Investor Education and Protection Fund
        Ministry of Corporate Affairs
        Government of India

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Shri Prem Chand Gupta
Union Minister
for Corporate Affairs

 

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IPO INVESTING

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 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:
(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.

Exemptions to certain category of entities from the eligibility norms
The following categories of entities are eligible for exemption from
entry norms.
(a) Private Sector Banks
(b) Public sector banks
(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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