sebi act.ppt

7/28/2019 sebi act.ppt

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Guidelines for issuing commercial

paper

Commercial paper is one of the NON Bank

source of working capital finance.

The raising of funds through commercial

paper is regulated by the direction of reserve

bank of India.

The issue of commercial paper is regulated by

non- banking companies directions, 1989

which came into force on 1 January 1990.


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Issue of commercial paper

Tangible net worth is not less than 4 crore.

Fund based working capital is not less than rs.4crore.

Specified credit rating of P2-crisil

A2-icra

Pr2-care

Borrower health is classified under health codeno. 1 and

Current ratio is 1.33:1.


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Usance

Commercial paper can be issued for a

minimum period of three months and

maximum of one year.

No grace period is allowed for payment. If the

maturity date falls on a holiday it should be

paid on the previous working day.


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Denomination:

Commercial paper is issued in denomination

of 5 lakh. but the minimum lot is rs. 25 lakh.

The total amount proposed to be issued

should be raised within 2 weeks from the date

of the proposal is taken on record by the bank.


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Ceiling:

The aggregate amount that can be raised bycommercial paper should not exceed 75 percent

of the companys fund based working capital. Mode of issue and discount rate:

Commercial paper is issued should be in the formof promissory note and negotiable byendorsement and delivery.

It can be issued at discount rate.


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Issue expenses:

Issue expenses like dealers fees rating agency

fees and other relevant expenses should be

born by the company.

Investor:

Commercial paper can be issued to anyperson, banks, company, or other registered

corporate body and incorporated body.


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Procedure for the issue:

Company submit the proposal in the formprescribed by the RBI to the bank. The bank

scrutinize the application and on being satisfiedthat eligibility criteria has met place the issuewithin 2 weeks. The initial investor pay thediscounted value of the paper.

The company must advise RBI, through the bank,of the amount of commercial paper issued within3 days.


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Guidelines for issue of shares

I.First issue by a new company:

A. Manufacturing company:

1) Should be dividend company: a companyshould have a track record of distributable

profits for at least 3 out of 5 preceding year

and pre-issue net worth of not less than 1

crore in 3 out of preceding 5 years.


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2) IPO size and Pre-issue Net worth: if the

company had a record of profitability and net

worth as specified in guidelines then the

company would allowed to issue an IPO up to

5 times of the pre-issue Net worth.


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3) Minimum public offer by the IT, Media,

Entertainment and telecom companies:

IT- public offer should be at least of s. 50 crore

and offer at least 20 lakh securities.

Media, entertainment, telecom companies- the

size of public offer should not be less than rs.

5 crore.


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4) Infrastructure companies:

Infrastructure companies were exempted

from making a minimum public offer of 25 %

of its security, 5 shareholders per rs 1 lakh of

offer and a minimum subscription of 90%.


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B) Finance company:

Those who have a track record of 2 years of

operation or registered as a non-banking

finance company by the RBI are eligible to

issue the securities as per the guidelines.


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II First issue by new company set up by an

existing company:

New company set up by an existing company

with 5 years track record of consistent

profitability provided the participation of the

promoting company is not less than 50 % of

the equity of the new company.


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III Public issue by Existing Listed companies:

Existing listed companies can raise fresh capitalin the capital market. These companies are free

to price their new shares. if the banks are raising fresh capital at premium

then they have to satisfy the criteria of any 2years profitability for such issue.

Company have to indicate the high and low priceof its shares for the last two years in the offercontent.


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IV public issue by existing unlisted Public

company:

Existing unlisted company can enter in the

capital market only when it has to pay the

regular dividend in the immediately preceding

3 years out of 5 years.


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V. first issue by existing private company:

Companies without track record can price the

issue at par only. An unlisted company can

freely price its securities provided it earned

net profits in the immediately preceding 3

year.

Not less than 20 % of equity should be offered

to public.


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Draft prospectus will be vetted by SEBI toensure adequacy of disclosure.

Companies with track record of 3 year but

promoted by the company with 5 years trackrecord are free to price the issue.

Price would be determined by the issuer and

lead manager to the issue and have to disclosethe net asset value of the company as per thelatest audited balance sheet.


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Guidelines for Right issue

The company have to submit a draft letter of

offer to SEBI for vetting to obtain an

acknowledgement card to raise the capital on

right basis.

The company are not allowed to raise the

capital not more than 50 lakh on right basis

unless the category-1 merchant bankers hassubmitted the offer document to the SEBI.


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If the company does not receive the amount

of minimum subscription within 42 days from

the date of closure of the issue, the entire

amount of subscription has to be refunded

within next 8 days.

If company fails to refund within such period it

will pay interest for the delayed period.


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The merchant banker have to submit the draft

letter at least 6 weeks before its issue.

incorporate comments received from the SEBI

within 3 weeks of the receipt of the draft and

submit a copy of the letter of offer to the SEBI

within 2 week of issue.

Any statement of offer should not contravene

any provision of the company act.


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Guidelines for issue of Bonus Shares

The bonus shares should be out of freereserve built out of genuine profits.

No bonus share shall be made which will

dilute the value of right of the holders ofdebentures, convertible fully or partly.

A company which announce its bonus issue

after the approval of the board of directorsmust implement the proposal within a periodof 6 months from the date of such approval.


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All contingent liabilities disclosed in the

audited accounts which have bearing on the

net profits, shall be taken into account in the

calculation of the residual reserve.

The declaration of bonus in lieu of dividend is

not made.

The bonus is not made unless the partly paid

shares is not made fully paid up.


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Reservations and firm allotment:

The reservation should not exceed 75 % of the

total issue amount.

Reservation in issue of shares:

Permanent employees including directors of

the company and in case of new company the

permanent employees of the promoting

company- MPA is 10 %.


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Shareholders of the promoting companies in

case of new companies and in case of existing

company the shareholders of group company-

MPA is 10%.

Indian mutual funds on a competitive basis-

MPA is 20%.

Foreign institutional investors including NRIs

and OCB MPA is 30%.


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Firm allotment:

FII-30%

Fis-20%

Indian Mutual Funds-20%

Permanent regular employees-10%

Lead merchant banker- 5%


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Guidelines for preferential allotment

The guidelines laid down by the SEBI permit

the issuing company to make preferential

allotment by complying with the provision of

the companies act.

The allotment should be made at the market

value of shares.


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The market price shall be determined by the

average value of weekly high and low of the

closing prices during the preceding 6 months

or weekly high and low of the closing pricesduring the preceding 2 weeks whichever is

higher.


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SEBI allowed to listed companies to make

preferential allotment to FIIs.

SEBI has imposed a 5 year lock in period for

shares, warrants and debentures issued on

preferential basis.


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Employee stock option

ESOP is a voluntary scheme which encourageemployee participation in the company.

Guidelines:

The issue size under ESOP should not exceed5% of the paid up capital of the company inone year.

The company cant allot securities topromoters and the part-time director underESOP.


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A company introducing ESOP has to submit a

certificate to the concerned stock exchange

that the securities have been issued as per the

scheme to permanent regular employees.

The companies are free to devise the ESOP

including the terms of payment.


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Guidelines for book building

Book building is a method of issue of sharesbased on floor price which is indicated beforethe opening of bidding process.

Book building involves firm allotment of theinstrument to a syndicate or a merchantbanker.

The lead merchant banker or the syndicatemember of the issue will nominate as a bookrunner by the issuer company.


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The book runner has to circulate the copy of

the draft prospectus to be filed with SEBI and

among the instructional buyers who are

eligible for firm allotment.

sebi act.ppt

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