Public Issue

What are the eligibility norms for an unlisted company for making a public issue?
An unlisted company has to satisfy the following criteria to be eligible to make a public issue
i.

Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years
with minimum networth to be met during immediately preceding 2 years and

ii.

track record of distributable profits for at least three (3) out of immediately preceding five
(5) years and

iii.

the issue size (i.e. offer through offer document + firm allotment + promoters
contribution through the offer document) shall not exceed five (5) times its pre-issue
networth.

In case an unlisted company does not satisfy any of the above criterion, it can come out with a
public issue only through the Book-Building process. In the Book Building process the company
has to compulsorily allot at least sixty percent (60%) of the issue size to the Qualified
Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.
What are the eligibility norms for a listed company for making a public issue?
A listed company is eligible to make a public issue if the issue size (i.e. offer through offer
document + firm allotment + promoters contribution through the offer document) is less than
five (5) times its pre-issue networth.
If the issue size is more than or equal to 5 times of pre-issue networth, then the listed company
has to take the book building route and allot sixty percent (60%) of the issue size to the Qualified
Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.
For details refer Chapter II of SEBI (DIP) Guidelines and relevant clarifications issued
subsequently.
Are there any restrictions on pricing by companies?
The companies can freely price their equity shares. However they have to give justification of the
price in the offer document / letter of offer
What are the requirements regarding promoters contribution and lock-in?
In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters has
to necessarily offer at least 20% of the post issue capital.

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 share holding to the extent of 20% of the postissue capital.
In case of any issue of capital to the public the minimum contribution of promoters shall be
locked in for a period of 3 years, both for an IPO and Public Issue by listed companies.
In case of an IPO, if the promoters contribution in the proposed issue exceeds the required
minimum contribution, such excess contribution shall also be locked in for a period of one year.
In case of a public issue by a listed company, participation by promoters in the proposed public
issue in excess of the required minimum percentage shall also be locked-in for a period of one
year as per the lock-in provisions as specified in Guidelines on Preferential issue.
Beside the above, in case of IPO the entire pre-issue share capital i.e. paid up share capital prior
to IPO and shares issued on a firm allotment basis along with issue shall be locked-in for a
period of one year from the date of allotment in public issue.
What is the basis of allotment?
In case of over-subscription in a fixed price issue the allotment is done in marketable lots, on a
proportionate basis (for details refer to clause 7.6.1 of DIP Guidelines).
In case of a book building issue, allotment to Qualified Institutional Buyers and Non-Institutional
buyers are done on a discretionary basis. Allotment to retail investors is done on a proportionate
basis as per provisions of Clause No. 7.6.1 of Guidelines.
How does one come to know of issues on offer and from where can one get copies of the
draft offer document ?
Every week SEBI issues press releases for information of the public, details of offer documents
filed with SEBI and observations issued. Details can be obtained from the "Primary Market '
page of the SEBI website. The draft offer document can also be purchased from the SEBI office
where the document is filed on payment of Rs.100/- by way of DD drawn in favor of SEBI. The
draft offer document/letter of offer remains posted on SEBI website for a period of 21days from
the date of filing the same to SEBI and can also be downloaded from there.
From where does one get the application forms and the prospectus?
Application form can be obtained from the lead manager and brokers to the issue. The
application forms are also generally available at collecting bankers. Name and addresses of the
Lead Manager are available in the prospectus/letter of offer
Can the public give their comments/complaints on the Issuer company or others connected
with the issue?

Yes, the objective of making offer document public is to invite public comments. The comments
should be given within 21 days of the filing of the Draft offer document with SEBI.
Where does one complain in case of wrong/ non-disclosures/ mis-statement in the offer
document?
The Primary Market Division in SEBI
Within how many days an investor should receive the refund order/ allotment advise?
Despatch of refund orders / allotment advice is to be within 2 working days of finalisation of the
basis of allotment
Companies are required to finalise the basis of allotment within 30 days from the closure of the
issue in case of a fixed price issue and within 15 days from the closure of the issue in case of a
book building issue or else they are liable to pay interest @ 15% p.a.
In case of non-receipt of the refund order / share certificate/ allotment advise what is the
course of action available to the investor?
The investor should give his complaint in writing to the lead manger/ registrar/ Investor
Grievance Cell of SEBI.
Within how many days should the company get its securities listed after the issue?
The post issue lead manager ensures 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.
.
Is it mandatory to have a Demat Account for applying in public issue?
An investor has the option to apply for and receive the shares in physical form. However, it is
advisable to get the allotment in Demat form as the shares in IPO shall be compulsorily tradable
in Demat segment in Stock Exchanges. Dealing of physical shares (allocated in IPO) will not be
accepted. In case of an IPO of any security of issue size of Rs. 10 crore or more, security shall be
issued only in dematerialised form. In book built issues, for QIBs and large investors (applying
for more than 1000 shares) allotment shall be only in Demat form and hence they should have a
Demat account.
From where can I get the addresses of the companies and details of change of names etc.?
From the stock exchanges and Registrar of Companies
What is Book Building?

SEBI Guidelines define Book Building as a process undertaken by which a demand for the
securities proposed to be issued by a corporate body is elicited and built up and the price for such
securities is assessed for the determination of the quantum of such securities to be issued by
means of a notice, circular, advertisement, document or information memoranda or offer
document
What is the main difference between offer of shares through book building and offer of
shares through normal public issue?
Price at which securities will be allotted is not known in case of offer of shares through book
building while in case of offer of shares through normal public issue, price is known in advance
to investor. In case of Book Building, the demand can be known everyday as the book is built.
But in case of the public issue the demand is known at the close of the issue.
What is minimum number of days for which bid should remain open in book building?
Book should remain open for minimum of 5 days.
Can open outcry system be used for book building?
No. As per SEBI, only electronically linked transparent facility is allowed to be used in case of
book building.
Is the issue price for placement portion and net offer to public the same?
Yes.
What is the floor price in case of book building?
Floor price is the minimum price at which bids can be made.
Can the Individual Investor use book building facility for making an application?
Yes.
Can the bidder revise his bids?
Yes.
What proof can bidder request from trading member for entering bids?
A bidder can request for a transaction registration slip as the proof of his/ her having entered the
bid. Whenever a bid is entered by trading members in to the system, a unique transaction
registration slip is automatically generated. Transaction registration slip gives details regarding
number of shares bided for, price, the client name etc.

Is it possible to enter bids less than floor price?

No. The system automatically rejects the bids if price is less than floor price.
Users may note to go through the Guidelines in detail for a thorough understanding of the
provisions. Queries seeking information of an advisory nature would not be responded to by
SEBI. Users are also advised to refer to "Quick Guide for Investors" for jurisdictions of relevant
authorities for various matters. Queries pertaining to other authorities would not be responded to
by SEBI.