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Eligibility norms for making an IPO
SEBI has stipulated
the eligibility
norms for companies
planning an IPO
which are as
follows:
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a) |
Net tangible
assets of at
least Rs 3 crore for three
full years |
|
b) |
Distributable
profits in at
least three
years |
|
c) |
Net worth of
at least Rs 1 crore in
three years |
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d) |
The issue
size should not
exceed 5 times
the pre-issue
net worth |
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e) |
If there has
been a change in
the company’s
name, at least
50 per
cent of the revenue
for preceding one
year should be from
the new
activity denoted by
the new name |
Alternative
routes
Recognizing that
many good companies,
for one reason or
the other, may not
be able to comply
with all the
eligibility norms,
two other
alternative routes
are available to
such companies:
Alternative I:
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(a) |
Issue shall be
through book
building route, with
at least 50% to be
mandatory allotted
to the Qualified
Institutional Buyers
(QIBs). (b) The
minimum post-issue
face value capital
shall be Rs. 10
crore or there shall
be a compulsory
market-making for at
least 2 years |
OR
Alternative II:
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(a) |
The “project” is
appraised and
participated to
the extent of
15% by FIs/Scheduled
Commercial Banks of
which at least 10%
comes from the
appraiser(s). |
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(b) |
The minimum
post-issue face
value capital
shall be Rs. 10 crore or
there shall be a
compulsory
market-making for at
least 2 years. In
addition to
satisfying the
aforesaid
eligibility norms,
the company shall
also satisfy the
criteria of having
at least 1000
prospective
allottees in its
issue. |
Exemptions to
certain category of
entities from the
eligibility norms
The following
categories of
entities are
eligible for
exemption from
entry norms.
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(a) |
Private Sector
Banks |
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(b) |
Public
sector banks |
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(c) |
An
infrastructure
company whose
project has been
appraised by a PFI
or IDFC or IL&FS or
a bank which was
earlier a PFI and
not less than 5% of
the project cost is
financed by any of
these institutions. |
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