The ICDR Regulations

Act, 2009

PREPARED BY-
GROUP 3
Compliances for an issuer and his lead merchant banker under
ICDR Act
The issuer cannot make public issue or right issue in the following case:
• If the issuer or any of its director are debarred from accessing the capital market by SEBI
• If the issuer of the convertible debt instrument is in the list of wilful defaulter.
• Unless he has made an application to one or more stock exchanges for the listing of the securities.
• Unless all the shares are fully paid, etc.

Issuer should appoint one or more merchant banker, one of which should be the lead merchant
banker

In case of book building, before issuing the public issue and where the aggregate value of the
specified security is fifty lakh or more , the lead merchant banker has to file a draft offer
document along with a fees 30 days prior to registering the prospectus with the registrar. In this
case approval from the all the listing stock exchanges are needed to be taken. The lead merchant
banker has to submit certificates as mentioned in part c of schedule VIII of the act along with the
due diligence certificate
The issue has to submit the permanent account number, bank account number and the
passport number etc of the promoters to the stock exchange at the time of the filing the draft
offer document

In case of underwriting the public issue or the rights issue, the issuer needs to appoint the
underwriter according to the SEBI Act 1993 and the lead merchant banker needs to undertake
the minimum underwriting obligation as mentioned in SEBI Regulation 1992. Minimum
subscription 90%

The issuer needs to make arrangement for monitoring the use of proceeds of the issue by the
financial institutions or the scheduled commercial bank named in the offer letter as the bankers
of the issue if the issue size is more than five hundred crore.
An issue making a public or rights issue of convertible debt instruments has to obtain the
1) credit rating
2) appoint one or debenture trustee
3) Create debenture redemption reserve
4) Create a charge or security on its assets in respect of secured convertible debts.

Without the consent of the holders of the convertible debt instruments, the issuers shall not
convert the optionally convertible debt instruments in to equity shares.

The issuer should comply with the conditions of IPO

• Net Tangible Assets of at least 3 crores out of which not more than 50% are held in monetary terms /
Net worth of 1 crores in the preceding 3 years
• Average Pre-Tax operating profit of Rupees 15 crores during three most profitable years of the
immediately preceding 5 years
If the number of allottees is less than one thousand, then the issuer will not make the
allotment pursuant to public issue. The issuer may determine the price( Price Band) of the
specified securities as well as the conversion price of convertible debt instrument with the lead
merchant banker or by the book building Process

The floor price and price band in case of IPO should be announced at least five working days
before the opening of the bid and at least one working day before the opening of the bid, in
Case of further Public offer ( FPO) in all the newspaper in which pre issue advertisement was
released
If issue price ≥ 500, Face value Rs 1-10
If < 500, face value rs10
Promoter contribution:In case of IPO, > 20% of post issue capital
In case of FPO, upto 20% of post issue capital or proposed issue size
Rights issue: if withdrawn,shall not issue for 12 months from record date
Will be open for 15-30 days for subscription
Part payment option- application payment should be more ha 25% of issue price
Advertisement in at least one engilsh,hindi and regional language newspaper
QIP price > average of weekly high and low closing price
Institutional placement- no partly paid option
Price band announced 1 day prior to opening of placement program
No. of allottees more than 10, no single allottee more than 25% of issue size
Bonus share, authorised by AOA, from free genuine profits,issue cannot be withdrawn.
IDR issue size > Rs 50 crore
50% of IDR to QIB
 Greenshoe Option
 Formally known as an "over-allotment option", a green shoe is the term commonly used to describe a special
arrangement in a share offering, for example an initial public offering (IPO), which enables the investment bank
representing the underwriters to support the share price after the offering without putting their own capital at
risk. The option is codified as a provision in the underwriting agreement between the leading underwriter - the
lead manager - and the issuer (in the case of primary shares) or vendor (secondary shares).

 The term is derived from the name of the first company, Green Shoe Manufacturing (now called 
Stride Rite Corporation), to permit underwriters to use this practice in an IPO.

 The use of green shoe options in share offerings is now widespread, for two reasons:
• it is a legal mechanism for an underwriter to stabilize the price of new shares, which reduces the risk of their trading
below the offer price in the immediate aftermath of an offer - an outcome damaging to the commercial reputation of both
issuer and underwriter.
• Secondly, it grants the underwriters some flexibility in setting the final size of the offer based on post-offer demand for the
shares.
Practical Workings of Greenshoe Options

 Greenshoe options typically allow underwriters to sell up to 15% more shares than the
original amount set by the issuer for up to 30 days after the IPO if demand conditions warrant
such action.
For example, if a company instructs the underwriters to sell 200 million shares, the
underwriters can issue if an additional 30 million shares by exercising a green shoe option (200
million shares x 15%). Since underwriters receive their commission as a percentage of the IPO,
they have the incentive to make it as large as possible. The prospectus, which the issuing
company files with the SEC before the IPO, details the actual percentage and conditions related
to the option.
Procedure for placing with Qualified Institutional
Buyers (QIBs).
Issuer: A company whose equity shares are listed on a stock exchange  having nation wide trading terminals and which
is complying with the prescribed requirements of minimum public shareholding of the listing agreement will be eligible to
raise funds in domestic market by placing securities with Qualified Institutional Buyers (QIBs).

Securities: Securities which can be issued through QIP are equity shares or any securities other than warrants, which
are convertible into or exchangeable with equity shares (hereinafter referred to as “specified securities”). A security which
is convertible into or exchangeable with equity shares at a later date, may be converted or exchanged into equity shares
at any time after allotment of security but not later than sixty months from the date of allotment. The specified securities
shall be made fully paid up at the time of allotment.

Investors / Allottees: The specified securities can be issued only to Qualified Institutional Buyers (QIBs), as defined
under sub-clause (v) of clause 2.2.2B of the SEBI (DIP) Guidelines. Such QIBs shall not be promoters or related to
promoters of the issuer, either directly or indirectly. Each placement of the specified securities issued through QIP shall
be on private placement basis, in compliance with the requirements of first proviso to clause (a) of sub-section (3) of
Section 67 of the Companies Act, 1956. A minimum of 10% of the securities in each placement shall be allotted to Mutual
Funds. For each placement, there shall be at least two allottees for an issue of size up to Rs.250 crores and at least five
allottees for an issue size in excess of Rs.250 crores. Further, no single allottee shall be allotted in excess of 50 per cent
of the issue size. Investors shall not be allowed to withdraw their bids / applications after closure of the issue.
Issue Size: The aggregate funds that can be raised through QIPs in one financial year shall not exceed five times of the net worth of the
issuer at the end of its previous financial year.

Placement Document: Issuer shall prepare a placement document containing all the relevant and material disclosures. There will be no
pre-issue filing of the placement document with SEBI. The placement document will be placed on the websites of the Stock Exchanges
and the issuer, with appropriate disclaimer to the effect that the placement is meant only for QIBs on private placement basis and is not
an offer to the public.

Pricing: The floor price of the specified securities shall be determined on a basis similar to that for GDR / FCCB issues and shall be
subject to adjustment in case of corporate actions such as stock splits, rights issue, bonus issue etc.

Other procedural requirements: The resolution approving QIP, passed under sub-section (1A) of Section 81 of the Companies Act,
1956 or any other applicable provision, will remain valid for a period of twelve months from the date of passing of the resolution. There
shall be a gap of at least six months between each placement in case of multiple placements of specified securities pursuant to authority
of the same shareholders’ resolution. Issuer and Merchant Banker shall submit documents / undertakings, if any, specified in this regard
in the listing agreement, for the purpose of seeking in-principle approval and final permission from Stock Exchanges for listing of the
specified securities.

Involvement of Merchant Banker: QIP shall be managed by a SEBI registered merchant banker who shall exercise due diligence and
furnish a due diligence certificate to Stock Exchanges stating that the issue complies with all the relevant requirements. The merchant
banker shall file a copy of the placement document and post issue details with SEBI within thirty days of the allotment, for record
purpose.