CAPITAL MARKET INSTRUMENTS

Equity Shares

Charecteristics

  

Owners of the company to the extent of the shareholding No specific rate of income in the form of dividend Vote in general meetings and thereby control management Share in profits in the form of dividends and bonus shares Not redeemable Limited liability Marketable

Equity Shares

Market Classification

Growth Shares
Income Shares Defensive Shares Cyclical Shares Speculative Shares

.Sweat Equity Shares  Sweat Equity Shares means     equity shares issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions. by whatever name called.

Provisions relating to Sweat Equity Shares (Sec. 79A and SEBI regulations  Special Resolution  Resolution valid for 12 months Each transaction of issue of sweat equity to be passed separately Pricing shall not be less than the higher of    the average of the weekly high and low of the related equity shares for the past 6 months preceeding the relevant date  the average of the weekly high and low of the related equity shares during the 2 weeks preceeding the relevant date (Relevant date is the date which is 30 days prior to the date on which the meeting of the shareholders in convened for this purpose)‫‏‬  .

Certificate from Audits of the company that the company has complied with the regulations relating to Sweat Equity and is in accordance with the resolution passed by the company In acsxe where Sweat Equity Shares are alloted to Directors the same shall be taken into consideration for calculating the ceiling on remuneration to Directors    Lock in period of 3 years Listing possible if these regulations are complied with  . 79A and SEBI regulations  In case of IPR valuation shall be carried out by a Merchant Banker who in turn has to obtain a certificate from an independent CA that the valuation is in accordance with the relevant Accounting Standards.Provisions relating to Sweat Equity Shares (Sec.

79A and SEBI regulations  Other Provisions  Auditors Certificate to be placed in the meeting of the shareholders The company shall.Provisions relating to Sweat Equity Shares (Sec. send a statement to the exchange giving the following details of the issue   number of sweat equity shares issued     price of issue amount invested persons to whom issued consequent changes in the capital structure and the shareholding pattern . within 7 days of the issue of sweat equity.

Differerential Voting Rights  Differential Voting Rights (DVR) shares are   shares which have different rights as to voting and dividends when compared with ordinary shares .

Requistes for issuing DVR shares  Distributable profits for preceeding 3 financial years No defaults in filing Annual Accounts and Annual Returns for preceeding 3 financial years No default in repayment of deposits or interest thereon on due date or redeem debentures on due date or pay dividend Authorisation in Articles of Association Company has not been convicted for any offence under FEMA. SCRA. SEBI Act. Not defaulted in meeting investors grievances Approval of shareholders in General Meetin Listed company to obtain approval by postal ballot        .

  (c) the company shall not convert its equity capital with voting rights into equity share capital with differential voting rights and the shares with differential voting rights into equity share capital with voting rights. .Requistes for issuing DVR shares  Notice to meeting at which resolution is to be passed shall state  (a) the rate of voting rights which the equity share capital with differential voting right shall carry. (b) the scale or in proportion to which the voting rights of such class or type of shares will vary.

(e) that a member of the company holding any equity share with differential voting rights shall be entitled to bonus shares.    Maintainence of Register . (f) the holders of the equity shares with differential voting rights shall enjoy all others rights to which the holder is entitled to excepting right to vote as indicated in (a) above.Requistes for issuing DVR shares  (d) the shares with differential voting rights shall not exceed 25% of the total share capital issued. right shares of the same class.

Preference Shares  Charecteristics        Owners of the company to the extent of the shareholding Specific rate of income in the form of dividend Cannot vote in general meetings No share in profits in excess of the rate of dividend other than in the case of Participating Preference Shares Redeemable Limited liability Marketable .

Preference Shares  Types         Cumulative Non cumulative Convertible Non convertible Redeemable Irredeemable Cumulative Convertible Preference Shares Participating Preference Shares .

Debentures  Charecteristics  Debentureholders are creditors and not owners Specific rate of income in the form of interest Cannot vote in general meetings No right of share in profits Redeemable Limited liability       Marketable .

Debentures  Types        Secured Unsecured Fully Convertible (FCD)‫‏‬ Non-Convertible (NCD)‫‏‬ Partly Convertible (PCD)‫‏‬ Redeemable Irredeemable .

Issues  Public  Initital Public Offering (IPO)‫‏‬   Fresh Issue Offer for Sale Fresh Issue Offer for Sale  Further Public Offering (FPO)‫‏‬    Rights Bonus Preferential or Bought Out Deals (BOD)‫‏‬   .

  Subsequently. the total number of shares alloted to the sponsors were 5.e. 10 per share . 65.3 lakh shares at a premium of Rs. 55 each. a gain of Rs. these were offloaded to the public through OTCEI at a premium of Rs. i. Under this deal.Bought Out Deal stories  For Maxwell Apparel a BOD was put together with ICICI as a sponsor and Times Guaranty as the cosponsor.

5 lakh equity shares of the 5 lakhs accquired by them .'s 17. at a premium of Rs. 38. 8 per share   Siris Ltd. a gain of Rs. 200. 265. 13.  The shares were offloaded to the public at a price of Rs. thus making a profit of Rs. along with the co-sponsors had to take 3. At Rs.12 crore  In the case of Growel Times the lead sponsor 20th Century Finance Corpn. 20 per share These were latter offered to the public at a price of Rs.50 lakh shares were offloadd to the sponsorers Videocon Leasing and Finance Ltd.Bought Out Deal stories  Reliance Capital and Finance Trust accquired 1 lakh shares of Nielcon Ltd. And Videocon Applicances Ltd.

The company would have already made earlier offer/s to the public An offer for sale is allowed only if listing obligations are to be met   .Public Issues Inititial Public Issue (IPO)‫‏‬  Unlisted company makes a fresh issue of securities or sale of it's existing securities or both for the first time to the public This paves the way for the securities of the company to be listed and traded  Follow on Public Issue (FPO)‫‏‬  A listed company makes a fresh issue of securities or sale of it's existing securities to the public.

1 crore in 3 years In case of change in name at least 50% revenue in the preceding 1 year should be from the new activity The issue size should not exceed 3 times the pre-issue net worth  . 3 crores for 3 full years Distributable profits in atleast 3 years Networth of Rs.Eligibility norms for IPO or FPO  Entry Norm I  The company shall meet the following requirements     Net Tangible Assets of Rs.

Eligibility norms for IPO or FPO  Entry Norm II  Issue shall be through the book building route. with at least 50% to be mandatorily allotted to Qualified Institutional Bidders (QIB)‫‏‬ The minimum post-issue face value capital should be Rs. 10 crore or there should be compulsory market-making for 2 years  .

10 crore or there should be compulsory market-making for 2 years   In addition to satisfying the requirements under any one of the the 3 entry norms it is necessary for the company to satisfy the criteria of having at least 1000 prospective allottees to the issue .Eligibility norms for IPO or FPO  Entry Norm III  The project is appraised and participated to the extent of 15% by FI / Scheduled Commercial Banks of which at least 10% is contributed by the appraisers The minimum post-issue face value capital should be Rs.

or An issue where the floor price or the price band is stipulated .Pricing of the Issue  The issuer (company) in consultation with the merchant banker shall decide the price There is no formula stated either by SEBI or any other regulator regarding the pricing Disclosure regarding the parameters considered for arriving at the issue price are to be made by the company and the merchant banker Pricing of an issue can by of two types      a fixed price issue.

Exemptions from Eligibility norms  Private Sector Banks  Public Sector Banks An infrastructure company whose project has been apprised by a Public Financial Institution or IDFC or ILFS or a bank which was earlier a PFI and not less than 5% of the project cost is financed by these institutions Rights issue by listed companies   .

Book Building  Book building is a process of price discovery  The Red Herring Prospectus does not contain the issue price. RHP contains either the floor price or the price band. The lower limit is called as the floor and the upper limit the cap. A price band is range of prices within which the bidding can be done. This has to be done before the closure date Book Building Issues have to be kept open for a minimum of 3 days and a maximum of 7 days      . The spread between the floor and cap cannot exceed 20% The applicants bid for the shares quoting the price and the quantity that they would like to bid The applicants can revise a bid by changing the price and / or quantity bid.

Intermediaries to Issue  Merchant Bankers or Book Running Lead Managers (BRLM)‫‏‬ Registrars to the issue Bankers to the Issue Underwriters to the Issue Auditors of the Company Solicitors       Others .

management. Marketing strategies for issue in cosultation with company     .Merchant Bankers  Pre Issue  Due Deligence of company's operation. printers. etc. Drafting and design of offer documents. bankers. prospectus. Appointment of other intermediaries such as registrars. statutory advertisements and memorandum containing the salient features of prospectus Compliance with requirements of SEBI. business plans. advertisers. legalaties. ROC. etc. Stock exchanges. etc.

The responsibility of the other agencies discharging thier functions is on the BRLM` .Merchant Bankers  Post Issue      Management of Escrow accounts Co-ordinate non-institutional allocation Co-ordinating intimation of allottment or refunds to bidders Finalisation of dealing with exchanges for trading Co-ordinating Dispatch of certificates and / or demat of delivery of shares  Co-ordinating activities of other intermediaries to the issue.

Registrars  Processing of applications on acontinues basis from the collecting bank branches till the basis of allottment is finalised Finalises the list of eligible allottees after deleting invalid ones Ensures corporate action for crediting of shares to the demat accountof the applications who have been allotted shares Despatch of refund order to the applicants Co-ordinating with BRLM     .

Bankers  Ensuring funds are collected and transferred to the escrow account Lead Merchant Banker has to appoint other bankers to the issue are appointed in all the mandatory centres as per SEBI guidelines Provides information to the BRLM regarding the progress of the issue by providing collection estimates and advising the issuer regarding the closure of the issue based on the collections   .

Red Herring Prospectus (RHP)‫‏‬  It is prospectus which does not contain the details of either the price or the number of shares offered or the amount of issue Only after completion of the bidding process the details of the final price are included in the offer document   The offer document filed thereafter with the ROC is called as the prospectus .

This document has to be filed with SEBI 21 days prior to filing the offer document with ROC . It accompanies the application form of the public issues   Draft Offer Document means the offer document in draft stage.Other Documents  Offer Document means a Prospectus in the case of a public issue and a Letter of Offer in the case of a Rights Issue Abridged Prospectus means a document which contains all the salient features of a prospectus.