certain category of entities like Public sector banks, and infrastructure companies whose project has been appraised by a public financial institution, etc. and not less than 5% of the project cost is financed by these institutions, are exempted from the entry norms prescribed under the SEBI ICDR Regulations 2009.
- How long is the issue required to be kept open for subscription?
For fixed price Public Offer, the period is between 3-10 working days. For book built issues, it is between 3-7 working days, which is extendable by 3 days in case of revision in price band.
- What is the average time taken for listing of securities after the issue opens?
In case of book built issues, listing normally takes place within 12 days of closure of issue. In case of fixed price issue, it takes place within 37 days after the closure of the issue.
- What is the minimum level of subscription required for the issue to be successful? What happen if this requirement is not met?
At least 90% of the issue has to be subscribed for the issue to sail successfully. Further in case of compulsory book built issue, at least 50% (or 60% where Rule 19(2)(b) of SCŪ rules 1957 is applicable) should be allotted to QIBs, failing which the full subscription monies has to be refunded.
- Is underwriting compulsory? What are the different types of underwriting?
Underwriting of shares is optional. There are two types of underwriting- hard underwriting and soft underwriting. Hard underwriting is when an underwriter agrees to buy his commitment before the issue opens. The underwriter guarantees a fixed amount to the issuer from the issue. Soft underwriting is when an underwriter agrees to buy the shares at a stage after the issue is closed.
- Is there any requirement of minimum number of shareholders in an issue?
There should be minimum number of 1000 shareholders in a Public Offer.
- Is there any time limit prescribed by SEBI for completion of the listing process? What happens if the same is not adhered to?
The company has to complete the process of credit of securities to successful investors/refunds within 15 days of closure of the issue. Further, the listing process should be completed within 7 working days of the basis of allotment. In case of delay, the company will become liable to pay interest for the delay.
- Is there any restriction on pricing of the issue? Who decides the pricing of the issue?
Companies have the freedom to fix the price in a Public Offer. However, they are required to give full disclosure of the parameters considered by them while deciding the issue price in the Offer Document. There are no restrictions on pricing the issue. The Offer Document contains the factors which have been taken into account while pricing the issue.
- What is the minimum % of shares required to be offered to the public for listing?
The Public Offer should constitute at least 25% of the post issue paid up capital of the company. However issue made with Public Offer component of less than 25% but more than 10% should meet the requirements of rule 19(2)(b) of SC(R) Rules, 1957.
- What is the Green shoe option?
Green Shoe option is a price stabilizing mechanism for maintaining post issue price stability. Under Green Shoe option, shares are issued in excess of the issue size by a maximum of 15% to underwriters to stabilize the price for a period of 30 days immediately following the Public Offer.
- As shares in PSU are held by the Government, is lock-in of pre-issue holding required?
Under SEBI ICDR REGULATIONS 2009 for IPO's, the promoters' contribution has to be not less than 20% of the post issue capital, which will be under lock-in for a period of 3 years. The remaining pre-issue capital will be locked in for a period of 1 year. There is no exemption from lock-in for PSUs.
- Can the Company reserve it shares for certain entities/ employees etc?
Reservation on competitive basis can be made to employees of the company, shareholders of the promoting companies and shareholders of group companies. In case of an existing company, reservations can be made for Indian Mutual funds, FIIs, Indian and Multilateral development institutions and scheduled banks
- What is differential pricing? Can the company have different pricing of different types of allottees?
When there is a price difference on the shares offered to different categories, it is called differential pricing. An issuer company can allot the shares to retail individual investors at a maximum discount of 10% to the price at which the shares are offered to other categories of public.
- Who are Anchor Investors? Are they compulsory?
An Anchor Investor is a QIB, who is permitted to bid for the shares of a public issue only on the day before the issue opens. The portion available for Anchor Investors is 30% of the portion available to QIBs. The minimum application size has to be for Rs. 10 crores. Allocation of shares to Anchor Investors is on discretionary basis subject to certain conditions. The number of shares and price at which allocation is done has to be published by the merchant banker before the issue opens. The Anchor Investor has to pay 25% of the amount on application and the balance within 2 days.
- Is it compulsory to have a full time Company Secretary?
Companies having a paid up capital of more than Rs. 5 crores have to compulsorily appoint a full time Company Secretary.
- Is Corporate Governance compliance compulsory for PSUs?
All listed companies including PSUs have to comply with Clause 49 of the listing agreement relating to Corporate Governance.
- Can a company list only on a regional exchange?
An unlisted company coming out with an IPO is required at least on one stock exchange having nation wise terminals. Additionally, a company may list on any other Exchange.
- What is grading? Is it compulsory?
Every unlisted company coming out with a Public Offer is required to obtain grading for its IPO from at least one credit rating agency. The company is required to disclose the rationale furnished by the credit rating agency in the RHP. In case a company has obtained grading from more than one rating agency, then all the grades obtained have to be disclosed in the RHP.
- Is it necessary to appoint a Compliance Officer?
Every listed company is required to appoint a Compliance Officer. The Company will have to intimate to SEBI, the name of the Compliance Officer, who will be required to directly liaise with SEBI regarding various compliance requirements and other matters.
- What are the advantages of listing with BSE?
BSE has the largest number of listed companies in the world. BSE has a history of more than 135 years. BSE has a full fledged listing Department to assist companies in listing of their securities. In case of PSUs, though the entire capital is listed, the Exchange charges listing fee only on the capital divested to the public.