IPO & New Listing

Initial Public Offering (IPO)

Initial Public Offer (IPO) is a process through which an unlisted Company can be listed on the stock exchange by offering its securities to the public in the primary market. The object of an IPO may be relating to expansion of existing activities of the Company or setting up of new projects or any other object as may be specified by the Company in its offer document or just to get its existing equity shares listed by diluting the stake of existing equity shareholders through offer for sale.

New Listing

New Listing is a process through which a company which is already listed on other stock exchange/s approaches the Exchange for listing of its equity shares. The companies fulfilling the eligibility criteria prescribed by the Exchange; from time to time; are listed on the Exchange.

Qualifications for listing Initial Public Offerings (IPO) are as below:

i.                Paid up Capital

The paid up equity capital of the applicant shall not be less than   10 crores * and the capitalisation of the applicant's equity shall not be less than   25 crores**

* Explanation

1 For this purpose, the post issue paid up equity capital for which listing is sought shall be taken into account.

** Explanation

2 For this purpose, capitalisation will be the product of the issue price and the post issue number of equity shares. In respect of the requirement of paid-up capital and market capitalisation, the issuers shall be required to include, in the disclaimer clause of the Exchange required to put in the offer document, that in the event of the market capitalisation (Product of issue price and the post issue number of shares) requirement of the Exchange not being met, the securities would not be listed on the Exchange.

ii.        Conditions Precedent to Listing:

The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

iii.        Atleast three years track record of either:

·         the applicant seeking listing; or

·         the promoters****/promoting company, incorporated in or outside India or

·         Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing. The Company subsequently formed would be considered for listing only on fulfillment of conditions stipulated by SEBI in this regard.

For this purpose, the applicant or the promoting company shall submit annual reports of three preceding financial years to NSE and also provide a certificate to the Exchange in respect of the following:

·         The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).

·         The networth of the company has not been wiped out by the accumulated losses resulting in a negative networth

·         The company has not received any winding up petition admitted by a court.

****Promoters mean one or more persons with minimum 3 years of experience of each of them in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally.

   iv.         The applicant desirous of listing its securities should satisfy the exchange on the following:

·         No disciplinary action by other stock exchanges and regulatory authorities in past three years

There shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company. In respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company, there shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year.

·         Redressal Mechanism of Investor grievance

The points of consideration are:

  i.        The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances

        ii.        The applicant's arrangements envisaged are in place for servicing its investor.

       iii.        The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) general approach and philosophy to the issue of investor service and protection

       iv.        defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) shall also be considered while evaluating a company's application for listing. The auditor's certificate shall also be obtained in this regard. In case of defaults in such payments the securities of the applicant company may not be listed till such time it has cleared all pending obligations relating to the payment of interest and/or principal.

·         Distribution of shareholding

The applicant's/promoting company(ies) shareholding pattern on March 31 of last three calendar years separately showing promoters and other groups' shareholding pattern should be as per the regulatory requirements.

·         Details of Litigation

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, status of litigation during the preceding three years period need to be clarified to the exchange.

·         Track Record of Director(s) of the Company

In respect of the track record of the directors, relevant disclosures may be insisted upon in the offer document regarding the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences etc.

Note:
a) In case a company approaches the Exchange for listing within six months of an IPO, the securities may be considered as eligible for listing if they were otherwise eligible for listing at the time of the IPO. If the company approaches the Exchange for listing after six months of an IPO, the norms for existing listed companies may be applied and market capitalisation be computed based on the period from the IPO to the time of listing.

For Securities of Existing companies

i.                Paid up Capital & Market Capitalisation

·         The paid-up equity capital of the applicant shall not be less than   10 crores * and the market capitalisation of the applicant's equity shall not be less than   25 crores**

Provided that the requirement of   25 crores market capitalisation under this clause 1(a) shall not be applicable to listing of securities issued by Government Companies, Public Sector Undertakings, Financial Institutions, Nationalised Banks, Statutory Corporations and Banking Companies who are otherwise bound to adhere to all the relevant statutes, guidelines, circulars, clarifications etc. that may be issued by various regulatory authorities from time to time.

or

·         The paid-up equity capital of the applicant shall not be less than   25 crores * (In case the market capitalisation is less than   25 crores, the securities of the company should be traded for at least 25% of the trading days during the last twelve months preceding the date of submission of application by the company on at least one of the stock exchanges where it is traded.)

or

·         The market capitalisation of the applicant's equity shall not be less than   50 crores. **

or

·         The applicant Company shall have a net worth of not less than   50 crores in each of the three preceeding financial years. The Company shall submit a certificate from the statutory auditors in respect of networth as stipulated above***.

* Explanation 1 For this purpose the existing paid up equity capital as well as the paid up equity capital after the proposed issue for which listing is sought shall be taken into account.

** Explanation 2 The market capitalisation shall be calculated by using a 12 month moving average of the market capitalisation over a period of six months immediately preceding the date of application. For the purpose of calculating the market capitalisation over a 12 month period, the average of the weekly high and low of the closing prices of the shares as quoted on the National Stock Exchange during the last twelve months and if the shares are not traded on the National Stock Exchange such average price on any of the recognised Stock Exchanges where those shares are frequently traded shall be taken into account while determining market capitalisation after making necessary adjustments for Corporate Action such as Rights / Bonus Issue/Split.

*** Explanation 3 Networth means Paid up equity capital + Free Reserves i.e. reserve, the utilization of which is not restricted in any manner may be taken into consideration excluding revaluation reserves – Miscellaneous Expenses not written off – Balance in profit and loss account to the extent not set off.

 ii.        Conditions Precedent to Listing:

The applicant shall have adhered to conditions precedent to listing as emerging from inter-alia, Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

iii.        Atleast three years track record of either:

·         the applicant seeking listing; or

·         the promoters****/promoting company, incorporated in or outside India or

For this purpose, the applicant or the promoting company shall submit annual reports of three preceding financial years to NSE and also provide a certificate to the Exchange in respect of the following:

·         The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR)

·         The networth of the company has not been wiped out by the accumulated losses resulting in a negative networth.

·         The company has not received any winding up petition admitted by a court.

**** Promoters mean one or more persons with minimum 3 years of experience of each of them in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally.

   iv.         The applicant should have been listed on any other recognized Stock Exchange Listed for atleast last three years or listed on the exchange having nationwide trading terminals for at least one year.

    v.          

vi.        The applicant has paid dividend in atleast 2 out of the last 3 financial years immediately preceding the year in which listing application has been made

or

The applicant has distributable profits ( as defined under section 205 of the Companies Act, 1956) in at least two out of the last three financial years (an auditors certificate must be provided in this regard).

or

The networth of the applicant is atleast   50 crores******

While considering the profitability / ability to distribute dividend, the non recurring income/extraordinary income shall be excluded from the total income. Further in case of companies where networth criteria is satisfied on account of shares being issued at a premium for consideration other than cash, such cases be referred to the Listing Advisory Committee (LAC) for consideration.

*** Explanation 4.

Networth means: Paid up equity capital plus Reserves excluding revaluation reserve minus Miscellaneous Expenses not written off minus balance in profit and loss account to the extent not set off

"Provided that Clause 4 and Clause 5 shall not be applicable for listing of:

·         Equity shares and securities convertible into equity issued by

  i.        a banking company including a local area bank (i.e. Private Sector Banks) set up under sub-clause (c) of Section 5 of the Banking Regulation Act, 1949 and which has received license from the Reserve Bank of India or

        ii.        a corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, State Bank of India Act, 1955 and the State Bank of India (Subsidiary Banks) Act, 1959 (i.e. Public Sector Banks) or

       iii.        an infrastructure company – (a) whose project has been appraised by a Public Financial Institution or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financial Services Limited (IL&FS) and (b) not less than 5% of the project cost is financed by any of the institutions referred to in clause (a) above, jointly or severally, irrespective of whether they appraise the project or not, by way of loan or subscription to equity or a combination of both.

·         Securities other than equity shares or securities convertible into equity shares at a later date issued by Government Companies, Public Sector Undertakings, Financial Institutions, Nationalised Banks, Statutory Corporations, Banking Companies and subsidiaries of Scheduled Commercial Banks."

vii.        The applicant desirous of listing its securities should also satisfy the Exchange on the following:

No Disciplinary action has been taken by other stock exchanges and regulatory authorities in the past three years

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) have not been in default in payment of listing fees to any stock exchange in the last three years or has not been delisted or suspended in the past and has not been proceeded against by SEBI or other regulatory authorities in connection with investor related issues or otherwise.

Redressal mechanism of Investor grievance

The points of consideration are:

·         The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances

·         The applicant’s arrangements envisaged are in place for servicing its investor

·         The applicant, promoters’/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) general approach and philosophy to the issue of investor service and protection

·         defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) shall also be considered while evaluating a company’s application for listing. The auditor’s certificate shall also be obtained in this regard. In case of defaults in such payments, the securities of the applicant company may not be listed till such time it has cleared all pending obligations relating to the payment of interest and/or principal.

Distribution of shareholding

The applicant company/promoting company(ies) shareholding pattern on March 31 of preceding three years separately showing promoters and other groups’ shareholding pattern should be as per the regulatory requirements.

Details of Litigation

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, status of litigation during the preceding three years need to be clarified to the exchange.

Track Record of Director(s) of the Company

In respect of the track record of the directors, relevant disclosures may be insisted upon in the offer document regarding the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge-sheeted with serious crimes.

Change in Control of a Company/Utilisation of funds raised from public

In the event of new promoters taking over listed companies which results in change in management and/or companies utilising the funds raised through public issue for the purposes other than those mentioned in the offer document, such companies shall make additional disclosures (as required by the Exchange) with regard to change in control of a company and utilisation of funds raised from public.

Note:

Where an unlisted company merges with a company listed on other stock exchanges and the merged entity seeks listing on the NSE, the Exchange may grant listing to the merged entity only if the listed company (prior to the merger with the unlisted company) meets all the criteria for listing on its own account or the unlisted company meets the requirements for listing on the Exchange, except for the market capitalisation condition, on its own account. In case either of the above conditions are not met then such company may be considered for listing after a minimum period of 18 months or more or after the publication of two annual reports whichever is later, provided it satisfies the criteria at that point of time.

Process

An Issuer has to take various steps prior to making an application for listing its securities on the NSE. These steps are essential to ensure the compliance of certain requirements by the Issuer before listing its securities on the NSE. The various steps to be taken include:

Submission of Memorandum and Articles of Association

Rule 19(2) (a) of the Securities Contracts (Regulation) Rules, 1957 requires that the Articles of Association of the Issuer wanting to list its securities must contain provisions as given hereunder.

The Articles of Association of an Issuer shall contain the following provisions namely:

i.                that there shall be no forfeiture of unclaimed dividends before the claim becomes barred by law;

ii.        that a common form of transfer shall be used;

iii.        that fully paid shares shall be free from all lien and that in the case of partly paid shares the Issuer's lien shall be restricted to moneys called or payable at a fixed time in respect of such shares;

iv.        that registration of transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person or persons indebted to the Issuer on any account whatsoever;

v.        that any amount paid up in advance of calls on any share may carry interest but shall not in respect thereof confer a right to dividend or to participate in profits;

vi.        that option or right to call of shares shall not be given to any person except with the sanction of the Issuer in general meetings.

vii.        permission for Sub-Division/Consolidation of Share Certificate.

Note: The Relevant Authority may take exception to any provision contained in the Articles of Association of an Issuer which may be deemed undesirable or unreasonable in the case of a public company and may require inclusion of specific provisions deemed to be desirable and necessary.

If the Issuer's Articles of Association is not in conformity with the provisions as stated above, the Issuer has to make amendments to the Articles of Association. However, the securities of an Issuer may be admitted for listing on the NSE on an undertaking by the Issuer that the amendments necessary in the Articles of Association to bring Articles of Association in conformity with Rule 19(2)(a) of the Securities Contract (Regulation) Rules, 1957 shall be made in the next annual general meeting and in the meantime the Issuer shall act strictly in accordance with prevalent provisions of Securities Contract (Regulation) Act, 1957 and other statutes.

It is to be noted that any provision in the Articles of Association which is not in tune with sound corporate practice has to be removed by amending the Articles of Association.

Approval of draft prospectus

The Issuer shall file the draft prospectus and application forms with NSE. The draft prospectus should have been prepared in accordance with the statutes, notifications, circulars, guidelines, etc. governing preparation and issue of prospectus prevailing at the relevant time. The Issuers may particularly bear in mind the provisions of Companies Act, Securities Contracts (Regulation) Act, the SEBI Act and the relevant subordinate legislations thereto. NSE will peruse the draft prospectus only from the point of view of checking whether the draft prospectus is in accordance with the listing requirements, and therefore any approval given by NSE in respect of the draft prospectus should not be construed as approval under any laws, rules, notifications, circulars, guidelines etc. The Issuer should also submit the SEBI acknowledgment card or letter indicating observations on draft prospectus or letter of offer by SEBI.

Submission of Application

For Issuers listing on NSE for the first time

Issuers desiring to list existing/new securities on the NSE shall make application for admission of their securities to dealings on the NSE in the forms prescribed in this regard as per details given hereunder or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof.

Appendix 'A' - Clauses of Articles of Association.
Appendix 'B'- Application Letter for Listing.
Appendix 'C-1' - Listing Application providing pre-issue details of securities.
Appendix 'C-2' - Listing Application providing post-issue details of securities.
Appendix 'D'- Checklist for supporting documents ( as applicable to the issuer)
Appendix 'E' - Schedule of Distribution
Appendix 'F'- Listing Agreement

Listing of further Issues by Issuers already listed on NSE

Issuers whose securities are already listed on the NSE shall apply for admission to listing on the NSE of any further issue of securities made by them. The application for admission shall be made in the forms prescribed in this regard or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof.

Appendix 'E' - Schedule of Distribution.
Appendix 'G'- Application Letter for Listing of further issues.
Appendix 'H' - Listing Application providing details of securities.
Appendix 'I' - Checklist for supporting documents submitted (as applicable).

Security Deposit

(Payable only for new and fresh issues and only when NSE is the Regional Stock Exchange)

The Relevant Authority shall not grant admission to dealings of securities of an Issuer which is not listed or of any new (original or further) issue of securities of an Issuer excepting Mutual Funds, which is listed on the NSE unless the Issuer deposits and keeps deposited with the NSE (in cases where the securities are offered for subscription, whether through the issue of a prospectus, letter of offer or otherwise, and NSE is the Regional Stock Exchange for the Issuer) an amount calculated at 1% of the amount of securities offered for subscription to the public and or to the holders of existing securities of the Issuer, as the case may be for ensuring compliance by the Issuer within the prescribed or stipulated period of all requirements and conditions hereinafter mentioned and shall be refundable or forfeitable in the manner hereinafter stated:

·         The Issuer shall comply with all prevailing requirements of law including all requirements of and under any notifications, directives and guidelines issued by the Central Government, SEBI or any statutory body or local authority or any body or authority acting under the authority or direction of the Central Government and all prevailing listing requirements and conditions of the NSE and of each recognized Stock Exchange where the Issuer has applied for permission for admission to dealings of the securities, within the prescribed or stipulated period;

·         If the Issuer has complied with all the aforesaid requirements and conditions including, wherever applicable, its obligation under Section 73 (or any statutory modification or re-enactment thereof) of the Companies Act, 1956 and obligations arising therefrom, within the prescribed or stipulated period, and on obtaining a No Objection Certificate from SEBI and submitting it to NSE , NSE shall refund to the Issuer the said deposit without interest within fifteen days from the expiry of the prescribed or stipulated period;

·         If on expiry of the prescribed or stipulated period or the extended period referred to hereafter, the Issuer has not complied with all the aforesaid requirements and conditions, the said deposit shall be forfeited by the NSE, at its discretion, and thereupon the same shall vest in the NSE. Provided the forfeiture shall not release the Issuer of its obligation to comply with the aforesaid requirements and conditions;

·         If the Issuer is unable to complete compliance of the aforesaid requirements and conditions within the prescribed or stipulated period, the NSE, at its discretion and if the Issuer has shown sufficient cause, but without prejudice to the obligations of the Issuer under the laws in force to comply with any such requirements and conditions within the prescribed or stipulated period, may not forfeit the said deposit but may allow such further time to the Issuer as the NSE may deem fit; provided that

  i.        the Issuer has at least ten days prior to expiry of the prescribed or stipulated period applied in writing for extension of time to the NSE stating the reasons for non-compliance, and

 ii.        the Issuer, having been allowed further time by the NSE, has before expiry of the prescribed or stipulated period, published in a manner required by the NSE, the fact of such extension having been allowed; provided further that where the NSE has not allowed extension in writing before expiry of the prescribed or stipulated period, the request for extension shall be deemed to have been refused; provided also that any such extension shall not release the Issuer of its obligations to comply with the aforesaid requirements and conditions.

·         50% of the above mentioned security deposit should be paid to the NSE in cash. The balance amount can be provided by way of a bank guarantee, in the format prescribed by or acceptable to NSE. The amount to be paid in cash is limited to Rs.3 crores.

Supporting Documents

·         Documents and Information

·         The documents and information prescribed in Appendix D or Appendix I (as the case may be) to this Regulation or such other documents and information as the Relevant Authority may from time to time prescribe, in addition thereto or in modification or substitution thereof together with any other documents and information which the Relevant Authority may require in any particular case;

·         Distribution Schedules
Distribution Schedules duly completed in respect of each class and kind of security in the form prescribed in Appendix E (Table I, II & III) to this Regulation or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof.

·         The listing fee applicable from April 1, 2011 is as follows:

Particulars	Amount (   )
Initial Listing Fees	50,000
Annual Listing Fees (based on paid up share, bond and/or debenture capital) Upto  5 Crore	18,000
Above   5 Crore and upto   10 Crores	31,500
Above   10 Crore and upto   20 Crores	57,500
Above   20 Crore and upto   30 Crores	90,000
Above   30 Crore and upto   40 Crores	1,00,000
Above   40 Crore and upto   50 Crores	1,05,000
Above   50 Crores and upto   100 Crores	1,75,000
Above   100 Crore and upto   150 Crores	2,00,000
Above   150 Crore and upto   200 Crores	2,40,000
Above   200 Crore and upto   250 Crores	2,75,000
Above   250 Crore and upto   300 Crores	3,10,000
Above   300 Crore and upto   350 Crores	3,40,000
Above   350 Crore and upto   400 Crores	3,75,000
Above   400 Crore and upto   450 Crores	4,35,000
Above   450 Crore and upto   500 Crores	5,00,000

·         Companies which have a paid up share, bond and/or debenture and/or debt capital, etc of more than   500 crores will have to pay a minimum fees of   5,00,000/- and an additional listing fees of   3,400/- for every increase of   5 crores or part thereof in the paid up share, bond and/ debenture and/or debt capital etc.

·         Companies which have a paid up share, bond and/or debenture and/or debt capital, etc. of more than   1,000 crores will have to pay minimum fees of   8,50,000/- and an additional listing fees of   3,700/- for every increase of   5 crores or part thereof in the paid up share, bond and/or debenture and/or debt capital etc.

·         The listing fees depend on the paid up share capital of the Company.

·         Please draw your Cheques/Demand Drafts favouring National Stock Exchange of India Limited payable at Mumbai.