Merchant Bankers Regulation Amendment 2010 for SME segment & obligation extended thereof for Chapter XA of ICDR

In the Securities and Exchange Board of India (Merchant Bankers ) Regulations, 1992, through SEBI (Merchant Bankers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/04/1109 dated 13th April 2010, the following updates were inserted:
(i) in regulation 13A, after the proviso and before the Explanation, the following proviso shall be inserted, namely:-,
“Provided further that a merchant banker, who has been granted certificate of registration under these regulations, may ensure market making in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 22, after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in any issue made in accordance with Chapter XA of
the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009 the merchant banker shall, itself or jointly
with other merchant bankers associated with the issue, underwrite at least
fifteen per cent of the issue size.”
(iii) in regulation 27, the following proviso shall be inserted, namely:-
“Provided that complete particulars of any transaction for acquisition of securities made in pursuance of underwriting or market making obligations in accordance with Chapter XA of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009 shall be
submitted to SEBI on quarterly basis.”

Market Making arrangement by Venture Capital Fund for securities listed on SME exchange: Regulation 12A insertion: VCF Amendment 2010

In the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, through SEBI (Venture Capital Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/07/1100 dated 13th April 2010, the following updates are inserted:

(i) after regulation 12, the following regulation shall be inserted, namely:-
“Investment in securities listed on SME exchange.
12A. The venture capital fund may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisions of regulation 12 shall not apply in case of acquisition or sale of securities pursuant to such subscription or market making.”

Equity Research Report on listed companies available for download: BSE/NSE website links for investors

PR No.161/2010

Independent Equity Research Reports on listed companies made available on Stock Exchange websites

In a meeting of SEBI recognized Investors’ Associations held on February 11, 2010, it was decided that independent equity research coverage on 20 listed companies each, for which research reports were not available hitherto, would be made available by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on their websites by July 30, 2010 for the benefit of investors. Accordingly, both the exchanges have since made available on their respective websites, the first set of research reports. Further, exchanges have agreed to jointly frame the criteria for selection of further companies for such research coverage in future.

Website links:

• http://www.nseindia.com/content/corporate/eq_research_reports.htm
• http://www.bseindia.com/sensex/research.aspx

NSE website link of QIP offer documents with shareholding pattern as filed under Clause 35 format

Sub: Disclosure of details of the allottees in the Qualified Institutional Placements (QIP) made by issuer company

SEBI has decided that the details of allottees and the corresponding pre and post QIP issue shareholding in the issuer company may be disclosed on the website of the stock exchanges. Accordingly, this circular is issued in exercise of powers conferred by sub-section (1) of Section 11 of the Securities and Exchange Board of India Act, 1992, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.   Ensure that the details of those allottes in QIP who have been allotted more than 5% of the securities offered in the QIP, viz names of the allottees and number of securities allotted to each of them, pre and post issue shareholding pattern of the issuer in the format specified in clause 35 of the Equity Listing Agreement shall be made available on the website of stock exchanges along with the final placement document.

Source: SEBI/CFD/DIL/LA/1/2010/05/03 dated 5th March 2010

Hence, the new disclosures can be found at

http://www.nseindia.com/content/equities/jp_qipfinal_new.htm

Issue of Debt Securities now has Non-Convertible Debentures (Reserve Bank) Directions, 2010 in addition to compliance under Companies Act & SEBI regulation

Reporting of Issuance of Non Convertible Debentures

The Reserve Bank of India has issued the ‘Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010’ vide IDMD.DOD.9/11.01.01(A)/2009-10 dated June 23, 2010 (which is made effective from 2nd August 2010) regarding regulation of non-convertible debentures of maturity up to one year (NCDs). In terms of paragraph 12.7 of the said Directions read with paragraphs 12.4, 12.5 and 12.6 ibid, the Debenture Trustees are required to report the details of issuance of the NCDs, the outstanding amount of NCDs and default in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Mumbai 400 001.

It is advised to submit the required information as per format enclosed in

1. Annex 1 (details of issuance of NCDs),
2. Annex 2 (outstanding amount of NCDs), and
3. Annex 3 (particulars of default in repayment of NCDs) to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort Mumbai 400 001 (Fax: 022-22630981/22634824; e-mail).
4. The required information may be submitted in hard as well as soft copies.
5. While the report on issuance of NCDs may be submitted within 3 days from the date of completion of the issue and
6. the report on default in repayment may be submitted immediately,
7. the report on outstanding amount of NCDs may be submitted on quarterly basis within five working days from the completion of the calendar quarter to which the report pertains.

Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 – An Understanding:

The Reserve Bank of India, having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred under sections 45K, 45L and  45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives to the agencies dealing in securities and money market instruments, the following directions for issuance of Non-Convertible Debentures (NCDs) of original or initial maturity up to one year.

Definition: Non-Convertible Debenture (NCD) means a debt instrument issued by a corporate (including NBFCs) with original or initial maturity up to one year and issued by way of private placement;

“Corporate” means a company as defined in the Companies Act, 1956 (including NBFCs) and a corporation established by an act of any Legislature.

Eligibility to issue NCDs
A corporate shall be eligible to issue NCDs if it fulfills the following criteria, namely,

1. the corporate has a tangible net worth of not less than Rs.4 crore, as per the latest audited balance sheet;
2. the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and
   
3. the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s.

Rating Requirement
An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose.
The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.

Maturity

• NCDs shall be issued for maturities of 90 days or more from the date of issue.
• The exercise date of option (put/call), if any, attached to the NCDs shall fall after the period of 90 days from the date of issue.
• The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument.

Denomination
NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh.

Limits and the Amount of Issue of NCDs

1. The aggregate amount of NCDs issued by a corporate shall be within such limit as may be approved by the Board of Directors of the corporate or the quantum indicated by the Credit Rating Agency for the rating granted, whichever is lower.
2. The total amount of NCDs proposed to be issued shall be completed within a period of 2 weeks from the date on which the corporate opens the issue for subscription.

Procedure for Issuance

1. The corporate shall disclose to the prospective investors, its financial position as per the standard market practice.
2. The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate.
3. The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate and shall also comply with Debt Listing Agreement.
4. The Debenture Certificate shall be issued within the period prescribed in the Companies Act, 1956 or any other law as in force at the time of issuance. 
5. NCDs may be issued at face value carrying a coupon rate or at a discount to face value as zero coupon instruments as determined by the corporate.

Debenture Trustee

• Every corporate issuing NCDs shall appoint a Debenture Trustee (DT) for each issuance of the NCDs.
• Any entity that is registered as a DT with the SEBI under SEBI (Debenture Trustees) Regulations, 1993, shall be eligible to act as DT for issue of the NCDs only subject to compliance with the requirement of these Directions.
• The DT shall submit to the Reserve Bank of India such information as required by it from time to time.

Investment in NCD
NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate bodies including insurance companies and mutual funds registered or incorporated in India and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs).

• Investments in NCDs by Banks/PDs shall be subject to the approval of the respective regulators.
• Investments by the FIIs shall be within such limits as may be set forth in this regard from time to time by the SEBI.

Preference for Dematerialisation

While option is available to both issuers and subscribers to issue/hold NCDs in dematerialised or physical form, they are encouraged to issue/ hold NCDs in dematerialised form. However, banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form.

Roles and Responsibilities

12.1 The role and responsibilities of corporates, DTs and the credit rating agencies (CRAs) are set out below:

(a) Corporates
12.2 Corporates shall ensure that the guidelines and procedures laid down for issuance of NCD are strictly adhered to.
(b) Debenture Trustees
12.3 The roles, responsibilities, duties and functions of the DTs shall be guided by these regulations, the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993, the trust deed and offer document.
12.4 The DTs shall report, within three days from the date of completion of the issue, the issuance details to the Chief General Manager, Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001.
12.5 DTs should submit to the Reserve Bank of India (on a quarterly basis) a report on the outstanding amount of NCDs of maturity up to year.
12.6 In order to monitor defaults in redemption of NCDs, the DTs are advised to report immediately, on occurrence, full particulars of defaults in repayment of NCDs to the Financial Markets Department, Reserve Bank of India, Central Office, Fort, Mumbai-400001, Fax: 022-22630981/22634824.
12.7 The DTs shall report the information called for under para 12.4, 12.5 and 12.6 of these Directions as per the format notified by the Reserve Bank of India, Financial Markets Department, Central Office, Mumbai from time to time.
(c) Credit Rating Agencies (CRAs)
12.8 Code of Conduct prescribed by the SEBI for the CRAs for undertaking rating of capital market instruments shall be applicable to them (CRAs) for rating the NCDs.
12.9 The CRA shall have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA shall, at the time of rating, clearly indicate the date when the rating is due for review.

12.10 While the CRAs may decide the validity period of credit rating, they shall closely monitor the rating assigned to corporates vis-à-vis their track record at regular intervals and make their revision in the ratings public through their publications and website.

Documentary Procedure

1. Issuers of NCDs of maturity up to one year shall follow the Disclosure Document brought out by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank of India as amended from time to time.
2. Violation of the directions will attract penalties, which would include debarring of the entity from the NCD market.

Demat Account Suspension for Debit & Credit without PAN - SEBI mandates & enforces strictly now for all electronic shareholdings

Sub: Mandatory requirement of Permanent Account Number (PAN)

1. Please refer to SEBI circular No.MRD/DoP/Cir-05/2007 dated April 27, 2007 making PAN mandatory for all transactions in the securities market.

2. As you are aware, the demat accounts for which PAN details have not been verified are “suspended for debit” until the same is verified with the Depository Participant (DP). However, it has come to our notice that despite follow up, investors are not furnishing the PAN details.

3. In order to ensure better compliance with the Know Your Client (KYC) norms it has been decided that with effect from August 16, 2010 such PAN non-compliant demat accounts shall also be "suspended for credit" other than the credits arising out of automatic corporate actions. It is clarified that other credits including credits from IPO/FPO/Rights issue, off-market transactions or any secondary market transactions shall not be allowed into such accounts.

Source: CIR/MRD/DP/ 22 /2010 dated 29th July 2010

Mutual Fund (MF) ASBA mandatory from 1st October 2010 and not from 1st July

Sub: Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as “ASBA”) in Mutual Funds

ASBA is already available for subscription to public  issue & rights issue of equity and now it is extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. The banks which are in SEBI’s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents (RTA) for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. Also read [SEBI-ASBA] Lets Learn the Concept.

Please refer to circular SEBI / IMD / Cir / No 18 / 198647 / 2010 dated March 15, 2010 regarding additional mode of payments through ASBA in Mutual Funds. The circular indicated that the Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after July 01, 2010.

In partial modification of the above circular, it has been decided that Mutual Funds / AMCs shall provide ASBA facility to investors for all NFOs launched on or after October 1, 2010.

 

Source: Cir / IMD / DF / 6 / 2010 dated 28th July 2010

Website link thru BSE/NSE to download ASBA forms online with UIN for making public issue applications - SEBI

SEBI is taking steps forward to make a public issue process completely online.

1. It has been decided to make ASBA bid-cum application forms available for download and printing, from websites of the Stock Exchanges which provide electronic interface for ASBA facility i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The ASBA forms so downloaded shall have a unique application number and can be used for making ASBA applications in public issues. A sample of the form is enclosed at Annexure A. 

Understand all about ASBA - in public issues, rights issues, by Mutual Funds, by QIB's - an alternate way of investing, SEBI

2. In order that the Stock Exchanges fill up essential details of an issue, the Merchant Banker to the issue shall ensure that the following details are provided to the Stock Exchanges at least 2 days before opening of the public issue:
a. Company Name
b. Type of issue
c. Issue opening date
d. Issue closing date
e. Price/ price band
f. Bid lot
g. Other relevant details
h. Soft copy of prospectus/abridged prospectus
3. The Stock Exchanges shall ensure the following :
a. The details furnished by the Merchant Banker to the issue are duly filled in the ASBA form for a specific public issue, before making the same available on websites.
b. The ASBA form for a specific public issue is made available on the websites of the Stock Exchanges at least one day before opening of the public issue.
c. A unique application number for an issue is generated for every ASBA form downloaded and printed from the websites.  Therefore application made using photocopy of the downloaded form shall not be accepted.
d. Investors have online access to soft copy of the abridged prospectus/prospectus of the public issue.
e. For revisions of bids, investors can take print of a bid revision form.
4. Merchant Bankers and SCSBs are directed to provide a hyperlink to BSE or NSE websites for this facility on their websites.  Links are expected in http://www.nseindia.com/content/ipo/ipo_asba_procedures.htm & http://www.bseindia.com/bookbuilding/asba.asp
5. All intermediaries are directed to comply with the instructions contained in this circular.
6. This circular shall be applicable to all public issues opening on or after July 19, 2010.

New Rule 19(2)(b) & 19A for initial & continuous listing requirement of 25% of capital with public as per SCRR amendment 2010 [for all companies]: 10% for 4000 crores to be increased@5% every year

The Securities Contracts (Regulation) Rules 1957 provide for the requirements which have to be satisfied by companies for the purpose of getting their securities listed on any stock exchange in India. A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation. Accordingly, the Finance Minister in his Budget speech for 2009-10, inter- alia, proposed to raise the threshold for non- promoter, public shareholding for all listed companies. To implement the Budget announcement the Securities Contracts(Regulation) (Amendment) Rules, 2010 has been notified vide Press Release F.No.5/35/2006-CM dated 4th June 2010 through

this Notification. [download now]

a) The minimum threshold level of public holding will be 25% for all listed companies.

b) Existing listed companies having less than 25% public holding have to reach the minimum 25% level by an annual addition of not less than 5% to public holding.

c) For new listing, if the post issue capital of the company calculated at offer price is more than Rs. 4000 crore, the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.

d) For companies whose draft offer document is pending with Securities and Exchange Board of India on or before these amendments are required to comply with 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum, irrespective of the amount of post issue capital of the company calculated at offer price.

e) A company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

f) The requirement for continuous listing will be the same as the conditions for initial listing.

g) Every listed company shall maintain public shareholding of at least 25%. If the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25% within a maximum period of 12 months from the date of such fall.

New definitions in Rule 2 of SCRR:

(d) “public” means persons other than – (i) the promoter and promoter group; (ii) subsidiaries and associates of the company. Explanation: For the purpose of this clause the words “promoter‟ and “promoter group‟ shall have the same meaning as assigned to them under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements-ICDR) Regulations, 2009.

(e) “public shareholding” means equity shares of the company held by public and shall exclude shares which are held by custodian against depository receipts issued overseas”.

New Rule 19(2)(b) of SCRR:

(i) At least 25% of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document; or
(ii) At least 10% of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than Rs. 4000 crores;

Provided that the requirement of post issue capital being more than Rs. 4000 crores shall not apply to a company whose draft offer document is pending with SEBI on or before the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, if it satisfies the conditions prescribed in clause (b) of sub-rule 2 of rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed prior to the date of such commencement (which is: offering atleast 10% if there are 20 lakh in number of securities, Rs.100 crores of offer size is given to public and follows bookbuilding by offering 60% to QIB)
Provided further that the company, referred in sub-clause (ii), shall bring the public shareholding to the level of at least 25% by increasing its public shareholding to the extent of at least 5% per annum beginning from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India .
Provided further that the company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

 

New Rule 19(4) of SCRR – fresh application in all cases now!!!

An application for listing shall be necessary in respect of the following: (a) all new issues of any class or kind of securities of a company to be offered to the public; (b) all further issues of any class or kind of securities of a company if such class or kind of securities of the company are already listed on a recognised stock exchange.

 

New Rule 19(6A) – taking away the power from Clause 40A of Listing Agreement of stock exchanges as there is no more Provisio!!!

All the requirements with respect to listing or continuous listing requirement prescribed by these rules, shall, so far as they may be, also apply to a body corporate constituted by an Act of Parliament or any State Legislature. [Old Provisio deleted]

Note: SEBI’s power to relax listing requirements under SCRR is withdrawn.  Also note, there is no more Clause 40A continuous listing requirement of 10% if the company has 2 crores of listed shares with a market capitalisation of Rs.1000 crore or more.

Clause 40A is now Rule 19A mandating 25% as CONTINUOUS LISTING REQUIREMENT for all Companies:

Every listed company shall maintain public shareholding of at least 25%

Provided that any listed company which has public shareholding below 25% on the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, shall bring the public shareholding to the level of at least 25% by increasing its public shareholding to the extent of at least 5% per annum beginning from the date of such commencement, in the manner specified by SEBI.

Provided further that the company may increase its public sharholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

(2) Where the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25%within a maximum period of 12 months from the date of such fall in the manner specified by the Securities and Exchange Board of India.”

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What is Corpfiling for Listed Company & how investors can get information online now (excel based filing), SEBI/Stock exchange website

SEBI had, vide circular no SEBI/CFD/DIL/LA/4/2007/27/12 dated December 27, 2007 informed that Electronic Data Information Filing And Retrieval (EDIFAR) will be phased out gradually in view of new portal viz. Corporate Filing and Dissemination System (CFDS) put in place jointly by BSE and NSE at the URL www.corpfiling.co.in.  No more EDIFAR...File it thru corpfiling SEBI says

 

SEBI has since discontinued the EDIFAR system w.e.f from April 1, 2010. In view of this, Stock Exchanges are advised to carry out the consequential amendments in Equity Listing Agreement i.e. removal of words, “and also through the EDIFAR website” from Clause 32 and omission of Clause 51 from Equity Listing Agreement. The Stock Exchanges are also advised to inform about discontinuation of EDIFAR to all the listed companies.

 

Now on, all the Stock Exchange/SEBI related filing such as

• Company Results
• Corporate Announcements
• Company Factsheet
• Quarterly Compliance Report
• Share Holding Pattern
• SAST (Takeover Code)
• Insider Trading

can be done online through Microsoft Excel sheet as downloaded from the said website.  The portal aims at providing a single interface to the investors/shareholders/stakeholders to keep track of the latest filings of all the listed companies in India online irrespective of the Stock Exchange.

Download Pre-requisite softwares for corpfiling.

Source: SEBI CIR/CFD/DCR/3/2010 dated 16th April 2010

Understand all about ASBA - in public issues, rights issues, by Mutual Funds, by QIB's - an alternate way of investing, SEBI

Understand what is Application Supported by Blocked Amounts (ASBA)?

Whether ASBA is applicable for Rights Issues?

Can QIB’s apply in a public issue under ASBA mechanism?

Till now only Indian Retail Individual Investors bidding at cut-off Price were entitle to use ASBA facility.

In this regard, Stock Exchanges, Merchant Bankers, Registrar to an Issue and Bankers to an issue acting as Self Certified Syndicate Banks are advised to ensure that appropriate arrangements are made to accept ASBA forms from Qualified Institutional Buyers (QIBs) also in addition to the existing categories of investors on or after 1st May 2010.

Source: SEBI CIR/CFD/DIL/2/2010 dated 6th April 2010

RBI approval is mandatory for Public (IPO), Preferential issue, QIP by Private bank; Understand what is required for Public issue of securities (SEBI)

Approvals required for various Corporate Actions, Issues by Private Sector Banks

1. Initial Public Offers (lPOs) – Public Issues:
(i) All banks should obtain RBI approval for IPOs. After listing on the stock exchanges, banks are free to price their subsequent issues.
(ii) Issue price should be based on merchant banker's recommendation. There need be no reference to the CCI formula for deciding on the pricing of such issues.
2. Rights issues:
RBI approval would not be required for rights issues by both listed and unlisted banks. However, banks need to comply with the requirements that have been laid down in the circular DBOD.No.PSBD.BC.99/16.13.100/2004-05 dated June 25, 2005 on Rights Issue.
3. Bonus issues:
Private sector banks, both listed and unlisted, need not seek RBI's approval for bonus issues. The issues would, however, be subject to SEBI's requirements on issue of bonus shares, viz. bonus issues (a) should be made from free reserves built out of genuine profits or share premium, (b) should not dilute the value or rights of partly or fully convertible debentures, (c) should not be in lieu of dividend and (d) should not be made unless all partly paid-up shares are fully paid-up. Further, bonus issues may be issued without linkage to rights issues.
4. Preferential issue:
All preferential issues would require prior approval of RBI. Pricing of preferential issues by listed banks may be as per SEBI formula, while for unlisted banks the fair value may be determined by a chartered accountant or a merchant banker.
5. Qualified Institutional Placement (QIP):
Private Sector Banks need to approach RBI for prior 'in principle' approval in case of Qualified Institutional Placements. Banks need to approach RBI along with details of the issue once the bank’s Board approves the proposal of raising capital through this route. Further, allotment to the investors would be subject to compliance with SEBI guidelines on QIPs and RBI guidelines dated February 3, 2004 on acknowledgement of allotment / transfer of shares. Once the allotment process is complete, the banks would also be required to furnish complete details of the issue to RBI in the enclosed format for seeking post facto approval. This would be irrespective of whether any acquisition results in shareholding of 5% or more of the paid up capital of the bank.
6. In case of pricing of issues

• where RBI approval is not required, pricing of issues should be as per SEBI guidelines (ICDR Regulations);
• in cases where prior approval of RBI is required, pricing should take into account both SEBI and RBI guidelines.

Source: Issue and Pricing of Shares by Private Sector Banks vide RBI/2009-10/411 DBOD.No.PSBD.BC.92 /16.13.100/2009-2010 dated 20th April 2010

SEBI's guide to Understand Prospectus, its concepts, structure, etc... [read offer documents in public issues now]

Guide to understand an Offer Document

This sub‐section attempts to inform the structure of presentation of the content in an offer document. The basic objective is to help the reader to navigate through the content of an offer document.

(a) Cover Page

Under this head full contact details of the Issuer Company, lead managers and registrars, the nature, number, price and amount of instruments offered and issue size, and the particulars regarding listing. Other details such as Credit Rating, IPO Grading, risks in relation to the first issue, etc are also disclosed if applicable.

(b) Risk Factors

Under this head the management of the issuer company gives its view on the Internal and external risks envisaged by the company and the proposals, if any, to address such risks. The company also makes a note on the forward looking statements. This information is disclosed in the initial pages of the document and also in the abridged prospectus. It is generally advised that the investors should go through all the risk factors of the company before making an investment decision.

(c) Introduction

Under this head a summary of the industry in which the issuer company operates, the business of the Issuer Company, offering details in brief, summary of consolidated financial statements and other data relating to general information about the company, the merchant bankers and their responsibilities, the details of brokers/syndicate members to the Issue, credit rating (in case of debt issue), debenture trustees (in case of debt issue), monitoring agency, book building process in brief, IPO Grading in case of First Issue of Equity capital and details of underwriting Agreements are given. Important details of capital structure, objects of the offering, funds requirement, funding plan, schedule of implementation, funds deployed, sources of financing of funds already deployed, sources of financing for the balance fund requirement, interim use of funds, basic terms of issue, basis for issue price, tax benefits are also covered.

(d) About us

Under this head a review of the details of business of the company, business strategy, competitive strengths, insurance, industry‐regulation (if applicable), history and corporate structure, main objects, subsidiary details, management and board of directors, compensation, corporate governance, related party transactions, exchange rates, currency of presentation and dividend policy are given.

(e) Financial Statements

Under this head financial statement and restatement as per the requirement of the Guidelines and differences between any other accounting policies and the Indian Accounting Policies (if the Company has presented its Financial Statements also as per either US GAAP/IFRS) are presented.

(f) Legal and other information

Under this head outstanding litigations and material developments, litigations involving the company, the promoters of the company, its subsidiaries, and group companies are disclosed. Also material developments since the last balance sheet date, government approvals/licensing arrangements, investment approvals (FIPB/RBI etc.), technical approvals, and indebtedness, etc. are disclosed.

(g) Other regulatory and statutory disclosures

Under this head, authority for the Issue, prohibition by SEBI, eligibility of the company to enter the capital market, disclaimer statement by the issuer and the lead manager, disclaimer in respect of jurisdiction, distribution of information to investors, disclaimer clause of the stock exchanges, listing, impersonation, minimum subscription, letters of allotment or refund orders, consents, expert opinion, changes in the auditors in the last 3 years, expenses of the issue, fees payable to the intermediaries involved in the issue process, details of all the previous issues, all outstanding instruments, commission and brokerage on, previous issues, capitalization of reserves or profits, option to subscribe in the issue, purchase of property, revaluation of assets, classes of shares, stock market data for equity shares of the company, promise vis‐à‐vis performance in the past issues and mechanism for redressal of investor grievances is disclosed.

(h) Offering information

Under this head Terms of the Issue, ranking of equity shares, mode of payment of dividend, face value and issue price, rights of the equity shareholder, market lot, nomination facility to investor, issue procedure, book building procedure in details along with the process of making an application, signing of underwriting agreement and filing of prospectus with SEBI/ROC, announcement of statutory advertisement, issuance of confirmation of allocation note("can") and allotment in the issue, designated date, general instructions, instructions for completing the bid form, payment instructions, submission of bid form, other instructions, disposal of application and application moneys, , interest on refund of excess bid amount, basis of allotment or allocation, method of proportionate allotment, dispatch of refund orders, communications, undertaking by the company, utilization of issue proceeds, restrictions on foreign ownership of Indian securities, are disclosed.

(i) Other Information

This covers description of equity shares and terms of the Articles of Association, material contracts and documents for inspection, declaration, definitions and abbreviations, etc.

Investment in public Issues/ rights issues

(a) Where can I get application forms for applying/ bidding for the shares?

Application forms for applying/bidding for shares are available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue. In case you intend to apply through new process introduced by SEBI i.e. APPLICATIONS SUPPORTED BY BLOCKED AMOOUNT (ASBA), you may get the ASBA application forms form the Self Certified Syndicate Banks. For more details on “ASBA process” please refer to the “FAQs on ASBA”

(b) Whom should I approach if the information disclosed in the offer document appears to be factually incorrect?

The document is prepared by Merchant Banker(s), registered with SEBI. They are required to do the due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. In case, you find any instance of misinformation/ lack of information, you may send your complaint to Lead Manager to the issue and/ or to SEBI, at this address: Securities & Exchange Board of India, C4 A, G Block, Bandra KurlaComplex, Bandra (E), Mumbai‐ 400051.

(c) Is it compulsory for me to have a Demat Account?

As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in demat mode. Thus, if you intend to apply for an issue that is being made in a compulsory demat mode, you are required to have a demat account and also have the responsibility to put the correct DP ID and Client ID details in the bid/application forms. You can also refer to FAQs relating to demat available in the URL http://investor.sebi.gov.in/faq/dematfaq.html in the Investor Education section of the SEBI website.

(d) Is it compulsory to have PAN?

Yes, it is compulsory to have PAN. Any investor who wants to invest in an issue should have a PAN which is required to be mentioned in the application form. It is to be distinctly understood that the photocopy of the PAN is not required to be attached along with the application form at the time of making an application.

(e) For how many days an issue is required to be kept open?

The period for which an issue is required to be kept open is:

For Fixed price public issues: 3‐10 working days

For Book built public issues: 3‐7 working days extendable by 3 days in case of a revision in the price band

For Rights issues: 15‐30 days.

(f) When do I get the allotment/ refund of shares?

For Fixed price public issues: 30 days of the closure of the issue

For Book built public issues: 15 days of the closure of the issue

For Rights issues: 15 days of the closure of the issue

(g) How can I know about the demand for an issue at any point of time?

The status of bidding in a book built issue is available on the website of BSE/NSE on a consolidated basis. The data regarding bids is also available investor category wise. After the price has been determined on the basis of bidding, the public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued. However, in case of a fixed price issue, information is available only after the closure of the issue through a public advertisement, issued within 10 days of dispatch of the certificates of allotment/ refund orders.

(h) How will I get my refund in an issue?

You can get refunds in an issue through various modes viz. registered/ordinary post, Direct Credit, RTGS (Real Time Gross Settlement), ECS (Electronic Clearing Service) and NEFT (National Electronic Funds Transfer). As stated above, if you are residing in one of the 68 centers as specified by Reserve Bank of India, then you will get refunds through ECS only except where you are otherwise disclosed eligible under Direct Credit and RTGS. If you are residing at any other center, then you will continue to get refunds through registered/ordinary post. You are therefore advised to read the instructions given in the prospectus/ abridged prospectus/ application form about centers. For more details, you may read subsection on “Electronic Clearing Scheme for Refunds”.

(i) When will the shares allotted to me get listed?

In book built public issue the listing of shares will be done within 3 weeks after the closure of the issue. In case of fixed price public issue, it will be done within 37 days after closure of the issue.

(j) How will I know which issues are coming to the market?

The information about the forthcoming issues may be obtained from the websites of Stock Exchanges. Further the issuer coming with an issue is required to give issue advertisements in an English national Daily with wide circulation, one Hindi national newspaper and a regional language newspaper with wide circulation at the place where the registered office of the issuer is situated.

(k) Where to I get the copies of the offer document?

The soft copies of the offer documents are put up on the website of Merchant banker and on the website of SEBI under Reports/Documents section [http://www.sebi.gov.in/Index.jsp?contentDisp= Section&sec_id=5 ]. Copies of the offer documents in hard form may be obtained from the merchant banker or office of SEBI, SEBI Bhawan, Plot No. C4‐A “G” Block, BKC, Bandra (E), Mumbai ‐ 400051 on a payment of Rs 100 through Demand Draft.

(l) How do I find the status of offer documents filed by issuers with SEBI?

SEBI updates the processing status of offer documents on its website every week under the section http://www.sebi.gov.in/Index.jsp?contentDisp=PrimaryMarket in SEBI website. The draft offer documents are put up on the website under Reports/Documents section. The final offer documents that are filed with SEBI/ROC are also put up for information under the same section.

(m) Whom do I approach if I have grievances in respect of non receipt of shares, delay in refund etc.?

You can approach the compliance officer of the issue, whose name and contact number is mentioned on the cover page of the Offer Document. You can also address your complaints to SEBI at the following address: Office of Investor Assistance & Education, Securities & Exchange Board of India, C4A, G Block,Bandra Kurla Complex, Bandra (E), Mumbai‐ 400051.

Understanding Book Building

(a) What is book Building?

Book building is a process of price discovery. The issuer discloses a price band or floor price before opening of the issue of the securities offered. On the basis of the demands received at various price levels within the price band specified by the issuer, Book Running Lead Manager (BRLM) in close consultation with the issuer arrives at a price at which the security offered by the issuer, can be issued.

(b) What is a price band?

The price band is a band of price within which investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. The price band can be revised. If revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

(c) How does Book Building work?

Book building is a process of price discovery. A floor price or price band within which the bids can move is disclosed at least two working days before opening of the issue in case of an IPO and atleast one day before opening of the issue in case of an FPO. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. After the bidding process is complete, the ‘cut‐off’ price is arrived at based on the demand of securities. The basis of Allotment is then finalized and allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process. Only the retail investors have the option of bidding at ‘cut‐off’.

(d) How does “cut‐off” option works for investors?

“Cut‐off” option is available for only retail individual investors i.e investors who are applying for securities worth up to Rs 1,00,000/‐ only. Such investors are required to tick the cut‐off option which indicates their willingness to subscribe to shares at any price discovered within the price band. Unlike price bids (where a specific price is indicated) which can be invalid, if price indicated by applicant is lower than the price discovered, the cut‐off bids always remain valid for the purpose of allotment

(e) Can I change/revise my bid?

Yes, you can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing or revising the bids shall be completed within the date of closure of the issue.

(f) Can I cancel my Bid?

Yes, you can cancel your bid anytime before the finalization of the basis of allotment by approaching/ writing/ making an application to the registrar to the issue.

(g) What proof can I request from a trading member or a syndicate member for entering bids?

The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. You can retain this as a sufficient proof that the bids have been accepted by the trading / syndicate member for uploading on the terminal.

Understand listing agreement amendments with new sub-clauses in 41 & 49 (position before & after 5th April 2010)

As part of a review of the extant policies of disclosure requirements for listed entities and  also  to  bring  more  transparency  and  efficiency  in  the  governance  of  listed entities  it  has  been  decided  to  specify  certain  listing  conditions  so  to  amend  the Equity Listing Agreement.  This post has list of new clauses inserted and ends with a summary table to understand position before and after amendment along with the effective date.

Voluntary  adoption  of  International  Financial Reporting Standards  (IFRS)  by listed entities having subsidiaries - Insertion of Clause 41(I) (g)
Various  regulatory  authorities  are  working  on  arriving  at  a  roadmap  for implementation of IFRS in India and on the steps to be taken for convergence of the Indian Accounting Standards with IFRS by April 01, 2011.

Requirement of a valid peer review certificate for statutory auditors- Insertion of Clause 41(1) (h)

It  has  been  decided  that  in  respect  of  all  listed  entities,  limited review/statutory audit reports submitted to the concerned stock exchanges shall be given only by those auditors who have subjected themselves to the peer review process of ICAI and  who  hold  a  valid  certificate  issued  by  the  ‘Peer  Review  Board’  of  Institute of Chartered Accountants of India.

Interim disclosure of Balance Sheet items by listed entities- Insertion of clause 41(V) (h) and Annexure IX

With  a  view  to  have more  frequent  disclosure  of  the  asset-liability position  of entities, it has been decided that listed entities shall disclose within forty-five days from  the  end  of  the  half-year,  as  a  note  to  their  half-yearly  financial  results,  a statement of assets and liabilities in the specified format.

Approval of appointment of ‘CFO’ by the Audit Committee- Insertion of Clause 49(II)(D)(12A)

 

GIST OF SEBI CIRCULAR 5^TH APRIL 2010 – AMENDMENT OF LISTING AGREEMENT

Credits to Mr. CS Sriram Sharma for the wonderful presentation in table format:

SL. NO	CLAUSES	AMENDMENT OF CIRCULAR
1	Clause 24 (i)	Company while filing for approval with the Stock Exchange any draft scheme of amalgamation / merger / reconstruction, etc under Clause 24(f) is required to file with the Stock Exchange an Auditors’ Certificate that the accounting treatment contained in the scheme of amalgamation is in compliance with the Accounting Standards specified by ICAI. Effective Date: 5th April 2010.
2	Clause 41 (I)(c)	Companies have an option to submit audited or un-audited quarterly and year to date financial results within 45 days of the end of each quarter instead of 1 month of the end of each quarter. [The above clause is for results to be submitted for other than last quarter]
3	Clause 41 (I) (c)	For Companies which opt to submit un-audited financial results, the copy of the Limited Review report should be furnished to Stock Exchange within 45 days from the end of the quarter instead of 2 months earlier. [The above clause is for results to be submitted for other than last quarter]
4	Clause 41 I (d)	In respect of the last quarter, Companies have an option to submit un-audited financial results for the quarter within 45 days of the end of the Financial Year OR if the Company decides to submit audited financial results for the entire Financial Year it should do so within 60 days of the end of the Financial Year
5	Clause 41 I (d)	The Limited Review Report in respect of the last quarter should be furnished to the Stock Exchange within 45 days of the end of the Financial Year
6	Clause 41 I (e) (i)	In case of a Company having subsidiaries, it may in addition to submitting quarterly and y-t-d stand alone financial results to the Stock Exchange within 45 days from the end of the quarter, also submit quarterly and year to date consolidated financial results within 45 days from the end of the quarter
7	Clause 41 I (e) (ii)	For a Company having subsidiaries, it should submit the annual audited consolidated financial results along with the annual audited stand alone financial results within 60 days from the end of the Financial Year to the Stock Exchange
8	Clause 41 I (ea) & (eaa)	A Statement of Assets & Liabilities as at the end of the half-year should be disclosed within 45 days from the end of the half-year to the Stock Exchange. The said information should be disclosed as a part of the audited or un-audited financial results for the half-year to the Stock Exchange so as to keep the shareholders informed about the solvency position of the Company
9	Clause 41 I (g)	If the Company has subsidiaries, it may opt to submit consolidated financial results as per IFRS
10	Clause 41 I (h)	Company to ensure that the Limited Review / Audit Reports is given by an Auditor who has subjected himself to the peer review process of the ICAI and holds a valid certificate issued by the Peer Review Board of the ICAI. Effective Date: For appointment of Auditors after 1st April 2010.
11	Clause 41 V (g)	Disclosure of Balance Sheet items as per Cl 41 I (eaa) to be in the format specified in Annexure IX drawn from the Schedule VI of the Companies Act, 1956
12	Clause 41 VI (b)	Disclosure of Consolidated financial results along with the following items on a stand alone basis as a foot note (a) Turnover (b) Profit before Tax (c) Profit after tax instead of only consolidated financial results
13	Clause 41 VI (b) (iv)	Companies that are required to prepare consolidated financial results for the first time at the end of the Financial Year should exercise the option mentioned in Cl. 41 VI (b) in respect of the quarter during the Financial Year in which they first acquire the subsidiary
14	Annexure V to Clause 41 – Limited Review Report for Companies other than Banks	Disclosures regarding “Public Shareholding” and “Promoter & Promoter Group Shareholding” which have been traced from the disclosures made by the management and have not been audited by us inserted
15	Annexure VI to Clause 41 – Limited Review Report for Banks	Same as point 14 above.
16	Annexure VII & VIII  (both parts)	Except for the disclosures regarding ‘Public Shareholding’ and ‘Promoter & Promoter Group Shareholding’ which have been traced from the disclosures made by the management and have not been audited by us inserted after the words pursuant to the requirement of Clause 41 of the Listing Agreement
17	Annexure IX	Statement of Assets & Liabilities introduced
18	Clause 49 II D (12A)	Audit Committee to approve the appointment of CFO - Approval of the appointment of CFO after assessing the qualifications, experience and background of the candidate.

 

Unless effective date is mentioned above, all other provisions shall be effective from the date of circular as mentioned below..

Source: SEBI CIR/CFD/DIL/1/2010 dated 5th April 2010