INITIAL

PUBLIC OFFER
BY: ABHA MEHTA & SHIVANI CHATURVEDI
 SCOPE OF THE
PRESENTATION
• Introduction
• Benefits
• Pricing
• Process
• Eligibility
• SEBI (ICDR) Regulations, 2015
• Questions
 WHAT IS AN IPO?
• Regulation 2(p) of ICDR Regs, 2015: “initial public
offer” means an offer of specified securities by an
unlisted issuer to the public for subscription and
includes an offer for sale of specified securities to
the public by any existing holders of such securities
in an unlisted issuer.
• Section 23 of CA, 2013: Issuance of securities by
public offer.
 BENEFITS & NEED OF
AN IPO
• Funding capital requirements for organic growth
• Financing working capital requirements
• Finance acquisitions
• Repayment of debt to strengthen balance sheet
• Retention and incentive to employees through
stock option.
 Eligibility
• Regulation 26 of SEBI ICDR 2015 lays down the eligibility requirements for making an initial public offer:
 Issuer can make Initial Public Offer if:
1. If it has a net tangible assets of Rs. 3 Crores in each preceding three years out of which not more than
fifty percent is monetary assets.
2. it has a minimum average pre-tax operating profit of rupees fifteen crore, during the three most
profitable years out of the immediately preceding five years.
3. it has a net worth of at least one crore rupees in each of the preceding three full years
4. the aggregate of the proposed issue and all previous issues made in the same financial year in terms of
issue size does not exceed five times its pre-issue net worth as per the audited balance sheet of the
preceding financial year;
5. if it has changed its name within the last one year, at least fifty per cent. of the revenue for the
preceding one full year has been earned by it from the activity indicated by the new name.
 If the above mentioned conditions are not satisfied) may make an initial public offer if the issue is made
through the book-building process and the issuer undertakes to allot, at least seventy five percent of the
net offer to public, to qualified institutional buyers and to refund full subscription money if it fails to make
the said minimum allotment to qualified institutional buyers
SEBI ICDR GUIDELINES,
2015
• Regulation 5- Appointment of a merchant banker.
• Regulation 6- Draft Offer Document
 No offer can be made without filing a draft offer
document with the Board.
 The Board may suggest changes or issue observations on
the draft offer document within thirty days from:
1. Date of receipt of draft offer document .
2. Date of receipt of satisfactory reply on any additional
informational sought by the Board.
3. Date of receipt of satisfactory reply on any additional
information sought by the Board from regulatory
authority.
4. Date of receipt of in-principle approval letter received
from the recognized stock exchanges.
• Regulation 11- Opening of an issue
 within twelve months from the date of issuance of the observations by the
Board under regulation 6; or
 within three months of expiry of the period stipulated in sub-regulation (2) of
regulation 6, if the Board has not issued observations:
 In case of shelf prospectus, the first issue may be opened within three months
of issuance of observations by the Board.
 The issuer shall, before registering the red herring prospectus (in case of a
book built issue) or prospectus (in case of a fixed price issue) with the Registrar
of Companies or filing the letter of offer with the designated stock exchange,
as the case may be, file with the Board through the lead merchant bankers,
an updated offer document highlighting all changes made in the offer
document.

• Regulation 14- Minimum Subscription

 90% as per offer document.

• Regulation 32- Minimum Promoter’s Contribution:

The promoter in case of an initial public offering has to contribute not less than
20% of the total post issue capital.
• Regulation 36- Lock in of specified securities held by the promoters
 Minimum Promoter’s contribution shall be locked in for a period of three years from the
date of allotment.
 Promoter’s holding in excess of the minimum contribution shall be locked in for a period
of one year.

• Regulation 43- Net offer to the public

 In an issue made through the book building process ,the allocation in the net offer to
public category shall be as follows:
(a) not less than thirty five per cent to retail individual investors;
(b) not less than fifteen per cent to non-institutional investors;
(c) not more than fifty per cent to qualified institutional buyers, five per cent. of which shall
be allocated to mutual funds
 In an issue made through the book building process under sub-regulation (2) of
regulation 26, the allocation in the net offer to public category shall be as follows:
(a) not more than ten per cent to retail individual investors;
(b) not more than fifteen per cent to non-institutional investors;
(c) not less than seventy five per cent to qualified institutional buyers, five per cent. of which
shall be allocated to mutual funds
• In an issue made other than through the book building
process, allocation in the net offer to public category
shall be made as follows:
(a) minimum fifty per cent. to retail individual investors;
and
(b) remaining to:
(i) individual applicants other than retail individual
investors; and
(ii) other investors including corporate bodies or institutions,
irrespective of the number of specified securities applied
for;
(c) the unsubscribed portion in either of the categories
specified in clauses (a) or (b) may be allocated to
applicants in the other category.
Questions?