<\/span><\/h4>\n\n\n\nUnder the profitability route, the following SEBI guidelines for IPO have to be followed:<\/strong><\/p>\n\n\n\n- The minimum net worth of the issuer must be more than INR 1 Crore in each previous three years.<\/li>
- The minimum net tangible assets of the issuer must be more than INR 3 Crores each, and not more than 50% of these assets must be held in the form of monetary assets in the previous three years.<\/li>
- The minimum average operating profit (before tax) of the company must be more than INR 15 Crores in at least three out of five previous years.<\/li>
- The issue size must not be more than five times the pre-issue net worth.<\/li>
- If the company has changed its name, then a minimum of 50% of the revenue in the previous year must be received from activities done under the new name.<\/li><\/ol>\n\n\n\n
Additionally,\nto provide ease of doing business and allow companies to easily make their\npublic offer, SEBI has introduced two alternative routes for companies who are\nunable to fulfil the requirements under the profitability route. The following\nroutes also allow a company to access the primary market for its public offer:<\/div><\/p>\n\n\n\n
<\/span>QIB Route – Entry Norm II <\/span><\/h4>\n\n\n\nCompanies that require a large capital base for their\noperations but are unable to fulfil the conditions laid down under the\nprofitability route can choose the QIB route to make their public offer. Under\nthe QIB Route, s company can access the public interest via the book-building\nprocedure. <\/p>\n\n\n\n
Under this process, 75% of the company\u2019s net offer to\nthe public must be allotted compulsorily to the Qualified Institutional Buyers\n(QIBs). If the company is unable to achieve the minimum subscription of QIB, it\nbecomes liable to refund the subscription fee.<\/p>\n\n\n\n
<\/span>Appraisal Route – Entry Norm III <\/span><\/h4>\n\n\n\nUnder\nthe appraisal route, the project or the public offer is appraised and\nparticipated to the extent of 15% by Financial Institutions or Scheduled\nCommercial Bank, of which, a minimum of 10% comes from the appraisers.<\/p>\n\n\n\n
The\nappraisal route comes with the condition that the minimum post-issue face value\ncapital must be INR 10 crores or a mandatory market-making must be there for at\nleast two years. <\/p>\n\n\n\n
All\nthe above-mentioned entry norms also include the requirement of at least 1000\nprospective allottees in the issuer company\u2019s public issue.<\/p>\n\n\n\n
<\/span>SEBI Guidelines for Public Issue for Listed Companies<\/strong><\/span><\/h3>\n\n\n\nA listed company that wants to make a further public issue (FPO) fulfil the following SEBI guidelines:<\/strong><\/p>\n\n\n\n- If the company has changed\nits name during the last one year, at least 50% of its revenue for the previous\none year must be from the activities performed by the company under its new\nname.<\/li>
- The size of its issue must\nnot be more than five times the pre-issue net worth per the company\u2019s audited\nbalance sheet of its last financial year.<\/li><\/ol>\n\n\n\n
<\/span>Exempted Entities under the SEBI\nGuidelines for IPO<\/strong><\/span><\/h3>\n\n\n\nSEBI\nhas exempted certain kinds of entities from the above-mentioned entry norms for\nmaking a public issue. These entities include:<\/p>\n\n\n\n
- Private and Public Sector\nBanks<\/li>
- Infrastructure company which\nhas its project appraised by a Public Financial Institution or IDFC or\nIL&FS or a bank which was previously a PFI, and at least 5% of its project\ncost is funded by any of these institutions. No entry norms are provided for a\nlisted company that wants to make a rights issue. <\/li><\/ol>\n\n\n\n
<\/span>Minimum Promoter\u2019s Contribution and Lock-In<\/strong><\/span><\/h3>\n\n\n\nWhen\nan unlisted company makes a public issue, the promoters of the company must\ncontribute at least 20% of the post-issue capital. This capital must be locked\nin for at least three years. This period is also called the lock-in period,\nwhich represents the freezing of such shares for that period. The remaining\npre-issue capital of the company must also be locked in for a period of one\nyear from the date of listing.<\/p>\n\n\n\n
When\na listed company makes a public issue in the form of Further Public Offer or\nFPO, the promoters of the company must contribute at least 20% of the\npost-issue capital or 20% of the total issue size. This requirement is in place\nto make sure that the promoters retain some part of the company\u2019s stakes once\nthe company makes its public offer.<\/p>\n\n\n\n
<\/span>General SEBI Guidelines for IPO<\/span><\/h2>\n\n\n\nA company that wants to make a public offer must also\nadhere to the following general SEBI guidelines for IPO in India:<\/p>\n\n\n\n
- The directors, promoters or other KMPs must not be\nassociated with any other company in a similar role.<\/li>
- The directors, promoters or any other key management\npersonnel who have the control of the company must not be debarred from\naccessing the primary market. <\/li>
- The application to list the company\u2019s shares must be\nfiled with a recognised stock exchange in India.<\/li>
- The company must enter into legal contracts with a\ndepository to dematerialise its specific securities.<\/li>
- The partly paid-up equity shares must be fully\npaid-up.<\/li>
- A listed company must maintain a minimum public\nshareholding of 25%. In case of failure to do so, the company gets one year to\nmeet the requirement.<\/li>
- A company must make financial arrangements from trust\nand verifiable sources for its financial requirements, excluding the amount put\nup to issue new company shares.<\/li>
- The process of an initial public offer of more than\nINR 50 lakhs must start with the company filing a draft offer in the form of Draft\nRed Herring Prospectus with the SEBI. <\/li>
- Once the draft is reviewed and received by the company\nalong with the issue of final observation letter, the final offer document or\nthe red herring prospectus must be filed with the Registrar of Companies (ROC).\n<\/li>
- The company may choose the book building process under\nEntry Norm II. In this case, the company must complete the IPO process within\none year from the date of receiving the final observation letter from SEBI.<\/li>
- 50% of the Board of Directors of the company must be\nindependent investors. <\/li>
- The same 50% of the Board of Directors of the company\nmust have no obligations to the promoters or the company.<\/li>
- No directors or promoters of the company must be\nguilty of an economic offence. <\/li>
- The company or any of its promoters or directors must\nnot be a wilful defaulter.<\/li>
- The issuer company must disclose the number of shares\nor the number of shares to SEBI between the date of filing its draft red\nherring prospectus and issue of specified securities.<\/li>
- If a company wants to go for a public issue of more\nthan INR 100 crores, it must submit a draft offer document with the regional\noffice of SEBI before doing so.<\/li><\/ul>\n\n\n\n