 OTC EXCHANGE OF INDIA CIRCULAR SEBI/CFD/DIL/DIP/25/2007/30/4 April 30, 2007 To
All Registered Merchant Bankers / Stock Exchanges Dear Sirs, Sub.:
Amendments to SEBI (Disclosure and Investor Protection) Guidelines,
2000. 1.
In exercise of the powers conferred under sub-section (1) of
Section 11 of the Securities and Exchange Board of India Act, 1992, it has
been decided to amend the SEBI (Disclosure and Investor Protection)
Guidelines, 2000 (hereinafter referred as “the Guidelines”). 2.
The full text of amendments are given in detail in
Annexure I and given in brief as under: 2.1
Processing of draft offer documents It is observed that many times, draft offer documents are
filed with SEBI with incomplete documentation, incomplete disclosures or
information which necessitates clarification from/ discussion with the Lead
Manager/s. SEBI issues observations on the draft offer documents so filed,
only after receipt of satisfactory replies from the Lead Manager/s to queries
raised, receipt of comments from regulators or other agencies where reference
has been so made and receipt of copies of in-principle approvals from all the
stock exchanges on which the issuer intends to list the securities proposed to
be offered through the prospectus. It has therefore been decided to amend the Guidelines to reflect
the aforementioned existing practice in the Guidelines. It has been decided to make grading of all IPOs mandatory.
The grading shall be done by credit rating agencies, registered with SEBI
under the SEBI (Credit Rating Agencies) Regulations, 1999. It shall be
mandatory to obtain grading from at least one credit rating agency. The issuer
shall be required to disclose all the grades obtained by it for its IPO in the
prospectus, abridged prospectus, issue advertisements and all other places
where the issuer is advertising for the IPO. Expenses incurred for grading of
IPO shall be borne by the issuer. 2.3 Guidelines
on preferential allotment At present, the provisions relating to pricing in
preferential allotment guidelines presuppose existence of listing history of
at least six months in a company proposing a preferential allotment. It has
been decided to amend the preferential allotment guidelines, so as to enable
companies with listing history of less than six months to raise money through
preferential allotment, subject to complying with the modified pricing and
disclosure norms. 2.4 Guidelines
on Qualified Institutions Placement (QIP) It has been decided to amend the eligibility criteria for a
company desirous of making a QIP. In addition to fulfilling other criteria
specified in the guidelines governing QIP, such company shall now be required
to have, a listing history of at least one year as on the date of issuance of
notice to its shareholders for convening a general meeting in terms of Section
81(1A) of the Companies Act, 1956 to consider the QIP. 2.5
Eligibility of pledged shares for computation of minimum
promoters’ contribution It has been decided to amend the Guidelines to provide that
securities which have been pledged with banks or financial institutions as
collateral security for loans granted by such banks or financial institutions
shall not be eligible for computation of minimum promoters’ contribution. 2.6
Miscellaneous It has also been decided to bring more clarity to the
provisions pertaining to eligibility of shares for promoters’ contribution
and incorporate the new addresses of SEBI offices at relevant places in the
Guidelines. 3.
Applicability 3.1
The amendments made vide this circular shall be applicable as under: a.
Amendments to clauses 2.0, 2.1.1, 2.1.2, 4.0, 4.6.1(ii), 4.6.2, 4.6.4A,
4.15.1, 5.6.1, 5.8.1 and 11.3.1(x) shall be applicable to all draft offer
documents on which observations are issued by SEBI on or after the date of the
circular; b.
Amendments to clauses 2.5A, 5.6B, 6.4.2.2(a)(x-a), 6.8.2.9A, 6.17.3A,
Schedule VIIA and Schedule XX-A shall be applicable to all draft offer
documents filed with SEBI after the date of the circular. c.
All amendments other than those specified in para (3.1) (a) and (3.1)
(b) above shall come into force with immediate effect. (i.e. 13.1.1.1,
13.1.1.2, Explanation to clauses 13.1.1.1 and 13.1.1.2, 13.1A, Proviso
inserted after 13.3.1(e), 13.7.2, 13A.1.1(a), Schedule XXII) 4.
This circular is available on SEBI website at www.sebi.gov.in
under the category “Legal Framework”. The entire text of the SEBI (DIP)
Guidelines, 2000, including the amendments issued vide this circular, is
available on the SEBI website under the categories “Legal Framework” and
“Issues and Listing”. 5.
All registered merchant bankers are directed to ensure
compliance with the applicable amendments made vide this circular. 6.
All stock exchanges are advised to bring to the notice of all
the listed companies, amendments mainly pertaining to preferential allotment
and QIP, made vide this circular. Yours faithfully, Neelam Bhardwaj Encl.:
Annexure I 2
ANNEXURE I AMENDMENTS
TO SEBI (DIP) GUIDELINES, 2000 CHAPTER
II ELIGIBILITY
NORMS FOR COMPANIES ISSUING SECURITIES 1.
In Clause 2.0, the words “, unless specified otherwise in the
Chapter” shall be inserted after the words “filing the draft offer
document with SEBI” and before the words “and also at the time of filing
the final offer document”. 2.
For clause 2.1.1, the
following clause shall be substituted, namely:- “2.1.1
No issuer company shall make any public issue of securities, unless a draft
Prospectus has been filed with the Board through a Merchant Banker, at least
30 days prior to the filing of the Prospectus with the Registrar of Companies
(ROC): Provided
that if the
Board specifies changes or issues observations
on the draft Prospectus (without being under any obligation to do so),
the issuer company or the Lead Manager to the Issue shall carry out such
changes in the draft Prospectus or comply with the observations issued by the
Board before filing the Prospectus with ROC. Provided
further that the
period within which the Board may specify changes or issue observations, if
any, on the draft Prospectus shall be 30 days from the date of receipt of the
draft Prospectus by the Board. Provided
further that
where the Board has sought any clarification or additional information from
the Lead Manager/s to the Issue, the period within which the Board may specify
changes or issue observations, if any, on the draft Prospectus shall be 15
days from the date of receipt of satisfactory reply from the Lead Manager/s to
the Issue. Provided
further that where
the Board has made any reference to or sought any clarification or additional
information from any regulator or such other agencies, the Board may specify
changes or issue observations, if any, on the draft Prospectus after receipt
of comments or reply from such regulator or other agencies. Provided
further that the
Board may specify changes or issue observations, if any, on the draft
Prospectus only after receipt of copy of in-principle approval from all the
stock exchanges on which the issuer company intends to list the securities
proposed to be offered through the Prospectus.” 3.
For clause 2.1.2, the
following clause shall be substituted, namely:- “2.1.2
No listed issuer company shall make any rights issue of securities, unless a
draft letter of offer has been filed with the Board, through a Merchant
Banker, at least 30 days prior to the filing of the letter of offer with the
Designated Stock Exchange (DSE). Provided
that if the
Board specifies changes or issues observations on the draft Letter of Offer
(without being under any obligation to do so), the issuer company or the Lead
Manager to the Issue shall carry out such changes in the draft Letter of Offer
or comply with the observations issued by the Board before filing the Letter
of Offer with DSE. Provided
further that the
period within which the Board may specify changes or issue observations, if
any, on the draft Letter of Offer shall be 30 days from the date of receipt of
the draft Letter of Offer by the Board. Provided
further that
where the Board has sought any clarification or additional information from
the Lead Manager/s to the Issue, the period within which the Board may specify
changes or issue observations, if any, on the draft Letter of Offer shall be
15 days from the date of receipt of satisfactory reply from the Lead Manager/s
to the Issue. Provided
further that where
the Board has made any reference to or sought any clarification or additional
information from any regulator or such other agencies, the Board may specify
changes or issue observations, if any, on the draft Letter of Offer after
receipt of comments or reply from such regulator or other agencies . Provided
further that the
Board may specify changes or issue observations, if any, on the draft Letter
of Offer only after receipt of copy of in-principle approval from all the
stock exchanges on which the issuer company intends to list the securities
proposed to be offered through the Letter of Offer.” 4.
After clause 2.5, the following new clause shall be inserted, namely:- “2.5A
IPO Grading 2.5A.1
No unlisted company shall make an IPO of equity shares or any other
security which may be converted into or exchanged with equity shares at a
later date, unless the following conditions are satisfied as on the date of
filing of Prospectus (in case of fixed price issue) or Red Herring Prospectus
(in case of book built issue) with ROC: (i)
the unlisted company has obtained grading for the IPO from at least one
credit rating agency; (ii)
disclosures of all the grades obtained, along with the rationale/
description furnished by the credit rating agency(ies) for each of the grades
obtained, have been made in the Prospectus (in case of fixed price issue) or
Red Herring Prospectus (in case of book built issue); and (iii)
the expenses incurred for grading IPO have been borne by the unlisted
company obtaining grading for IPO.” CHAPTER
IV PROMOTERS’
CONTRIBUTION AND LOCK-IN REQUIREMENTS PART
I – PROMOTERS’ CONTRIBUTION 5.
The following words shall be inserted in clause 4.0 after the words
“the following provisions”, namely:- “as on the date of filing of draft offer document with SEBI,
unless specified otherwise in this Part ” 6.
In sub-clause (ii) of clause 4.6.1, the following words shall be
inserted after the words “without accrual of cash resources “, namely:- ” or against shares which are otherwise ineligible for
computation of promoters’ contribution” 7.
In clause 4.6.2, for the words “issued to” appearing after the
words “securities which have been” and before the words “the promoters
during the preceding one year”, the words “acquired by” shall be
substituted. 8.
After 1st proviso to clause 4.6.2, the following proviso shall be
inserted to clause 4.6.2, namely:- “Provided further that nothing contained in clause
4.6.2 shall apply to shares acquired by promoters interse, if such shares had
been acquired by the transferor promoter during the preceding one year at a
price equal or higher than the price at which equity is being offered to
public or had been acquired by the transferor promoter prior to the preceding
one year.” 9.
After clause 4.6.4, the following clause shall be inserted, namely:- “4.6.4A
Pledged securities held by promoters shall not be eligible for
computation of promoters’ contribution.” PART
III - OTHER REQUIREMENTS IN RESPECT OF LOCK-IN 10.
After clause 4.15.1, the following proviso shall be inserted to clause
4.15.1, namely:- “Provided that if securities are locked in as
minimum promoters’ contribution under clause 4.11.1, the same may be
pledged, only if, in addition to fulfilling the requirements of this clause,
the loan has been granted by such banks or financial institutions for the
purpose of financing one or more of the objects of the issue.” CHAPTER
V PRE-
ISSUE OBLIGATIONS 11.
In clauses 5.6.1 and 5.8.1, for the figures and words “21 days”,
the figures and words “30 days” shall be substituted. 12.
For clause 5.6B, the following clause shall be substituted, namely:- “5.6B
IPO Grading 5.6B.1
Every unlisted company obtaining grading for IPO under clause 2.5A.1
shall disclose all the grades obtained, along with the rationale/ description
furnished by the credit rating agency(ies) for each of the grades obtained, in
the Prospectus, Abridged Prospectus, issue advertisements and at all other
places where the issuer company is advertising for the IPO.” CHAPTER
VI CONTENTS
OF OFFER DOCUMENT SECTION
I - CONTENTS OF THE PROSPECTUS 13.
In sub-clause (a) of clause 6.4.2.2, for item (x-a), the following item
shall be substituted, namely:- “(x-a)
Disclosure under the heading “IPO Grading”, stating all the grades
obtained for the IPO and giving reference to the page number(s) on which
details of IPO Grading, as provided for in clause 6.8.2.9A, are given.” 14.
In sub-clause (a) of clause 6.8.2.9A, – ,(a)
for the words “Name of the credit rating agency”, the words “Names
of all the credit rating agencies” shall be substituted. (b)
the words “and the grading so obtained, including unaccepted
grades” shall be omitted. 15.
For sub-clause (b) of clause 6.8.2.9A, the following sub-clause shall
be substituted, namely:- “(b) Disclosure
of all the grades obtained from the credit rating agencies.” SECTION
II - CONTENTS OF ABRIDGED PROSPECTUS 16.
For clause 6.17.3A, the following clause shall be substituted, namely:- “6.17.3A Disclosure
under the heading “IPO Grading”, stating all the grades obtained for the
IPO, along with the rationale/ description furnished by the credit rating
agency(ies) for each of the grades obtained.” CHAPTER
XI GUIDELINES
ON BOOK BUILDING 17.
In clause 11.3.1, sub-clause (x) shall be omitted. CHAPTER
XIII GUIDELINES FOR PREFERENTIAL
ISSUES 18.
For the opening para of clause 13.1.1.1, the following para shall be
substituted, namely:- “Where the equity shares of a company have been listed on a
stock exchange for a period of six months or more as on the relevant date, the
issue of shares on preferential basis shall be made at a price not less than
higher of the following:”
19.
After clause 13.1.1.1 and before the Explanation given under clause
13.1.1.1, the following clause shall be inserted, namely:- “13.1.1.2
Where the equity shares of a company have been listed on a stock
exchange for a period of less than six months as on the relevant date, the
issue of shares on preferential basis can be made at a price not less than the
higher of the following: i)
The price at which shares were issued by the company in its IPO or the
value per share arrived at in a scheme of arrangement under sections 391 to
394 of the Companies Act, 1956, pursuant to which the shares of the company
were listed, as the case may be; OR ii)
The average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchange during the period shares have been
listed preceding the relevant date; OR iii)
The average of the weekly high and low of the closing prices of the
related shares quoted on a stock exchange during the two weeks preceding the
relevant date. Provided
that on
completing a period of six months of being listed on a stock exchange, the
company shall recompute the price of the shares in accordance with the
provisions mentioned in sub-clause (i) of clause 13.1.1.1 and if the price at
which shares were allotted on a preferential basis under clause 13.1.1.2 was
lower than the price so recomputed, the difference shall be paid by the
allottees to the company.” 20.
In the Explanation appearing after clause 13.1.1.2 inserted as above, - (a)
in clauses (a) and (b), for the words “for the purpose of this
clause”, the words “for the purpose of clauses 13.1.1.1 and 13.1.1.2”
shall be substituted. (b)
In clause (a), at the end, after the words “to consider the proposed
issue” and before the full stop, the following words shall be inserted,
namely:- “;
provided however that in respect of shares issued on preferential basis
pursuant to a scheme approved under the Corporate Debt Restructuring framework
of Reserve Bank of India, the date of approval of the Corporate Debt
Restructuring package shall be the relevant date”. 21.
In clause 13.1A, after sub-clause (v), the following sub-clause shall
be inserted, namely:- “vi.
in case of a preferential allotment to which clause 13.1.1.2 is
applicable, requirements specified in proviso to clause 13.1.1.2 and proviso
mentioned after sub-clause (e) of clause 13.3.1.” 22.
In clause 13.3.1, after clause (e), the following proviso shall be
inserted, namely:- “Provided that where any amount payable by the allottee of shares under the
proviso to clause 13.1.1.2 is not paid till the expiry of lock-in period
mentioned in sub-clauses (a) to (e) above, lock-in period in respect of the
shares issued to such allottee shall continue till the time the company
receives such amount from such allottee.” 23.
After clause 13.7.1, the following clause shall be inserted,
namely:-: “13.7.2
Clauses 13.1 and 13.3 shall not be applicable to shares allotted to any
financial institution within the meaning of sub-clauses (ia) and (ii) of
clause (h) of section 2 of the Recovery of Debts due to Banks and Financial
Institutions Act, 1993 (51 of 1993).” CHAPTER
XIII-A GUIDELINES
FOR QUALIFIED
INSTITUTIONS PLACEMENT 24.
In clause 13A.1.1, for sub-clause (a), the following shall be
substituted, namely:- “(a)
its equity shares of the same class were listed on a stock exchange
having nation wide trading terminals for a period of at least one year as on
the date of issuance of notice to its shareholders for convening the meeting
referred to in Explanation (a) to clause 13A.3.1; and” SCHEDULE
VIIA ORDER
OF PRESENTATION OF DISCLOSURES IN PROSPECTUS 25.
In Schedule VIIA, - (a)
under the sub-heading “Issue Details” appearing under the heading
“Front Cover Pages”, the following item shall be inserted after item (i),
namely:- “(i-a)
IPO Grading.” (b)
under the sub-heading “General Information” appearing under the
heading “Introduction”, the following item be inserted after item (ix),
namely:- “(ix-a)
IPO Grading.” SCHEDULE
XX-A FORMATS
OF ISSUE ADVERTISEMENTS 26.
In Parts A, B and C of Schedule XX-A, the words “IPO GRADING”
shall be inserted after the information about “Debenture Trustees” and
before the information about “Availability of Application Forms”. SCHEDULE
XXII [Clause 16.1.1(b),
16.2.3.1, 16.2.4.3] JURISDICTION OF REGIONAL
OFFICES/ HEAD OFFICE OF THE BOARD 27.
In Schedule XXII, the Northern Region and Eastern Region addresses of
SEBI offices shall be substituted by the following, namely:- Northern Region –
“5th Floor, Bank of Baroda Building, 16,
Sansad Marg, New
Delhi - 110 001.” Eastern Region – “3rd
Floor, 16 Camac Street, Kolkata
- 700 017.” 28.
In Schedule XXII, the following address shall be inserted in the list
of Head Office addresses of SEBI offices, namely:- Head Office –
“3) Plot No.C4-A, 'G' Block, Bandra
Kurla Complex, Bandra (East), Mumbai - 400051.”
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