SMO PPT

Slide 1: 

GROUP-3 1-ASHISH VERMA 2-ARUN SINGH 3- AMIT SHARMA 4- DAYA SHANKAR PANDEY 5- VISHAL PATHAK 6- VINEET KUMAR SONKAR

Slide 2: 

PRESENTATION ON NEW ISSUES: SEBI GUIDELINES FOR PUBLIC ISSUE- PRICING OF ISSUE, PROMOTER’S CONTRIBUTION, APPOINTMENT & ROLE OF MERCHANT BANKERS.

Slide 3: 

A BRIEF INTRODUCTION OF SEBI (STOCK EXCHANGE BOARD OF INDIA) The Securities and Exchange Board of India Act, 1992 is having retrospective effect and is deemed to have come into force on January 30, 1992. Relatively a brief act containing 35 sections, the SEBI Act governs all the Stock Exchanges and the Securities Transactions in India. A Board by the name of the Securities and Exchange Board of India (SEBI) was constituted under the SEBI Act to administer its provisions. It consists of one Chairman and five members. One each from the department of Finance and Law of the Central Government, one from the Reserve Bank of India and two other persons and having its head office in Bombay and regional offices in Delhi, Calcutta and Madras.The Central Government reserves the right to terminate the services of the Chairman or any member of the Board. The Board decides questions in the meeting by majority vote with the Chairman having a second or casting vote.

Slide 4: 

Section 11 of the SEBI Act provides that to protect the interest of investors in securities and to promote the development of and to regulate the securities market by such measures, it is the duty of the Board. It has given power to the Board to regulate the business in Stock Exchanges, register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, etc., also to register and regulate the working of collective investment schemes including mutual funds, to prohibit fraudulent and unfair trade practices and insider trading, to regulate take-over, to conduct enquiries and audits of the stock exchanges, etc. PROTECTIVE MEASURES OF SEBI FOR INVESTORS

Slide 5: 

All the stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediary who may be associated with the Securities Markets are to register with the Board under the provisions of the Act, under Section 12 of the SEBI Act. The Board has the power to suspend or cancel such registration. The Board is bound by the directions vested by the Central Government from time to time on questions of policy and the Central Government reserves the right to supersede the Board. The Board is also obliged to submit a report to the Central Government each year, giving true and full account of its activities, policies and programme. Any one of the aggrieved by the Board's decision is entitled to appeal to the Central Government.

Slide 6: 

ROLE OF SEBI IN A PUBLIC ISSUE (value more than 50lakh Rs.) Any company making a public issue or a rights issue of securities of value more than Rs 50 lakhs is required to file a draft offer document with SEBI for its observations. The validity period of SEBI’s observation letter is three months only i.e. the company has to open its issue within the period of three month starting from the date of issuing the observation letter. There is no requirement of filing any offer document / notice to SEBI in case of preferential allotment and Qualified Institution Placement (QIP). In QIP, Merchant Banker handling the issue has to file the placement document with Stock Exchanges for making the same available on their websites.

Slide 7: 

There are few clarifications regarding the role played by SEBI: (a) Till the early nineties, Controller of Capital Issues used to decide about entry of company in the market and also about the price at which securities should be offered to public. However, following the introduction of disclosure based regime under the aegis of SEBI, companies can now determine issue price of securities freely without any regulatory interference, with the flexibility to take advantage of market forces.

Slide 8: 

(b) The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. The SEBI DIP Guidelines over the years have gone through many amendments in keeping pace with the dynamic market scenario. It provides a comprehensive framework for issuing of securities by the companies.

Slide 9: 

(c) Before a company approaches the primary market to raise money by the fresh issuance of securities it has to make sure that it is in compliance with all the requirements of SEBI (DIP) Guidelines, 2000. The Merchant Banker are those specialised intermediaries registered with SEBI, who perform the due diligence and ensures compliance with DIP Guidelines before the document is filed with SEBI.

Slide 10: 

(d) Officials of SEBI at various levels examine the compliance with DIP guidelines and ensure that all necessary material information is disclosed in the draft offer documents.

Slide 11: 

SEBI Guidelines for IPOs 1. IPOs of small companies Public issue of less than five crores has to be through OTCEI and separate guidelines apply for floating and listing of these issues. (Public Offer By Small Unlisted Companies) 2. Size of the Public Issue Issue of shares to general public cannot be less than 25% of the total issue, incase of information technology, media and telecommunication sectors this stipulation is reduced subject to the conditions. Offer to the public is not less than 10% of the securities issued. A minimum number of 20 lakh securities is offered to the public and Size of the net offer to the public is not less than Rs. 30 crores.

Slide 12: 

3. Promoters’ Contribution Promoters should bring in their contribution including premium fully before the issue Minimum Promoters contribution is 20-25% of the public issue. Minimum Lock in period for promoters contribution is five years Minimum lock in period for firm allotments is three years.

Slide 13: 

4. Collection centers for receiving applications There should be at least 30 mandatory collection centers, which should include invariably the places where stock exchanges have been established. For issues not exceeding Rs.10 corers (including premium, if any), the collection centers shall be situated at:- The four metropolitan centers viz. Bombay, Delhi, Calcutta, Madras; and at all such centers where stock exchanges are located in the region in which the registered office of the company is situated.

Slide 14: 

5. Regarding allotment of shares Net Offer to the General Public has to be at least 25% of the Total Issue Size for listing on a Stock exchange. It is mandatory for a company to get its shares listed at the regional stock exchange where the registered office of the issuer is located. In an Issue of more than Rs. 25 crores the issuer is allowed to place the whole issue by book-building Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares. There should be at least 5 investors for every 1 lakh of equity offered (not applicable to infrastructure companies). Quoting of Permanent Account Number or GIR No. in application for allotment of securities is compulsory where monetary value of Investment is Rs.50,000/- or above. Indian development financial institutions and Mutual Fund can be allotted securities up to 75% of the Issue Amount.

Slide 15: 

6. Timeframes for the Issue and Post- Issue formalities The minimum period for which a public issue has to be kept open is 3 working days and the maximum for which it can be kept open is 10 working days. The minimum period for a rights issue is 15 working days and the maximum is 60 working days. A public issue is effected if the issue is able to procure 90% of the Total issue size within 60 days from the date of earliest closure of the Public Issue. In case of over-subscription the company may have the right to retain the excess application money and allot shares more than the proposed issue, which is referred to as the ‘green-shoe’ option. A rights issue has to procure 90% subscription in 60 days of the opening of the issue. Allotment has to be made within 30 days of the closure of the Public Issue and 42 days in case of a Rights issue. All the listing formalities for a public Issue has to be completed within 70 days from the date of closure of the subscription list.

Slide 16: 

7. Dispatch of Refund Orders Refund orders have to be dispatched within 30 days of the closure of the Public Issue. Refunds of excess application money i.e. for un-allotted shares have to be made within 30 days of the closure of the Public Issue. 8. Other regulations pertaining to IPO Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public unless it is disinvestment in which case it is not applicable. If the issue is undersubscribed then the collected amount should be returned back (not valid for disinvestment issues). If the issue size is more than Rs. 500 crores voluntary disclosures should be made regarding the deployment of the funds and an adequate monitoring mechanism to be put in place to ensure compliance. Code of advertisement specified by SEBI should be adhered to.

Slide 17: 

9. Relaxations to public issues by infrastructure companies. These relaxations would be applicable to Infrastructure Companies as defined under Section 10(23G) of the Income Tax Act, 1961, provided their projects are appraised by any Developmental Financial Institution (DFI) or IDFC or IL&FS. The projects must also have a participation of at least 5% of the project cost (in debt and/or equity) by the appraising institution.

Slide 18: 

Disclosure and investor protection guidelines The Disclosure and Investor Protection Guidelines of SEBI were amended to provide for enhanced investor protection. The appraising agency would bring in the required contribution at least one day before the opening of the issue. The promoters contribution has been made uniform at 20 per cent irrespective of the issue size. Only such securities have to be offered for promoters contribution for which a specific written consent has been obtained from the shareholders for lock-in. Mandatory provision made for appointment of registrar for rights issues.

Slide 19: 

Mean of Merchant Bankers In modern times, importance of merchant banker is very much, because it is the key intermediary between the company and issue of capital. Main activities of the merchant bankers are – Determining the composition of the capital structure, drafting of prospectus and application forms, compliance with procedural formalities, appointment of registrars to deal with the share application and transfer, listing of securities, arrangement of underwriting / sub-underwriting, placing of issues, selection of brokers, bankers to the issue, publicity and advertising agents, printers and so on.

Slide 20: 

The salient features of the SEBI framework, related to merchant bankers are:- Registration : Merchant bankers require compulsory registration with the SEBI to carry out their activities. Previously there were four categories of merchant bankers, depending upon the activities. Now, since Dec. 1997, there is only one category of registered merchant banker and they perform all activities.

Slide 21: 

Grant of Certificate : The SEBI grants a certificate of registration to applicant if it fulfills all the conditions like- (i) it is a body corporate and is not a NBFC. (ii) it has got necessary infrastructure to support the business activity. (iii) it has appointed at least two qualified and experienced (in merchant banking) persons. (iv) it’s registration is in the general interest of investors.

Slide 22: 

Capital Adequacy Requirement : A merchant banker must have adequate capital to support its business. Hence SEBI respect to the information to be given to the investors are duly incorporated. Acquisition of Shares : A merchant banker is prohibited from acquiring securities of any company on the basis of unpublished price sensitive information obtained during the course of any professional assignment either from the client or otherwise.

Slide 23: 

Disclosure to SEBI : As and when required, a merchant banker has to disclose to SEBI His responsibilities with regard to the management of the issue, Any change in the information/ particulars previously furnished which have a bearing on the certificate of registration granted to it, Names of the companies whose issues he has managed or has been associated with The particulars relating to the breach of capital adequacy requirements and Information relating to his activities as manager, underwriter, consultant or advisor to an issue.

Slide 24: 

Action in case of Default : A merchant banker who fails to comply with any conditions subject to which the certificate of registration has been granted by SEBI and / or contravenes any of the provisions of the SEBI Act, rules or regulations, is liable to any of the two penalties Suspension of registration Or (b) Cancellation of registration.

Slide 25: 

THANK YOU!