ISSUE TYPE

􀀃 2 􀀃1. Different􀀃kinds􀀃of􀀃issues􀀃􀀃 􀀃 What􀀃are􀀃the􀀃different􀀃kinds􀀃of􀀃issues􀀃which􀀃can􀀃be􀀃made􀀃by􀀃an􀀃Indian􀀃company􀀃in􀀃India?􀀃 􀀃 Primarily,􀀃 issues􀀃made􀀃by􀀃an􀀃 Indian􀀃company􀀃can􀀃be􀀃classified􀀃as􀀃Public,􀀃Rights,􀀃Bonus􀀃and􀀃 Private􀀃Placement.􀀃While􀀃right􀀃issues􀀃by􀀃a􀀃listed􀀃company􀀃and􀀃public􀀃issues􀀃involve􀀃a􀀃detailed􀀃 procedure,􀀃bonus􀀃issues􀀃and􀀃private􀀃placements􀀃are􀀃relatively􀀃simpler.􀀃The􀀃classification􀀃of􀀃 issues􀀃is􀀃as􀀃illustrated􀀃below:􀀃 􀀃 (a) Public􀀃issue􀀃 (i) Initial􀀃Public􀀃offer􀀃(IPO)􀀃 (ii) Further􀀃public􀀃offer􀀃(FPO)􀀃 (b) Rights􀀃issue􀀃 (c) Bonus􀀃issue􀀃 (d) Private􀀃placement􀀃 (i) Preferential􀀃issue􀀃 (ii) Qualified􀀃institutional􀀃placement􀀃􀀃 􀀃􀀃􀀃􀀃 􀀃 (a) Public􀀃 issue:􀀃When􀀃an􀀃 issue􀀃 /􀀃offer􀀃of􀀃 securities􀀃 is􀀃made􀀃 to􀀃new􀀃 investors􀀃 for􀀃becoming􀀃 part􀀃of􀀃 shareholders’􀀃 family􀀃of􀀃 the􀀃 issuer3􀀃 it􀀃 is􀀃 called􀀃a􀀃public􀀃 issue.􀀃Public􀀃 issue􀀃 can􀀃be􀀃 further􀀃 classified􀀃 into􀀃 Initial􀀃 public􀀃 offer􀀃 (IPO)􀀃 and􀀃 Further􀀃 public􀀃 offer􀀃 (FPO).􀀃 The􀀃 significant􀀃features􀀃of􀀃each􀀃type􀀃of􀀃public􀀃issue􀀃are􀀃illustrated􀀃below:􀀃 􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃􀀃 3􀀃Entity􀀃making􀀃an􀀃issue􀀃is􀀃referred􀀃as􀀃“􀀃Issuer”􀀃 Issues Public􀈱Issue􀈱 Rights􀈱Issue􀈱 Bonus􀈱Issue􀈱 Private􀈱Placement IPO􀈱 FPO Fresh􀈱Issue􀈱 Offer􀈱for􀈱sale􀈱 Fresh􀈱Issue􀈱 Offer􀈱for􀈱Sale Preferential􀈱Issue􀈱 Qualified􀈱Institutional􀈱Placement􀀃 3 (i) Initial􀀃 public􀀃 offer􀀃 (IPO):􀀃When􀀃 an􀀃 unlisted􀀃 company􀀃makes􀀃 either􀀃 a􀀃 fresh􀀃 issue􀀃of􀀃 securities􀀃 or􀀃 offers􀀃 its􀀃 existing􀀃 securities􀀃 for􀀃 sale􀀃 or􀀃 both􀀃 for􀀃 the􀀃 first􀀃 time􀀃 to􀀃 the􀀃 public,􀀃 it􀀃 is􀀃 called􀀃 an􀀃 IPO.􀀃 This􀀃 paves􀀃 way􀀃 for􀀃 listing􀀃 and􀀃 trading􀀃 of􀀃 the􀀃 issuer’s􀀃 securities􀀃in􀀃the􀀃Stock􀀃Exchanges.􀀃 􀀃 (ii) Further􀀃 public􀀃 offer􀀃 (FPO)􀀃 or􀀃 Follow􀀃 on􀀃 offer:􀀃 􀀃When􀀃 an􀀃 already􀀃 listed􀀃 company􀀃 makes􀀃either􀀃a􀀃fresh􀀃issue􀀃of􀀃securities􀀃to􀀃the􀀃public􀀃or􀀃an􀀃offer􀀃for􀀃sale􀀃to􀀃the􀀃public,􀀃 it􀀃is􀀃called􀀃a􀀃FPO.􀀃 􀀃􀀃 (b) Rights􀀃 issue􀀃 (RI):􀀃When􀀃 an􀀃 issue􀀃 of􀀃 securities􀀃 is􀀃made􀀃 by􀀃 an􀀃 issuer􀀃 to􀀃 its􀀃 shareholders􀀃 existing􀀃as􀀃on􀀃a􀀃particular􀀃date􀀃fixed􀀃by􀀃the􀀃issuer􀀃(i.e.􀀃record􀀃date),􀀃it􀀃is􀀃called􀀃an􀀃rights􀀃 issue.􀀃The􀀃rights􀀃are􀀃offered􀀃in􀀃a􀀃particular􀀃ratio􀀃to􀀃the􀀃number􀀃of􀀃securities􀀃held􀀃as􀀃on􀀃the􀀃 record􀀃date.􀀃 􀀃􀀃 (c) Bonus􀀃issue:􀀃When􀀃an􀀃issuer􀀃makes􀀃an􀀃issue􀀃of􀀃securities􀀃to􀀃its􀀃existing􀀃shareholders􀀃as􀀃on􀀃 a􀀃record􀀃date,􀀃without􀀃any􀀃consideration􀀃from􀀃them,􀀃it􀀃is􀀃called􀀃a􀀃bonus􀀃issue.􀀃The􀀃shares􀀃 are􀀃 issued􀀃out􀀃of􀀃 the􀀃Company’s􀀃 free􀀃 reserve􀀃or􀀃 share􀀃premium􀀃account􀀃 in􀀃a􀀃particular􀀃 ratio􀀃to􀀃the􀀃number􀀃of􀀃securities􀀃held􀀃on􀀃a􀀃record􀀃date.􀀃􀀃 􀀃 (d) Private􀀃 placement:􀀃When􀀃 an􀀃 issuer􀀃makes􀀃 an􀀃 issue􀀃 of􀀃 securities􀀃 to􀀃 a􀀃 select􀀃 group􀀃 of􀀃 persons􀀃not􀀃exceeding􀀃49,􀀃and􀀃which􀀃is􀀃neither􀀃a􀀃rights􀀃issue􀀃nor􀀃a􀀃public􀀃issue,􀀃it􀀃is􀀃called􀀃 a􀀃private􀀃placement.􀀃Private􀀃placement􀀃of􀀃shares􀀃or􀀃convertible􀀃securities􀀃by􀀃listed􀀃issuer􀀃 can􀀃be􀀃of􀀃two􀀃types:􀀃 􀀃 (i) 􀀃􀀃Preferential􀀃allotment:􀀃When􀀃a􀀃listed􀀃issuer􀀃issues􀀃shares􀀃or􀀃convertible􀀃securities,􀀃to􀀃 a􀀃 select􀀃 group􀀃 of􀀃 persons􀀃 in􀀃 terms􀀃 of􀀃 provisions􀀃 of􀀃 Chapter􀀃 XIII􀀃 of􀀃 SEBI􀀃 (DIP)􀀃 guidelines,􀀃it􀀃is􀀃called􀀃a􀀃preferential􀀃allotment.􀀃The􀀃issuer􀀃is􀀃required􀀃to􀀃comply􀀃with􀀃 various􀀃 provisions􀀃which􀀃 inter􀍲alia􀀃 include􀀃 pricing,􀀃 disclosures􀀃 in􀀃 the􀀃 notice,􀀃 lock􀍲in􀀃 etc,􀀃in􀀃addition􀀃to􀀃the􀀃requirements􀀃specified􀀃in􀀃the􀀃Companies􀀃Act.􀀃 􀀃 (ii) Qualified􀀃institutions􀀃placement􀀃(QIP):􀀃􀀃When􀀃a􀀃listed􀀃issuer􀀃issues􀀃equity􀀃shares􀀃or􀀃 securities􀀃convertible􀀃in􀀃to􀀃equity􀀃shares􀀃to􀀃Qualified􀀃Institutions􀀃Buyers􀀃only􀀃in􀀃terms􀀃 of􀀃provisions􀀃of􀀃Chapter􀀃XIIIA􀀃of􀀃SEBI􀀃(DIP)􀀃guidelines,􀀃it􀀃is􀀃called􀀃a􀀃QIP.􀀃􀀃􀀃 4 􀀃2. Types􀀃of􀀃Offer􀀃Documents􀀃(ODs)􀀃 􀀃 (a) What􀀃is􀀃an􀀃offer􀀃document?􀀃 􀀃 ‘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􀀃and􀀃is􀀃used􀀃for􀀃inviting􀀃subscription􀀃to􀀃the􀀃issue􀀃being􀀃made􀀃by􀀃the􀀃issuer.􀀃􀀃 􀀃 ‘Offer􀀃 Document’􀀃 is􀀃 called􀀃 “Prospectus”􀀃 in􀀃 case􀀃 of􀀃 a􀀃 public􀀃 issue􀀃 or􀀃 offer􀀃 for􀀃 sale􀀃 and􀀃 “Letter􀀃of􀀃Offer”􀀃in􀀃case􀀃of􀀃a􀀃rights􀀃issue.􀀃􀀃 􀀃(b) I􀀃hear􀀃various􀀃terms􀀃like􀀃draft􀀃offer􀀃document,􀀃Red􀀃Herring􀀃prospectus􀀃etc,􀀃what􀀃are􀀃they􀀃 and􀀃how􀀃they􀀃are􀀃different􀀃from􀀃each􀀃other?􀀃 􀀃 Terms􀀃used􀀃for􀀃offer􀀃documents􀀃vary􀀃depending􀀃upon􀀃the􀀃stage􀀃or􀀃type􀀃of􀀃the􀀃issue􀀃where􀀃 the􀀃document􀀃is􀀃used.􀀃The􀀃terms􀀃used􀀃for􀀃offer􀀃documents􀀃are􀀃defined􀀃below:􀀃􀀃 􀀃 (i) Draft􀀃offer􀀃document:􀀃is􀀃an􀀃offer􀀃document􀀃filed􀀃with􀀃SEBI􀀃for􀀃specifying􀀃changes,􀀃if􀀃 any,􀀃 in􀀃 it,􀀃 before􀀃 it􀀃 is􀀃 filed􀀃 with􀀃 the􀀃 Registrar􀀃 of􀀃 companies􀀃 (ROCs).􀀃 􀀃 Draft􀀃 offer􀀃 document􀀃 is􀀃made􀀃available􀀃 in􀀃public􀀃domain􀀃 including􀀃 SEBI􀀃website,􀀃 for􀀃enabling􀀃 public􀀃to􀀃give􀀃comments,􀀃if􀀃any,􀀃on􀀃the􀀃draft􀀃offer􀀃document.􀀃 􀀃(ii) Red􀀃 herring􀀃 prospectus􀀃 is􀀃 an􀀃 offer􀀃 document􀀃 used􀀃 in􀀃 case􀀃 of􀀃 a􀀃 book􀀃 built􀀃 public􀀃 issue.􀀃 It􀀃 contains􀀃all􀀃 the􀀃 relevant􀀃details􀀃except􀀃 that􀀃of􀀃price􀀃or􀀃number􀀃of􀀃 shares􀀃 being􀀃offered.􀀃It􀀃is􀀃filed􀀃with􀀃RoC􀀃before􀀃the􀀃issue􀀃opens.􀀃 􀀃 (iii) Prospectus􀀃 is􀀃 an􀀃 offer􀀃 document􀀃 in􀀃 case􀀃 of􀀃 a􀀃 public􀀃 issue,􀀃which􀀃 has􀀃 all􀀃 relevant􀀃 details􀀃 including􀀃 price􀀃 and􀀃 number􀀃 of􀀃 shares􀀃 being􀀃 offered.􀀃 This􀀃 document􀀃 is􀀃 registered􀀃with􀀃RoC􀀃􀀃􀀃before􀀃the􀀃issue􀀃opens􀀃in􀀃case􀀃of􀀃a􀀃fixed􀀃price􀀃issue􀀃and􀀃after􀀃 the􀀃closure􀀃of􀀃the􀀃issue􀀃in􀀃case􀀃of􀀃a􀀃book􀀃built􀀃issue.􀀃 􀀃 (iv) Letter􀀃of􀀃offer􀀃is􀀃an􀀃offer􀀃document􀀃in􀀃case􀀃of􀀃a􀀃Rights􀀃issue􀀃and􀀃is􀀃filed􀀃with􀀃Stock􀀃 exchanges􀀃before􀀃the􀀃issue􀀃opens.􀀃 􀀃 (v) Abridged􀀃prospectus􀀃is􀀃an􀀃abridged􀀃version􀀃of􀀃offer􀀃document􀀃in􀀃public􀀃issue􀀃and􀀃is􀀃 issued􀀃along􀀃with􀀃 the􀀃application􀀃 form􀀃of􀀃a􀀃public􀀃 issue.􀀃 It􀀃 contains􀀃all􀀃 the􀀃 salient􀀃 features􀀃of􀀃a􀀃prospectus.􀀃􀀃 􀀃 (vi) Abridged􀀃letter􀀃of􀀃offer􀀃is􀀃an􀀃abridged􀀃version􀀃of􀀃the􀀃letter􀀃of􀀃offer.􀀃It􀀃is􀀃sent􀀃to􀀃all􀀃 the􀀃shareholders􀀃along􀀃with􀀃the􀀃application􀀃form.􀀃 􀀃 (vii) Shelf􀀃prospectus􀀃is􀀃a􀀃prospectus􀀃which􀀃enables􀀃an􀀃issuer􀀃to􀀃make􀀃a􀀃series􀀃of􀀃issues􀀃 within􀀃a􀀃period􀀃of􀀃1􀀃year􀀃without􀀃the􀀃need􀀃of􀀃filing􀀃a􀀃fresh􀀃prospectus􀀃every􀀃time.􀀃 This􀀃facility􀀃is􀀃available􀀃to􀀃public􀀃sector􀀃banks􀀃/Public􀀃Financial􀀃Institutions.􀀃 􀀃 (viii) Placement􀀃document􀀃is􀀃an􀀃offer􀀃document􀀃for􀀃the􀀃purpose􀀃of􀀃Qualified􀀃Institutional􀀃 Placement􀀃and􀀃contains􀀃all􀀃the􀀃relevant􀀃and􀀃material􀀃disclosures.􀀃􀀃 5 􀀃 3. Issue􀀃Requirements􀀃 􀀃 (a) Are􀀃there􀀃any􀀃entry􀀃requirements􀀃for􀀃an􀀃issuer􀀃to􀀃make􀀃an􀀃issue􀀃/􀀃offer􀀃to􀀃public?􀀃If􀀃yes,􀀃 what􀀃are􀀃these?􀀃 􀀃 SEBI􀀃 has􀀃 laid􀀃 down􀀃 entry􀀃 norms􀀃 for􀀃 entities􀀃making􀀃 a􀀃 public􀀃 issue/􀀃 offer.􀀃 The􀀃 same􀀃 are􀀃 detailed􀀃below􀀃􀀃 􀀃 Entry􀀃Norms:􀀃 Entry􀀃 norms􀀃 are􀀃 different􀀃 routes􀀃 available􀀃 to􀀃 an􀀃 issuer􀀃 for􀀃 accessing􀀃 the􀀃 capital􀀃market.􀀃 􀀃 (i) An􀀃unlisted􀀃issuer􀀃making􀀃a􀀃public􀀃issue􀀃i.e􀀃(making􀀃an􀀃IPO)􀀃is􀀃required􀀃to􀀃satisfy􀀃 the􀀃following􀀃provisions:􀀃 􀀃 Entry􀀃Norm􀀃I􀀃(commonly􀀃known􀀃as􀀃“Profitability􀀃Route”)􀀃􀀃 􀀃The􀀃Issuer􀀃Company􀀃shall􀀃meet􀀃the􀀃following􀀃requirements:􀀃 (a)􀀃Net􀀃 Tangible􀀃 Assets􀀃 of􀀃 at􀀃 least􀀃 Rs.􀀃 3􀀃 crores􀀃 in􀀃 each􀀃 of􀀃 the􀀃 preceding􀀃 three􀀃 full􀀃 years.􀀃 (b)􀀃Distributable􀀃profits􀀃in􀀃atleast􀀃three􀀃of􀀃the􀀃immediately􀀃preceding􀀃five􀀃years.􀀃 (c)􀀃Net􀀃worth􀀃of􀀃at􀀃least􀀃Rs.􀀃1􀀃crore􀀃in􀀃each􀀃of􀀃the􀀃preceding􀀃three􀀃full􀀃years.􀀃 (d)􀀃 If􀀃 the􀀃 company􀀃 has􀀃 changed􀀃 its􀀃 name􀀃 within􀀃 the􀀃 last􀀃 one􀀃 year,􀀃 atleast􀀃 50%􀀃 revenue􀀃for􀀃the􀀃preceding􀀃1􀀃year􀀃should􀀃be􀀃from􀀃the􀀃activity􀀃suggested􀀃by􀀃the􀀃new􀀃 name.􀀃 (e)􀀃The􀀃issue􀀃size􀀃does􀀃not􀀃exceed􀀃5􀀃times􀀃the􀀃pre􀍲􀀃issue􀀃net􀀃worth􀀃as􀀃per􀀃the􀀃audited􀀃 balance􀀃sheet􀀃of􀀃the􀀃last􀀃financial􀀃year􀀃 􀀃To􀀃 provide􀀃 sufficient􀀃 flexibility􀀃 and􀀃 also􀀃 to􀀃 ensure􀀃 that􀀃 genuine􀀃 companies􀀃 do􀀃 not􀀃 suffer􀀃 on􀀃 account􀀃 of􀀃 rigidity􀀃 of􀀃 the􀀃 parameters,􀀃 SEBI􀀃 has􀀃 provided􀀃 two􀀃 other􀀃 alternative􀀃 routes􀀃 to􀀃 the􀀃 companies􀀃not􀀃 satisfying􀀃 any􀀃of􀀃 the􀀃 above􀀃 conditions,􀀃 for􀀃 accessing􀀃the􀀃primary􀀃Market,􀀃as􀀃under:􀀃 􀀃Entry􀀃Norm􀀃II􀀃(Commonly􀀃known􀀃as􀀃“QIB􀀃Route”)􀀃 􀀃(a)􀀃 Issue􀀃 shall􀀃 be􀀃 through􀀃 book􀀃 building􀀃 route,􀀃with􀀃 at􀀃 least􀀃 50%􀀃 to􀀃 be􀀃mandatory􀀃 allotted􀀃to􀀃the􀀃Qualified􀀃Institutional􀀃Buyers􀀃(QIBs).􀀃 (b)􀀃The􀀃minimum􀀃post􀍲issue􀀃face􀀃value􀀃capital􀀃shall􀀃be􀀃Rs.􀀃10􀀃crores􀀃or􀀃there􀀃shall􀀃be􀀃 a􀀃compulsory􀀃market􀍲making􀀃for􀀃at􀀃least􀀃2􀀃years􀀃 􀀃Entry􀀃Norm􀀃III􀀃(commonly􀀃known􀀃as􀀃“Appraisal􀀃Route”)􀀃 􀀃(a)􀀃 The􀀃 “project”􀀃 is􀀃 appraised􀀃 and􀀃 participated􀀃 to􀀃 the􀀃 extent􀀃 of􀀃 15%􀀃 by􀀃 Financial􀀃 Institutions􀀃 /􀀃 Scheduled􀀃 Commercial􀀃 Banks􀀃 of􀀃which􀀃 at􀀃 least􀀃 10%􀀃 comes􀀃 from􀀃 the􀀃 appraiser(s).􀀃 (b)􀀃The􀀃minimum􀀃post􀍲issue􀀃face􀀃value􀀃capital􀀃shall􀀃be􀀃Rs.􀀃10􀀃crores􀀃or􀀃there􀀃shall􀀃be􀀃 a􀀃compulsory􀀃market􀍲making􀀃for􀀃at􀀃least􀀃2􀀃years.􀀃 􀀃In􀀃 addition􀀃 to􀀃 satisfying􀀃 the􀀃 aforesaid􀀃 entry􀀃 norms,􀀃 the􀀃 Issuer􀀃 Company􀀃 shall􀀃 also􀀃 satisfy􀀃the􀀃criteria􀀃of􀀃having􀀃at􀀃least􀀃1000􀀃prospective􀀃allotees􀀃in􀀃its􀀃issue.􀀃