a) The issuer shall stipulate in the offer document, the minimum application size in terms of number of specified securities which shall fall within the range of minimum application value of Ten thousand rupees to Fifteen thousand rupees.
b) The issuer shall invite applications in multiples of the minimum application value.
c) The minimum sum payable on application shall not be less than 25% of the issue price Provided that in case of an offer for sale, the issue price payable for each specified security shall be brought in at the time of application.
A. Reservation
The expression 'reservation' shall mean reservation on competitive basis wherein allotment of shares is made in proportion to the shares applied for by the concerned reserved categories.
I.P.O
(Fixed Price Method)
Reservation on competitive basis can be made in Initial Public Offering (Fixed Price Method) to the following categories :
(a) employees and in the case of new issuer, persons who are in the permanent and full-time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies;
(b) shareholders (other than promoters) of:
(i) listed promoting companies, in the case of a new issuer; and (ii) listed group companies. in the case of an existing issuer. I.P.O (Book
Building Method)
Reservation on competitive basis can be made in Initial Public Offering (Book Building Method) to the following categories:
(a) employees; and in the case of new issuer;·person who are in the permanent and full-time employment of the promoting companies excluding the others and an immediate relative of the promoter of such companies;
(b) shareholders (other than promoters) of: --
(i) listed promoting companies, in the case of a new issuer; and (ii) listed group companies, in the case of an existing issuer.
(c) persons who as on the date of filing the draft offer document with the Board, are associated with the issuer as depositors, bondholders or subscribers to services of the issuer making an initial public offer.
F.P.O (Fixed Price as well as Book Building Method)
Reservation on competitive basis can be made in Further Public Offering (Fixed Price as well as Book Building Method) in favour of retail individual shareholders of the issuer. Retail Individual Shareholder" means a shareholder of a listed issuer. who:
(i) as on the date fixed for the purpose of determining shareholders eligible for reservation, is holding equity shares which. on the basis of the closing price of the equity shares on the recognised stock exchange in which highest trading volume in respect of the equity shares of the issuer was recorded as on the previous day, are worth up to two lakh rupees; and
(ii) applies or bids for specified securities for a value of not more than two lakh rupees.
Reservation on
competitive basis
The reservation on competitive basis shall be subject to following conditions: (a) the aggregate of reservations for employees shall not exceed 5% of the post-
issue capital;
(b) reservation for shareholders shall not exceed 10% of the issue size;
(c) reservation for persons who as on the date of filing the draft offer document with the SEBI, have business association as depositors, bondholders and subscribers to services with the issuer making an initial public offer shall not exceed 5% of the issue size;
(d) no further application for subscription in the net offer to public category shall be entertained from any person (except an employee and retail individual shareholder) in favour of whom reservation on competitive basis is made;
(e) any unsubscribed portion in any reserved category may be added to any other reserved category and the unsubscribed portion, if any, after such inter-se adjustments among the reserved categories shall be added to the net offer to the public category;
(f) in case of under-subscription in the net offer to the public category, spill-over to the extent of under-subscription shall be permitted from the reserved category to the net public offer category;
SEBI (ICDR) REGULATION, 2009 N.K.SINGH 9818248595 011-65568595 4.18 (g) value of allotment to any employee shall not exceed Rs. 1 lac.
Here 'new issuer' means an issuer which has not completed 12 months of commercial operation and its audited operative results are not available.
Net offer to Public
Unlisted Company: It shall be minimum 25% of the post-issue capital. Listed Company: It shall be minimum 25% of the issue size.
It may be noted that the aforesaid percentages will be changed to 10%, if a company comes out with a public issue in terms of Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957.
It may further be noted that 'Net Offer to the Public' is also known as 'Condition for Initial Listing'.
It may further be noted that the aforesaid provisions are not applicable to the following companies:
Government Companies. Infrastructure Companies. Statutory Corporation.
Pricing Free Pricing: A company may freely price its public issue of equity shares. An issuer company, in consultation with lead merchant banker, shall decide the price. SEBI does not play any role in price fixation.
The company and the lead merchant banker, however, are required to give full disclosure of the parameters which they had considered while deciding the issue price. There are two types of price i.e., Fixed Price and Floor Price/Price Band.
Illustration regarding allotment to qualified institutional buyers other than anchor investors 1) Issue Details
Where 50% of the net offer to the public is required to be allotted to QIBs. QIB Bids.
Types of QIB bidders. No. of Shares bid for
(in Crores) Q1 50 Q2 20 Q3 130 Q4 50 Q5 50 MF1 40 MF2 40 MF3 80 MF4 20 MF5 20 Total 500
Q1-Q5--- QIB bidders other then mutual funds. MF1-MF5--- QIB bidders which are mutual funds.
Type of QIB bidders Equity shares bid for Allocation of 3.5 crores equity shares to MFs proportionately Allocation of balance 66.5 crores equity shares to QIB proportionately. Aggregate allocation to MFs. Q1 50 0 6.65 0 Q2 20 0 2.66 0 Q3 130 0 17.29 0 Q4 50 0 6.65 0 Q5 50 0 6.65 0 MF1 40 0.7 5.32 6.02 MF2 40 0.7 5.32 6.02 MF3 80 1.4 10.64 12.04 MF4 20 0.35 2.66 3.01 MF5 20 0.35 2.66 3.01 500 3.5 66.5 30.1
BOOK BUILDING METHOD OF PUBLIC ISSUE
Book Building means a process undertaken to elicit demand and to assess the price for determination of the quantum or value of specified securities.
In today's world, book-building system of public issue is more popular in comparison to fixed price method because in modern and liberalized economy everything is consumer (i.e., investor in the capital market) driven.
In Book-Building or Price Discovery Method, final allotment price is discovered through the prospective investors, which means that prospective investors have a say in the determination of allotment price and hence called the price discovery method.
SEBI (ICDR) REGULATION, 2009 N.K.SINGH 9818248595 011-65568595 4.20