ey DEPARTMENT OF B.COM CORPORATE SECRETARYSHIP SECURITIES LAWS & MARKET OPERATIONS STUDY MATERIAL ey AGURCHAND MANMULL JAIN COLLEGE INTRODUCTION TO FINANCIAL MARKET Security A security is a negotiable financial instrument that represents some type of financial value. Security Laws ead It determines the rules and regulations governing financial market and its instruments. These rules are designed to prevent fraud, insider training, market manipulation and promote transparency in trading. Security Market Operations \/s Tt specifies the operation of securities market according to the guidelidés fiathed DY\SEBI, SCRA and government. It enables flow of capital from those with idle resources to others who Raye a’produetive need for them in a fair and ethical manner. & INDIAN FINANCIAL SYSTE! yancial Market ‘ A. Organized X 1) Capital market: Itis a place where buyers and stern ttade (uying/selling) of financial securities like bonds, stocks, ete. It is divided into two: - Y Primary: Its also known as new issues mate I ‘deals wit new securities being issued for the first time by new company or by an existing company. ¥ Secondary: It is also known as the sfoek market of Stock exchange. It is a market for the purchase and sale of existing securities. Ithelps éXistinghinves(Ofsto disinvest and fresh investors to enter the market. 2) Money market: It is a market where low tisk, aye and highly liquid short term debt instruments are issued whose maturity period istip to Xx yearfty/instruments are: ¥ Call Money (used by the bank8)y_ ¥ Treasury bill (a promissory note my by RBI on behalf of Government of India) ¥ Commercial Paper [issued by, Commercial Banks (CB), Financial Institutions (FI) and Blue Chip companies}. ) Y Certificate of Deposit (issued majorly by CB and development Fis) Y Trade or Commercial BiV/BOE (issued by business firms to finance credit sales ie., traders buy goods on credit and pay affénthe end of the credit period) 3) Foreign eXchange/FOREX/Currencies market: It is a global marketplace where currencies are traded at an international Level.“ 4) Aye Government Securities market: It is a market where securities are issued by both central and state & goverment of India in the form of bonds, treasury bills, or notes. B. Unorganizee/Indigenous banking system: It is a banking system that involves private firms or individuals who act as Banks | by providing financial services such as loans and accepting deposits. incial Insti ‘A. Banking: Ic includes RBI, commercial bank, cooperative bank, developmental bank, agricultural/mortgaged banks (regional rural banks), Merchant banks and Indigenous bank, B. Non-banking: It includes loan companies, leasing companies, chit funds, hire purchase, housing finance, mutual benefit companies, residuary non-banking companies.A. Organized 1) Capital marke It includes developmental banks, insurance companies, UTI, agricultural financial institutions, EXIM bank NBFC namely hire purchasing, leasing, investment company and financial company, 2) Money market: It includes RBI, Commercial Banks, Non-banking Finance Companies, State Governments, Large Corporate Houses and other specialised FI like LIC, GIC, UTI, ete. 4 3) Foreign exchange market: It includes RBI, authorized dealers, money changers, foreign ee Sports and exports bank. B. Unorganized: It includes money lenders, indigenous bank, pawn brokers, traders and land JordN \ Financial Services \ y Ie includes services namely mumnal funds, investment trust, venture capil funy, meg blinking, leasing and factoring. FUNCTIONS OF FINANCIAL MARKET { a) Mobilisation of Savings and channelling them into the most Producti User? ‘Tt mobilizes the savings from an individual in order to convert them as investors Le., savers to inestors. It gives the savers a choice from different investment avenues and helps them to channelize surplus funds into most productive use. b) Facilitates Price Discovery: In the financial market, the potential “Dpvestors are suppliers of funds and business firms represent the demand, The interaction between them helps to establish a price for the financial asset which is being traded in the market. ~ar Y ©) Provides Liquidity to Financial Assets: It failitates liquidity by easy purchase and sale of financial assets. Holders of assets can readily sell their finaféial asets thrOugh the mechanism of financial market 4) Reduces Transactions Cost: It provideall feguired information about securities being traded inthe market and the cost involved in it, This helps to reduce thé'risk and cost for both buyers and sellers, ©) Easy access: In financial market, based on theineW technology, it is easy for the buyer to find the seller for his asset and vice versa. Hence, it Féducés the burden of keeping the asset for long time. f) Transfer of risk: Financial'market transfers the risk from the investors to a person who undertakes to invest their funds in variouggsse nore to provide good retums from it FUNCTIONS OF prrtianyy MARKET + Origination/New issue e Offer: Teefers to the detailed investigation, analysis and processing of new proposals in is areas namely techy ‘economic, financial and/legal aspects of the issui 0 companies, acetates itis not subseribed by public (00%). + Distribution! of neW issue: The sale of securities to the ultimate investors via prospectus is known as VARIOUS\METHODS OF FLOATING NEW ISSUE ‘ompany | Public Offerings: IPO is the first sale of stock by unlisted or private companies to the public in order to raise their capital, The following are the ways of making IPOs- ¥ Prospectus: A public company may issue securities to public through prospectus which is referred as "public off¥ Bought out deals: In this, an existing company off-loads @ part of the promoters’ capital to a wholesaler instead of making a public issue. Private placement: Any offer or invitation made by a company to subscribe securities other than by way of public offer to 200 persons or fess in a financial year is called as ‘private placement’, 2) Follow-on or Further Public Offerings (FPOs): When a company (which already makes an issue) wants to raise its subscribed capital by making further issue of shares is called Follow-up public offeringsThe following are the ways of making FPOs- ¥ Preferential allotment: I refers to the issue of shares or other securities by a company t or group of persons on preferential basis and it does not include shares or other secur ‘© public issue or rights issue ‘+ employee stock option scheme ‘issue of sweat equity shares or bonus shares + depository receipts issued in a country outside India or foreign sect son y of a company on pro-rata basis at a low price. It gives the. subscribe new shares at a price lesser than the market price. ¥ Bonus Issue: These are issued by the company to their, @up shareholders in proportion to the number of shares held by them at free of cost. ¥ Sweat equity shares: These are given to the company*s s oF employees in recognition of their work. It is one of the mode of making share based payi : Y Employees’ Stock Option Plan (ESOP): <") company, the benefit or right to purchase ina pred n 10 the directors, officers, employees of a ined price. vate Company 1) Initial Public Offerings: A private s notjfrave the eligibility make initial public offer (IPOs) to the public unless it is converted i 1y. But, it has the option to make IPOs through Private placement capital in the following w Y Right issue ¥ Bonus Issue Y Sweat equity v diversification and expansion. © Working capital: It offers sufficient working capital for the companies to run its day to day business operations. ¢ Fair price: The shares price is fixed by the promoters in consultation with lead managers which is usually a fair Price. ‘Reduction of shareholdings for promoters: Through offer for sale (OFS), the promoters of public companies ccan sell their shares to issue house in order to reduce their shareholdings.‘TYPES OF INVESTORS IN NEW ISSUE MARKET © Retail Individual Investors (RID: They are the investors who bid below Rs.2,00,000. It is compulsory for the company to allot 35% of shares to them i.e, their Quotaoffer reservation is 35%. NRI or HUF comes under this category. They can bid at cut-off price. + Non-Institutional Investors (NID): They are the investors who bid above Rs.2,00,000. It is compulsory for the company to allot 15% of shares to them ie. their quota offer reservation is 15%. Eligible NRIs, HUFS, companies, corporate bodies, scientific institutions, societies and trusts comes under this categoryi,They are not eligible to bid at cut-off price. few ‘+ Qualified Institutional Bidders/Buyers (QUB's): They are the representatives of small investors Who inyest in mutual funds, ULIP schemes of insurance companies and pension schemes. It is compulory for the, company to allot 50% of shares to them i.e., their quota/ offer reservation is 50%. Public financial ih ions, Gommercial banks, mutual funds and Foreign Portfolio Investors etc., come under this categorya\They aré not éligible to bid at cut-off price. a ) \. + Anchor investors: They are QIBs who makes an application for a value of Rs 10 crOFeSor more through the book- building process, From among 50% of QIB reservation, up 6O% Mage to AL, They are not eligible to bid at cut-off price. Vv TYPES OF ISSUE PRICE/TYPES OF IPO ~ \* 1) Fixed price: It is a price determined and printed in the prospect ‘by the @Binpany for the shares offered to the investors. The investors knew the share price before the company goes for public offer. 2) Book building: The method of offering shares in a/prige range/band #8 called book building method. It provides an opportunity to discover demand price for the Seeurities, Thus, if is a mechanism where the bids are collected from investors at various prices between theprice bands, * Price band: It is a value-setting method in, which the i§suer indicates an upper and lower price level within which the investor has to place their bids.“ ‘* Floor and cap price: Floor Prie@ is the wninimuity’price and Cap price is the maximum price between which the bids are made by the inyestors. «Appointment of book! runners: | ‘Lead merchant banker(s) as ‘book runners’ to fix the price band and cut-off price. ‘Determination of price band + Drafting and filing of, { RHP: filed with SEBI for approval. + Appointmént/of Syndicate members: Commercial or investment banks with whom orders are to be placed by Able investors. © Opening of issue: The minimum and maximum period under which biding will be open for investors is 3-7 workifig days which may extended to 3 days. ‘© Application made by investors: who are willing to buy the shares at desired bid price. «Submission of application: to bidding centres i.e., syndicate members. He inputs the bidding made by the investors in an ‘electronic book’ to find out demand for the share price and to determine the cut-off price. + Determination of cut-off price: Its calculated by the issuer and lead manager. Example: If the price bracke/band for an IPO is Rs.200 to Rs. 205 and the application made by RII is for 10 shares at Rs, 202 bid price; then after deciding the cut-off price by the issuer, 4¥ Cutoff price Rs. 201 - Ril receives allotment at Rs. 201 even though he bid for Rs. 202. Y Cutoff price Rs. 204 - RIT will not receive allotment of shares. Y If RIT did not mentioned his bid price in application and select cut-off option, then he is potential for allotment at any determined issue price. ‘+ Allotment: of securities is made to the bidders within 10 days from the last date of bidding. «Issue of share certificates and refund for non-allottees DIFFERENCE BETWEEN FIXED PRICE & BB PROCESS: an ~~ Particulars Fixed Price Issue Book Building Issues The share price is fixed on the first day The share price @s,not determined in of issue and is printed in the prospectus. | advance. Only the \prige band)is: fixed. The investors have to buy shares at that | The actual cutoff prige’is fix€d after the price only. closure of bid. ‘ <... ;, | It is known in advance and is printed on | It is not knowh. Onilythe price band at Known of share price im | 1. rospectus. which"the company is willing to sell its advance | sharesiis kOwa,in advance. Prospectus is issued which contains the | The ara red herring prospectus is issued Issue of prospectus details of price of share and total.shares |'whith cOftains price band and total offered. Ao )shares tered. Demand for the securities offered isi{It can be known every day as the bids are Demand known to company and! Ainvéstors 0 Maly -gistered in the book until the closure of after the closure of issue. issue. ‘The total share™ price along with | Only application money is paid at the application moneyishoiild be paid at the | time of bidding. The share price money is Payment time of | siibmitting the _ pplication. | paid only after the cut-off price has been Refund Sf money is made for non- | fixed. allotees. 2 30% OPahe allocations are reserved Tor | 50 of allocations are reserved for the Reservations 4 RIL, and the pest is allocated for those | QIBs. 35% for RII and the rest for NII. 6 | investors who demanded high volume of shares,” ae “Tecan be used for any type of issue Le., | It is used only for public issue Le, IPO oa IPOFEPO, private placement, etc. and FPO. ay PLAY INVOEVEDIN THE NEW ISSUE MARKET Theyre as follows: - MERGHANTBANKERS ‘Anipperson(financial institutions/banks) who is engaged in the business of issue management either by making deviation penton tying, Belling: Weer ingc es sevacides of tes wa manage coats, ods corporate in relation to issue management is called merchant banker. If he undertakes only the duty of issue ‘management he is named as lead manager. Registration of merchant bankers/lead managers: An application by a person for grant of a certificate shall be made to the Board in Form A. Conditions/eligibility for registration * Body corporate© Necessary infrastructure ‘¢ Appointment of 2 persons: in the field of merchant banking, ‘+ Capital requirements: net worth of at least 5 Crores. « Not to involve in litigation «Not to convict offence ‘+ Possess qualification: in finance, law or business management from any Government recognized insti Duties or role or functions of lead manager Pre issue activities © Due diligence of company’s operations. ‘Drafting of prospectus and application forms + Preparing the budget of expenses related to the issue. © Compliance with procedural formalities. Completion of prescribed formalities with SE for listing of securities. Advising the company in the appointment of registrars to the issue, uni advertising agents etc. * Arrangement of underwriting and sub-underwriting, * Publicity in newspapers to place issues to public. Post issue activities ‘¢ Management of escrow accounts ¢ Dispatch of refunds to non-allotees Demat delivery of shares to allotees ankers to the issue, UNDERWRITER He is an individual, bank, financial i joint stock company who promises to subscribe to a specified number of shares or debent jot subscribed by the public to the issue in order to make 90% subscription. They are appoint 1y in consultation with merchant bankers. To act as an underwriter, a certificate of regist Need for underwriting © 90% subscription Refund of subseription Underwriting Commission — les not subscribed by publie. by issuing company fons who has obtained certificate of registration from SEBI, can act as underwriter. The s and stock brokers who are already having a valid certificate of registration from SEBI to act as sand stock brokers, does not require to have a separate registration from SEBI to act as underwriter. Conditions for iting registration Necessary infrastructure + Prior experience ‘* Incligibility: If involved in any disciplinary action + Capital requirements: net worth of Rs 20 lakhs + Not convicted offence‘* Abide code of conduct ‘¢ Payment of fee: pay prescribed fee for registration and renewal or else it is suspended by SEBI. Code of conduct or respo ies or obligation of an underwriter Integrity and fairness Ethical dealings: The dealings of him must be ethical. ‘Must not harm the interest of other underwriters: by indulging in unfair competition Not to misrepresent the facts Not to reveal confidential information Not to hide any material faets: in documents furnished to the board. Not to drive any benefit: except receiving underwriting commission. R + Subscription: subscribe for securities within 45 days of the receipt of intimation from a ising company. pes or methods of underwriting o~ * Complete Underwriting: entire issue of shares or debentures of a company. is/ undertaken either by one underwriter or by a number of underwriters & ’ Partial Underwriting: part of the issue of shares or debenture of a ye underwriter or by a number of underwriters. ¢ Open or candonal Underwriting: an underwter egrees jp uni Me such, shares which are not subscribed by the public. x Firm Underwriting: an underwriter agrees to buy a definite SVE aes or debentures in addition 1o the shares or debentures he/she has agreed to take under the undeswritig agreement Syndicate Underwriting: When the issue is very big,and itis impossible to be underwritten by a single underwriter, syndicate underwriters come to resctie, Joint Underwriting: In joint underwriting, when thoigus i8'toO large, the issuer company itself appoints more than one underwriter to reduce the burden Ot sinile undensrite. IF an underwriter as proftied t6)underwrite an issue and later on he feels that itis beyond his individual capacity, then he may/appoint a subunderwriter to safeguard himself from underwriting, In such a case, the sub-underwriter exclusivelyiliable to underwriter and he is unrelated to the company. f underwriter ~ Tt is an option of sellingequity\shar@in addition (o the actual public issue ic., it allows the underwriters to sell 15% shares in addition to the actual piblic issue, if the demand exceeds expectations and the stock trades above its offer price. Thus, it is done.to stabilize the market price of the shares in case of rise or fall in the demand of market price. . 9 For example: If & company ingtructs the underwriters to sell 200 million shares, the underwriters can issue an : Uridertaken either by one additional 30/%million shares by exercising a green shoe option (200 million shares * 15% = 30 million shares). BROKERS. “ Brokers are registered members of the stock exchanges who procure application and application money from applicants. Company is free to appoint many numbers of brokers in the place where stock exchanges are located. Their nameland address should be disclosed in the prospectus. Procedure for appointment + Company can appoint more than one broker + Lead manager guide the company: regarding selection and appointment of brokers. ‘© Obtaining consent: from brokers of exchanges to act as brokers to the issue. + Filing with ROC: consent letter along with prospectus. * Disclosure: their names & addresses in the prospectus. 7CONDITIONS FOR PAYMENT OF BROKERAGE FEE * Condition: paid according to SEBI guidelines & Companies Act, 2013 ‘+ Brokerage Rate: 1.5 percent ‘+ Payment period: within two months from the date of allotment. © Mode of payment: cheque REGISTRARS TO AN ISSUE He is an intermediary employed by the company to handle all investor-related services in the ptimary market such as- * Collection of application and application money from intermediaries «keep proper record of holders of securities ‘assist the company Y determining basis of allotment in consultation with stock exchange finalizing list of persons entitled for allotment Y dispatch of share certificate Y refund of application money for non allotees: A company can appoint one or more registrars according to tl registrar to the issue has a necessary infrastructure like Computer, Inte ize of is always ensured that the shone SHARE TRANSFER AGENT He is an agent who, on behalf of the body corporat body corporate and deals with the processes of transf Roles of share transfer agent + Transfer of securities and record keepit + Inform investors regarding new fun + Transmission, consolidation, + Cancel the name and certi reholder who had sold the shares of securities and replace it with the new shareholder. BANKERS TO THE ISS uled bank: The applicant must be a scheduled bank. + Act ace. To Interest of investors + Renewal: three months before the expiry of the certificate. + Annual fee: paid to SEBI RS.5 lakhs for 2 years; Rs.2.5 lakh from 3" year onwards. General obligations and responsibilities He has to furnish the following information to SEBI: - + The number of issues he has engaged as a banker to an issue; 8+ The number of application money received; + The dates on which applications were forwarded to registrar to an issue; + dates and amounts of refund money made to the investors. Books of Account/Record/Documents maintained the books of accounts for a minimum 3 years- + the number of applications received; + the names of the investors; + the time within which the applications received were forwarded to the issuing company/registrar to the issue; and + dates and amounts of refund money made to the investors. DEBENTURE TRUSTEE + He is a trustee for securing any issue of debentures made by a company. + Inorder to act as debenture trustee, a certificate from the SEBI is necessary. + He inspeets the books of accounts of the company, ensure security o! ture holders. + Solve the grievances of investors + Only scheduled commercial banks, PFis, Insurance comp: 1d COmpanties are entitled to act as a debenture trustees. + He has to send consent in writing to the issuing company t re trustee, Registration of debenture trustees Only such persons who has obtained certificate, strat fronY'SEBI, can act as debenture trustee. Conditions for granting registratio + Necessary infrastructure + Prior experience nm + Ineligibility: If involved in disciplitiary a + Possess professional qualification: in finance Maw or business mgmt Not convicted offence Eligibility for being debenture + Ascheduled bank + A public financial institution. + An insurance + A body corporate. Renewal certificate: before 3 is syndicate members (Commercial or investment banks) to serves as an intermediate investor. They are mainly appointed to collect entire the bid forms and make entry of the cial activity, hs of expiry of certificate PORTFOLIO MANAGERS ‘They are individuals who understands the clients’ financial needs and designs a suitable investment plan as per their income and risk taking abilities. To act as portfolio manager, he has to get certificate of registration from SEBLADVERTISING AGENCIES They play a key role in promoting the public issue. They take the responsibility of giving publicity to the issue on the suitable media such as newspapers/magazinesMhoardings/press release or the combination of all ‘THE FINANCIAL INSTITUTIONS, They underwrite the issue and provide financial assistance to the companies. Hence, normally they 20 through the draft of prospectus, study the proposed program of public issue and approve them. Exx(IDBI, IFCI & ICICI, LIC, GIC and UTI. COLLECTION CENTERS ‘They are appointed by lead manager to collect applications from applicants along with by cheques or in other manners and not by cash and deposit the same in Escrow a ith designated scheduled bank. © There should be at least 30 mandatory collection centers inclusive of the stock exchanges are located. If the issue is not exceeding Rs.10 crore, the mandatory collection centers DIFFERENCE BETWEEN UNDERWRITER AND BROKER Underwriter ‘An underwriter is a person who agrees to take a specified number of shares or debentures, if it is not subscribed by the public, brol roker mn who finds buyers for the jebentures of the company and gets the 1¢ On the number of shares or debentures id by the public through hi An underwriter is liable 0 take up shai fase the, | A broker is not liable. public fails to subscribe Underwriter gets underwriting commiss Broker gets brokerage. Broker does the service of placing the shares. ‘on behalf [A broker does not take any such risk. Underwriter gives guarantee for An underwriter takes the risk of the company making pi debentures. Underwriting acts F insurance or guarantee | Broker acts as a mediator between company and against the danger eiving minimum | public for selling shares. subscription, SECURT HANGE BOARD OF INDIA yy the Government of India on 12" April 1988 to promote orderly and healthy growth of Act, 1992, Organisation structure of SEBI + Board members + Operational departments + Advisory committees 10Objectives of SEBL * To regulate stock exchanges ¢ To protect the rights and interests of investors ‘* To guide and educate investors To prevent trading malpractices * To regulate and develop a code of conduct ROLE OF SEBI RELATING IN NEW ISSUE MARKET «Better environment: for efficient mobilisation and allocation of resources through the securities matket. Competition: provided norms and reservation for investors (RII, QIB and NIT) participating in TRO.to stimulate competition among them. . + Insistence on quality securities: revised the norms for companies accessing capital make. to erigure whether quality securities are listed and traded in stock exchanges. «Meeting needs: of issuers of securities (Companies), the investors and the market iitermediafies * Provide better market place for issuers: to raise funds by the issuers in an edsy, fair and efficient manner. © Protection to inyestor’s rights and interest: through disclosure of adequafe, “Weeurate and authentic information. « Professionalized market for intermediaries: through adequate and ee infrastructure to render better service to issuers and investors, ~ y «Regulation of intermediaries: by providing strict rules and regulations} % ‘+ Free pricing of securities: permitted companies to issue, shares below theface value of Rs. 10 and liberalized the norms for initial public offerings. 4 FUNCTIONS OF SEBI Developmental Functions © Promotion: self-regulatory organizations atid training ofintermediaries. © Research: publishes information regarding future movements of stock exchanges. ‘© Develop capital market: by adaptiig various regulatory functions and guidelines. * Promotion of derivatives market and’mutual funds + Introduction of internet-based trading facility: with the support of registered stock brokers. Protective functions «Prohibition of insider trading: Iasider trading is the buying or selling of a publicly traded company's stock by someone who has nonepublic or material information about that stock ‘© Check on price rigging/price fiking/collusion: Price rigging is the act of causing unnatural fluctuations in the price of securities either by)increasing or decreasing the market price of the stocks that leads to unexpected losses for'the fiyestors. + Promoting fair-practicés « Bdiication to investors Regulatory functions Registration: provide registration of mutual funds, brokers and sub-brokers and other players in the market. Guidelities and code of conduct: to be followed by companies and financial intermediaries. Regulation: for proper functioning of intermediaries, derivatives market and mutual funds. Monitoring: substantial acquisitions of shares and take-over of bids by companies. Inspection and enquiry: of books banks, intermediaries involved in the securities market, Levying fees: to conduct research for proper functioning of financi Performs and exercise powers as said hy SCRA and government: Secu 1956. ial market, Contracts (Regulation) Act rtPOWERS OF SEBL «Regulatory powers: regulate the business of stock exchange: «Power to improve monetary penalties: on intermediaries for violations. * Power to initiate actions: by issuing guidelines to intermediaries to protect interests of investors. ‘© Power to regulate insider trading: and impose penalties on company caught doing something unethical. «Powers to exercise powers said under Securities Contracts Act: for effective regulation of stock exchanges. «Power to recover dues: from person liable to pay under this Act. Hence, SEBT's powers are collectively said as- ma © Quasi-Executive Functions: absolute authority and power to build and implement rules and. regulations to shield the interest of investors, R 7 Quasi-Judicial: power to conduct hearing and pass judgments in case of any fraudulent Betivity to assure fairness, reliability and accountability in the capital market. © Quasi-Legislative: power to create guidelines for including disclosure requirements, insider)ttading regulation and listing obligation. ~ intermediaries and mutual funds. SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTIO! Eligibility norms for . © Net tangible assets ‘Distributable profits in at least three years 5 «Net worth ~ atleast Rs 1 crore ‘© The issue size should not exceed 5 times the pre-issue. Conditions for the companies making IPO: Theeompany is'Moballowed to make publ © Submission of DRHP: unless DRHP hasbeen filed with Board at least 30 days prior to filing the same with ROC. yf” 4 ‘+ Companies barred from not to issue security: No company shall make issue, if it is prohibited from accessing capital market under any order or dir8étion passed by the Board. © Application for listing: unles@ithas madé"an application for listing of those securities in the stock exchange. ‘Issue of securities in dematerialisédform: unless the company enters into an agreement with a depository to issue securities in dematetialized form. © Credit Rating: unléssit obtain crédit rating from least one credit rating agency and disclose the same in the offer document. é y Not a wilful defaulter: it is hot in the list of wilful defaulters of RBI. Partly Paid-up Shares: unless all the existing partly paid-up shares have been fully paid ot forfeited. Pricing by companies issuing securities © Adist@dcompany cai freely price its equity shares. « Kn unlisied compliny can freely price its shares by listing in any one recognized stock exchange. ‘An Gligible infrastructure/construction company can freely price its shares, subjected to the norms specified by SEBI from time to time, The banks (public or private) can freely price its shares subjected to approval by the RBI Steps in IPO/SEBI’s guidelines in IPO process Pre- Issue Obligations + Appointment of Merchant Bankers or Lead Managers: to provide assistance (o the issuer during the IPO process, issue- 2Intermediaries: lead manager appoint namely Registers, Brokers, Bankers, Underwriters, Authorized collection agents. ‘Underwriting: lead manager obtain consent from underwriter to act as underwriter. ‘+ Submission of documents: lead manager submit Memorandum of Understanding (MOU), DRHP to SEBI. * Pre—Issue Advertisement: in English, one Hindi National and a regional language newspaper. Agreement with Depositories: to issue shares in dematerialisation form. AC the stage of issue + Issue of prospectus and application form: in online and offline mode © Filling and submission of forms: by RII, NII and QIB specifying the lot size, price; it to banks/brokers or via online mode. Opening and closing date: 3-7/10 working days. Promoters’ Contribution: not less than 20% of post issue paid up share capit Authorized collection agents: appointed by lead manager to collect applica along’ with application money. «Escrow account: to deposit the collected application money. Post- Issue Obligations * Post issue monitoring report: submitted by lead manager within 3 «Co-ordination with Intermediaries: to monitor the flow of ‘+ Redressal of Investor Grievances: by Lead Merchant mana © Post-issue Advertisement: stating that "The subscription has « Allotment of shares: decided by the issuer and Ie ‘Issue of Share Certificate: for whom the sha © Lock-in period: apart from certain shay sell their shares immediately after allotment. They are: ~ Y Promoters: for 3 years Y Qualified Institutional Bidders (QIB’S): for 30 days Y Anchor investors: for 90 days fromthe closure of issue. ‘ollecting centres. 13