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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:
| 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 |
| d) |
The
issue size
should not
exceed 5
times the
pre-issue
net worth |
| e) |
If
there has
been a
change in
the
company’s
name, at
least 50% of
the revenue
for
preceding
one year
should be
from the new
activity
denoted by
the new name
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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:
| (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:
| (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).
|
| (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.
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Exemptions
to certain category
of entities from the
eligibility norms
The following
categories of
entities are
eligible for
exemption from entry
norms.
 |
A
banking
company
including a
local area
bank set up
under the
Banking
Regulation
Act, 1949 |
 |
A
corresponding
new bank set
up under the
Banking
Companies
Act, 1970 |
 |
An
infrastructure
company
Whose
project has
been
appraised by
a Public
Financial
Institution
(PFI)
Not
less than 5%
of the
project cost
is financed
by any of
the PFI |
 |
Rights
Issue by a
listed
company |
Minimum Public
Shareholding
Requirements
Clause 40A of the
BSE Listing
Agreement requires
at least 25% of the
post issue paid up
capital to be with
the ‘public’
(i.e. other than
promoter and
promoter group).
As per rule 19(2)
(b) of the
Securities Contract
(Regulation) Rules,
a minimum of 25% of
each class of
security must be
offered to the
public for
subscription.
However, at least
10% can be offered
if the following 3
conditions are
fulfilled:
 |
Minimum
2 MM
securities
(excluding
reservations,
firm
allotment
&
promoter
contribution)
to be
offered to
the public |
 |
Minimum
offer size
– Rs. 100
crores |
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Issuance
through book
building
with 60% QIB
allocation |
Continuous public
shareholding since
listing also needs
to be maintained as
per Clause 40A of
the listing
agreement.
The aforesaid
requirement of
maintaining minimum
level of public
shareholding on a
continuous basis
will not be
applicable to
government companies
(as defined under
Section 617 of the
Companies Act,
1956),
infrastructure
companies (as
defined under
Chapter II Clause
14(4) of the SEBI
ICDR Regulations
2009) and companies
referred to the
Board for Industrial
and Financial
Reconstruction.
Note: Section
617 of the Companies
Act, 1956 defines
Government company
as follows -
Government Company
means any company in
which not less than
51% of the paid-up
share capital is
held by the Central
Government, or by
any State Government
or Governments, or
partly by the
Central Government
and partly by one or
more State
Governments, and
includes a company
which is a
subsidiary of a
Government company
as thus defined.
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