SEBI/CFD/DIL/DIP/38/2009/08/20
August 20, 2009
To all registered Merchant Bankers
To all registered Bankers to an Issue
To all registered Registrars to issues
Dear Sir/Madam,
Sub.: Amendment to SEBI (DIP) Guidelines, 2000 – Rights Issue Process/
Procedure.
1. In exercise of the powers conferred under Section 11 read with Section 11A of the
Securities and Exchange Board of India Act, 1992, in order to simplify the rights
issue process as well as to make it more efficient and effective, it has been
decided to amend the SEBI (Disclosure and Investor Protection) Guidelines, 2000
(hereinafter referred to as “the SEBI (DIP) Guidelines”).
2. The full text of amendments is given in Annexure I and the brief of amendments
are as under:
2.1 Rationalisation of rights issue disclosure requirements:
2.1.1 Rights issues are further issuances of capital made by listed entities to existing
shareholders. These shareholders are generally in possession of basic
information about the issuer company and are generally updated on major
developments in the company on a continuous basis.
2.1.2 In order to encourage listed companies to look at rights issues as a viable form of
capital raising by reducing the overall cost of such issuances and also to make
the process of such issues faster, it has been decided to rationalise the
disclosure requirements for rights issues.
2.2 Applications Supported by Blocked Amount (ASBA) in rights issues:
2.2.1 SEBI, vide circular dated September 25, 2008, had enabled the facility of
applying in rights issue through ASBA on a pilot basis.
2.2.2 It has now been decided to make ASBA applicable to all rights issues. ASBA will
co-exist with the current process, wherein cheque/demand draft is used as a
mode of payment. Since the web enabled interface of stock exchanges is now
operational for the purpose of acceptance of the rights issue applications, self
certified syndicate banks shall upload the application data in to the aforesaid
interface of stock exchanges.
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2.2.3 All applicants who desire to apply through ASBA should hold shares of the issuer
company in a depository account.
2.2.4 The applicants shall indicate either in (i) in Part A of the composite application
form of rights issue or (ii) in the plain paper application, as to whether they desire
to avail of the ASBA option.
2.2.5 The ASBA process, from the time of submission of application by the applicants
till transfer of shares in the depository account of the investors, as specified for
book built public issues, shall be followed in the case of rights issues also. The
role and responsibilities of self certified syndicate banks, stock exchanges,
registrars and merchant bankers, as enumerated in the ASBA process for book
built public issues, shall be applicable mutatis mutandis.
2.3 Utilisation of issue proceeds after finalization of the basis of allotment in
the issue:
2.3.1 Clause 8.19 of the SEBI (DIP) Guidelines provides that in a rights issue, the
issuer may utilise the issue proceeds collected after satisfying the designated
stock exchange that minimum 90% subscription is received. In a public issue, in
terms of section 73 of the Companies Act, 1956, the issuer company can access
the issue proceeds only after allotment and listing is completed.
2.3.2 SEBI has reduced the time period taken for finalization of basis of allotment in
the rights issues to 15 days from the earlier period of 42 days from the date of
closure of the issue. In view of this, it has been decided to amend clause 8.19 of
the SEBI (DIP) Guidelines to provide that the issuer company can utilize the
issue proceeds only after the basis of allotment is finalized.
2.4 Applicability:
2.4.1 This circular shall be applicable as follows:
a. Amendments in Annexure-1 pertaining to rationalised disclosures for Rights
Issues shall be applicable for all rights issues where draft letters of offer are
filed with SEBI on or after the date of this circular;
b. All other amendments in Annexure-1 shall be applicable to:
i. all rights issues where draft letters of offer are filed with SEBI on or
after the date of this circular;
ii. all rights issues where draft letters of offer have been filed with SEBI
but no observations has been issued on them by SEBI; and
iii. all rights issues where SEBI has issued observations but where the
letter of offer is yet to be filed with the designated stock exchanges.
3. All registered merchant bankers are advised to ensure compliance with this
circular including the amendments contained in Annexure I of this circular.
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4. This circular and the entire text of the SEBI (DIP) Guidelines, including the
amendments contained in Annexure I of this circular, are available on SEBI
website at www.sebi.gov.in under the categories “Legal Framework” and “Issues
and Listing”.
Yours faithfully,
Parag Basu
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Annexure I
Amendments to SEBI (DIP) Guidelines, 2000
CHAPTER I
PRELIMINARY
1. For clause 1.2.1 (iii-b), the following clause shall be substituted, namely:-
“(iii-b) “ASBA Investor” means an investor who intends to apply through ASBA
process and
(A) in case of public issue:
(a) is a “Resident Retail Individual Investor”;
(b) is bidding at cut-off, with single option as to the number of
shares bid for;
(c) is applying through blocking of funds in a bank account with
the SCSB;
(d) has agreed not to revise his/her bid;
(e) is not bidding under any of the reserved categories.
(B) in case of rights issue , an applicant, who;
(a) holds the shares of the issuer in dematerialized form as on
record date and has applied for entitlements and /or
additional shares in dematerialized form;
(b) has not renounced his/ her entitlements in full or in part;
(c) is not a renouncee;
(d) is applying through a bank account maintained with SCSBs.”
CHAPTER V
PRE-ISSUE OBLIGATIONS
3. In clause 5.2.1, after the words “in all book built public issues” and before the words
“provided in all” the words “and rights issues, whichever is applicable,” shall be
inserted.
4. Clause 5.3.3.2 (ia) shall be substituted as:-
“Where the second proviso to clause 6.3, or clause 6.39 are applicable, certify that
the issuer company is complying with conditions (a) and (b) laid down in 2nd proviso
to clause 6.3 or with conditions (a), (b) and (c) laid down in clause 6.39, as the case
may be;”
5. In clause 5.7.2, after the words “abridged letter of offer” and before the words “are
dispatched”, the words “along with composite application form” shall be inserted;
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6. For clause 5.11.4, the following clause shall be substituted, namely:-
“5.11.4 The advertisement shall also contain a format to enable the shareholders
to make the application on a plain paper containing necessary particulars
like name, address, ratio of right issue, issue price, number of shares held,
ledger folio numbers, Depository Participant ID, Client ID number of
shares entitled and applied for, additional shares if any, amount to be paid
along with application, particulars of cheque, etc. to be drawn in favour of
the company Account - Rights issues.”
7. for clause 5.11.6, the following clause shall be substituted, namely:-
“5.11.6 The advertisement may also invite attention of the shareholders to the fact
that the shareholders making the applications otherwise than on the
composite application form shall not be entitled to renounce their rights
and shall not utilise the composite application form for any purpose
including renunciation even if it is received subsequently.”
8. for clause 5.11.7, the following clause shall be substituted, namely:-
“5.11.7 If the shareholder makes an application in more than one mode i.e. both in
the Composite Application Form and on plain paper, he may face the risk
of rejection of both the applications.”
CHAPTER VI
CONTENTS OF OFFER DOCUMENT
9. Section III of Chapter VI of the Guidelines shall be substituted as under:-
“SECTION III – CONTENTS OF THE LETTER OF OFFER
6.39 A listed issuer company making a rights issue shall make disclosures, as
specified in clause 6.42, in the letter of offer, if it satisfies the following
conditions:
(a) the issuer company has been filing periodic reports, statements and
information in compliance with the listing agreement for the last
three years immediately preceding the date of filing of the letter of
offer with the designated stock exchange, in case of a fast track
issue and in any other case, the date of filing of the draft letter of
offer with the Board;
(b) the reports, statements and information referred to in sub-clause (a)
above are available on the website of any recognised stock
exchange with nationwide trading terminals or on a common e-filing
platform specified by the Board;
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(c) the issuer company has investor grievance-handling mechanism
which includes meeting of the Shareholders’ or Investors’
Grievance Committee at frequent intervals, appropriate delegation
of power by the board of directors of the issuer company as regards
share transfer and clearly laid down systems and procedures for
timely and satisfactory redressal of investor grievances.
6.40 If the listed issuer company does not satisfy the conditions specified in
clause 6.39, it shall make disclosures in the letter of offer as specified in
Section I and as specified in sub-clauses (d), (e) and (f) of clause
6.42.16.2 of this Section.
6.41 Irrespective of whether the conditions specified in clause 6.39 are satisfied
or not, the following listed issuer companies shall make disclosures, as
specified in Section I, in the letter of offer:
(a) A listed issuer company whose management has undergone
change pursuant to acquisition of control in accordance with the
provisions of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997;
(b) An issuer company whose securities have been listed consequent
to relaxation granted by the Board under sub-rule (7) of rule 19 of
the Securities Contracts (Regulation) Rules, 1957 for listing of its
securities pursuant to a scheme sanctioned by a High Court under
sections 391 to 394 of the Companies Act, 1956.
6.42 A listed issuer company referred to in clause 6.39 shall make the following
disclosures in the letter of offer, as far as possible, in the order in which
the disclosures are specified in this clause.
6.42.1 Cover Pages
6.42.1.1 The cover page paper shall be of adequate thickness (preferably minimum
hundred gcm. quality).
6.42.1.2 Front Cover Pages
(a) The front outside and inside cover pages of the letter of offer shall be
white and no patterns or pictures shall be printed on these pages.
(b) The front outside cover page of the letter of offer shall contain only the
following details:
a. The words "Letter of Offer".
b. The name of the issuer company, its logo, address of its registered office,
its telephone number, fax number, contact person, website address and email
address.
c. The nature, number, price and amount of the instruments offered and
issue size, as may be applicable.
d. The following clause on general risk :
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"Investment in equity and equity related securities involve a degree of risk
and investors should not invest any funds in this offer unless they can
afford to take the risk of losing their investment. Investors are advised to
read the risk factors carefully before taking an investment decision in this
offering. For taking an investment decision, investors must rely on their
own examination of the issuer company and the offer including the risks
involved. The securities being offered in the issue have not been
recommended or approved by Securities and Exchange Board of India
(SEBI) nor does SEBI guarantee the accuracy or adequacy of this
document."
Specific attention of investors shall be invited to the statement of “Risk
factors” given on page number(s) ….. under the section “General Risks”.
e. The following clause on ‘Issuer’s Absolute Responsibility’ shall be
incorporated in a box format:
"The issuer company, having made all reasonable inquiries, accepts
responsibility for and confirms that this letter of offer contains all
information with regard to the issuer company and the issue, which is
material in the context of the issue, that the information contained in the
letter of offer is true and correct in all material aspects and is not
misleading in any material respect, that the opinions and intentions
expressed herein are honestly held and that there are no other facts, the
omission of which make this document as a whole or any of such
information or the expression of any such opinions or intentions
misleading in any material respect."
f. The names, logos and addresses of all the lead merchant bankers with
their titles who have signed the due diligence certificate and filed the letter
of offer with the Board, along with their telephone numbers, fax numbers,
website addresses and e-mail addresses.
g. The name, logo and address of the registrar to the issue, along with its
telephone number, fax number, website address and e-mail address.
h. Issue schedule:
a. Date of opening of the issue.
b. Date of closing of the issue.
c. Last date for request for split.
i. The names of the recognised stock exchanges where the securities of the
issuer company are listed and the details of in-principle approval for listing
of the securities proposed to be offered in the rights issue.
6.42.1.3 Back Cover Pages
(c) The back inside cover page and back outside cover page shall be in white.
6.42.2 Table of Contents
6.42.2.1 The table of contents shall appear immediately after the front inside cover
page.
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6.42.3 Definitions and Abbreviations
6.42.3.1 Conventional or general terms.
6.42.3.2 Issue related terms.
6.42.3.3 Issuer company and industry related terms.
6.42.3.4 Abbreviations.
6.42.4 Risk Factors
6.42.4.1 The risk factors shall be printed in clear readable font (preferably of
minimum point ten size).
6.42.4.2 The risk factors shall be in relation to the following:
(a) The issue and objects of the issue.
(d) The issuer company and its ongoing business activities.
(e) The material litigations which impact the business of the issuer company.
6.42.4.3 The risk factors shall be determined on the basis of their materiality. In
determining the materiality of risk factors, the following shall be
considered:
(a) Some events may not be material individually but may be found material
collectively.
(b) Some risks may have an impact which is qualitative though not
quantitative.
(c) Some risks may not be material at the time of making the disclosures in
the letter of offer but may have a material impact in the future.
6.42.4.4 The risk factors shall appear in the letter of offer in the following manner:
(a) The risks envisaged by the management.
(b) The proposals, if any, to address the risks and the manner in which the
same are proposed to be addressed.
6.42.4.5 The proposals to address risks shall not contain any speculative statement
on the positive outcome to any litigation, etc.
6.42.4.6 The proposals to address risks shall not be given for any matter that is
sub-judice before any Court or Tribunal.
6.42.4.7 The risk factors shall be disclosed in the descending order of materiality.
Wherever risks about material impact are stated, the financial and other
implications of the same shall be disclosed. If it cannot be quantified, a
distinct statement about the fact that the implications cannot be quantified
shall be made.
6.42.5 Prominent notes
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6.42.5.1 This section shall contain notes which are required to be given
prominence and shall also include the following:
(a) The net worth before the issue (as per latest audited financial statement
disclosed in the letter of offer) and issue size.
(b) The details of transactions by the issuer company with group or subsidiary
companies during the last one year immediately preceding the date of
filing the letter of offer with the designated stock exchange, in case of a
fast track issue and in any other case, the date of filing draft letter of offer
with the Board, the nature of transactions and the cumulative value of
transactions.
(c) The details of all financing arrangements whereby the promoter group, the
directors of the company which is a promoter of the issuer, the directors of
the issuer and their relatives have financed the purchase by any other
person of securities of the issuer company other than in the normal course
of the business of the financing entity during the period of six months
immediately preceding the date of filing the letter of offer with the
designated stock exchange, in case of a fast track issue and in any other
case, the date of filing draft letter of offer with the Board.
6.42.6 Introduction
6.42.6.1 Summary
(a) Issue details in brief.
(b) Summary consolidated financial, operating and other data.
6.42.6.2 General Information
(a) The name and address of the registered office and the registration number
of the issuer company, along with the address of the Registrar of
Companies where the issuer company is registered.
(b) The names, addresses, telephone numbers, fax numbers and e-mail
addresses of the Company Secretary and compliance officer of the issuer
company.
(c) The names, addresses, telephone numbers, fax numbers, contact person,
website addresses and e-mail addresses of the bankers to the issue, Self
Certified Syndicate Bankers and legal advisors to the issue.
(d) The statement of inter-se allocation of responsibilities among lead
merchant bankers, where more than one merchant banker is associated
with the issue.
(e) The following details of credit rating, in case of a rights issue of convertible
debt instruments:
(i) The details of all the credit ratings including unaccepted rating obtained for
the issue of convertible debt instruments.
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(ii) All credit ratings obtained during the three previous years before filing the
letter of offer for any of its listed convertible debt instruments at the time of
accessing the market through a convertible debt instrument.
(f) The names, addresses, telephone numbers, fax numbers, website
addresses and e-mail addresses of the trustees under debenture trust
deed, in case of a rights issue of convertible debt instruments.
(g) The name of the monitoring agency, if applicable.
(h) The name, address, telephone number and e-mail address of the
appraising entity, in case the project has been appraised.
(i) The details of underwriting, if any:
(i) The names, address, telephone numbers, fax numbers and e-mail
address of the underwriters and the amount underwritten by them.
(ii) A declaration by the board of directors of the issuer company that the
underwriters have sufficient resources to discharge their respective
obligations.
(iii) In case of partial underwriting of the issue, the extent of underwriting.
(iv) The details of final underwriting arrangement, indicating actual number of
securities underwritten, in the letter of offer before it is filed with the
designated stock exchange.
(j) The principal terms of loan and assets charged as security.
6.42.6.3 Capital Structure
(a) The authorised, issued and subscribed capital after suitable incorporation
of the outstanding convertible securities (number of securities, description
and aggregate nominal value).
(b) Paid-up capital.
(c) The following details of outstanding instruments:
(i) Details of options, if any.
(ii) Details of convertible securities, if any.
(d) The details of securities held by promoter and promoter group including
the details of lock-in, pledge of and encumbrance on such securities.
(e) The details of shares acquired by promoters and promoter group in the
last one year immediately prior to the date of filing of the draft letter of
offer with the Board.
(f) The intention and extent of participation by promoters and promoter group
in the issue with respect to:
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(i) their rights entitlement.
(ii) the unsubscribed portion over and above their rights entitlement.
(g) The shareholding pattern as per the latest filing with the recognised stock
exchange(s).
(h) The details of the shareholders holding more than one per cent. of the
share capital of the issuer company.
6.42.7 Particulars of the Issue
6.42.7.1 Objects of the Issue
(a) The objects of the issue shall be disclosed.
(b) If one of the objects is investment in a joint venture or subsidiary or an
acquisition, the following additional disclosures shall be made:
(i) The details of the form of investment, i.e., equity, debt or any other
instrument.
(ii) If the form of investment has not been decided, a statement to that effect.
(iii) If the investment is in debt instruments, complete details regarding the
rate of interest, nature of security, terms of repayment, subordination, etc.
(iv) If the investment is in equity, whether any dividends are assured.
(v) The nature of benefit expected to accrue to the issuer company as a result
of the investment.
(c) If one of the objects of the issue is the grant of a loan to any entity, details
of the loan agreements including the rate of interest, whether secured or
unsecured, duration, nature of security, terms of repayment,
subordination, etc. and the nature of benefit expected to accrue to the
issuer company as a result of the investment. If such loan is to be granted
to a subsidiary, group or associate company, details of the same.
(d) If one of the objects of the issue is utilisation of the issue proceeds for long
term working capital, the following additional disclosures shall be made:
(i) Basis of estimation of working capital requirement, along with relevant
assumptions.
(ii) Reasons for raising additional working capital, substantiating the same
with relevant facts and figures.
(iii) Details of the projected working capital requirement including detailed
assessment of working capital after implementation of the project or
achievement of objects of the issue, as the case may be, capacity
utilisation assumptions, break-up of expected current assets into raw
materials, finished goods, work in progress, sundry debtors etc., along
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with the assumption about the holding norms for each type of current
asset, total current liabilities, net current assets and envisaged sources of
finance for net current assets, i.e., bank finance, institutional finance, own
funds, etc.
(iv) The total envisaged working capital requirement in a tabular form, the
margin money thereof and the portion to be financed by any bank(s) or
otherwise.
(v) A complete perspective on the present working capital position vis-à-vis
the projected working capital position based on which the money is
proposed to be raised in the public issue.
(vi) Details of the existing working capital available with the issuer company,
along with a break-up of total current assets into raw materials, finished
goods, work in progress, sundry debtors, etc., total current liabilities, net
current assets and sources of finance for net current assets, i.e., bank
finance, institutional finance, own funds, etc.
(vii) If no working capital is shown as part of the project for which issue is
being made, the reasons therefor.
6.42.7.2 Requirement of Funds
(a) The requirement for funds proposed to be raised through the issue.
(b) Where the issuer company proposes to undertake more than one activity
or project, such as diversification, modernisation, expansion, etc., the total
project cost shall be given activity-wise or project wise, as the case may
be.
(c) Where the issuer company is implementing the project in a phased
manner, the cost of each phase including the phase, if any, which has
already been implemented, shall be separately given.
(d) The details of all material existing or anticipated transactions in relation to
the utilisation of the issue proceeds or project cost with promoters,
directors, key management personnel, associates and group companies.
The relevant documents shall be included in the list of material documents
for inspection.
(e) If object of the issue is to fund a project, the following details shall be
given:
(i) Location of the project.
(ii) Plant and machinery, technology, process, etc.
(iii) Collaboration, performance guarantee if any, or assistance in marketing
by the collaborators.
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(iv) Infrastructure facilities for raw materials and utilities like water, electricity,
etc.
(f) If the proceeds, or any part of the proceeds, of the issue of the shares or
debentures are, or is, to be applied directly or indirectly:
(i) in the purchase of any business; or
(ii) in the purchase of an interest in any business and by reason of that
purchase, or anything to be done in consequence thereof, or in connection
therewith; the issuer company will become entitled to an interest as
respects either the capital or profits and losses or both, in such business
exceeding fifty percent, thereof;
a report made by accountants (who shall be named in the letter of offer)
upon:
a. the profits or losses of the business of each of the five financial
years immediately preceding the issue of the letter of offer; and
b. the assets and liabilities of the business at the last date to which
the accounts of the business were made up, being a date not more
than six months before the date of the issue of the letter of offer.
(g) If:
(i) the proceeds, or any part of the proceeds, of the issue of the shares or
debentures are or is to be applied directly or indirectly in any manner
resulting in the acquisition by the issuer company of shares in any other
body corporate; and
(iii) by reason of that acquisition or anything to be done in consequence
thereof or in connection therewith, that body corporate will become a
subsidiary of the issuer company;
a report made by accountants (who shall be named in the letter of offer)
upon:
a. the profits or losses of the other body corporate for each of the five
financial years immediately preceding the issue of the Letter of
Offer; and
b. the assets and liabilities of the other body corporate at the last date
to which its accounts were made up.
(h) Strategic partners, if applicable, to the project / objects of the issue.
(i) Financial partners, if applicable to the project / objects of the issue.
6.42.7.3 Funding Plan (Means of Finance)
(a) An undertaking shall be given in the letter of offer by the issuer company
confirming that firm arrangements of finance through verifiable means
towards seventy five per cent. of the stated means of finance, excluding
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the amount to be raised through proposed issue and existing identifiable
internal accruals, have been made.
(b) The balance portion of the means of finance for which no firm
arrangement has been made shall be mentioned without specification.
(c) The details of funds tied up and the avenues for deployment of excess
proceeds, if any.
6.42.7.4 Appraisal
(a) The scope and purpose of the appraisal, if any, along with the date of
appraisal.
(b) The cost of the project and means of finance as per the appraisal report.
(c) Explanation regarding revision, if any, in the project cost and the means of
finance after the date of issue of the appraisal report.
(d) The weaknesses and threats, if any, given in the appraisal report, by way
of risk factors.
6.42.7.5 Schedule of Implementation
(a) The schedule of implementation of the project in a tabular form and the
progress made so far, giving details of land acquisition, civil works,
installation of plant and machinery, trial production, date of commercial
production and reasons for delay, if any.
6.42.7.6 Deployment of Funds
(a) The details of the sources of funds and the deployment of these funds on
the project (where the issuer company is raising capital for a project), up
to a date not earlier than two months from the date of filing the letter of
offer with the designated stock exchange, as certified by a Chartered
Accountant, along with the name of the chartered accountant and the date
of the certificate.
(b) Where share application money brought in advance by the promoters is
deployed in the project and the same is being adjusted towards their rights
entitlement in the rights issue, the extent of deployment and utilisation of
the funds brought in by the promoters shall be disclosed.
6.42.7.7 Sources of Financing of Funds Already Deployed
(a) Means and source of financing, including details of "bridge loan" or other
financial arrangement, which may be repaid from the proceeds of the
issue.
6.42.7.8 Details of Balance Fund Deployment
(a) Year wise break up of the expenditure proposed to be incurred on the said
project.
6.42.7.9 Interim Use of Funds
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(a) Investment avenues in which the management proposes to deploy issue
proceeds, pending its utilisation in the proposed project.
6.42.7.10 Any special tax benefits for the issuer company and its shareholders.
6.42.7.11 Key Industry Regulations for the proposed objects of the issue (if different
from existing business of the issuer company).
6.42.7.12 Interest of promoters and directors, as applicable to the project or objects
of the issue.
6.42.8 History and Corporate Structure about the Issuer company
6.42.8.1 In case the issuer company has not come out with any issue in the past
ten years or more, a brief statement about the history and corporate
structure of the issuer company, the main objects of the issuer company
and major events in the past.
6.42.9 Management (Board of Directors)
6.42.9.1 Name, age, qualifications, Director Identification Number, experience,
address, occupation and date of expiration of the current term of office of
manager, managing director, and other directors (including nominee
directors, whole-time directors), giving their directorships in other
companies.
6.42.9.2 The nature of any family relationship between any of the directors.
6.42.9.3 Any arrangement or understanding with major shareholders, customers,
suppliers or others, pursuant to which of the directors was selected as a
director or member of senior management.
6.42.9.4 Details of service contracts entered into by the directors with the issuer
company providing for benefits upon termination of employment and a
distinct negative statement in the absence of any such contract.
6.42.10 Financial Information of the Issuer company
6.42.10.1 Stand-alone and consolidated financial statements of the issuer company:
(a) A report by the auditors of the company with respect to profit or loss and
assets and liabilities (indicating changes in accounting policies, if any) in
respect of the last completed accounting year for which audit has been
completed.
(b) A report by the auditors of the company on a limited review of the profit or
loss and assets and liabilities (indicating changes in accounting policies, if
any), as at a date not earlier than six months prior to the date of the
opening of the issue, where audited accounts as at such date are not
available.
(c) For the purpose of sub-clauses (a) and (b) above, it shall be sufficient if:
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(i) In the statement of the assets and liabilities, the main heads of assets and
liabilities as provided in Part I of Schedule VI of the Companies Act, 1956
have been provided. If an issuer company is governed by a statute other
than the Companies Act, 1956, the main heads of assets and liabilities as
specified in such statute shall be provided in the statement of assets and
liabilities.
(ii) In the statement of profit or loss, the information required to be disclosed
under the heads of income and expenditure as per clause 41 of the equity
listing agreement in respect of quarterly financial information to be filed
with the recognised stock exchanges, has been provided.
6.42.10.2 In addition, in accordance with Ministry of Finance Circular no.F.2/5/SE/76
dated February 05, 1977 and amended further on March 08, 1977, the
following information for the period between the last date of the balance
sheet and profit and loss account sent to the shareholders and up to the
end of the last but one month preceding the date of the letter of offer shall
be furnished.
(a) Working results of the issuer company under following heads:
(i) a. Sales / turnover
b. Other income
(ii) Estimated gross profit / loss (excluding depreciation and taxes).
(iii) a. Provision for depreciation
b. Provision for taxes.
(iv) Estimated net profit / loss.
(b) Material changes and commitments, if any affecting financial position of
the issuer company.
(c) Week-end prices for the last four weeks; current market price; and highest
and lowest prices of equity shares during the period with the relative
dates.
6.42.10.3 Stock market quotation of shares/ convertible instruments of the company
(high/ low price in each of the last three years and monthly high/low price
during the last six months).
6.42.10.4 Accounting and other ratios:
(a) The following accounting ratios shall be given for each of the accounting
periods for which financial information is given:
(i) Earnings per share: This ratio shall be calculated after excluding extra
ordinary items.
(ii) Return on Networth: This ratio shall be calculated excluding revaluation
reserves.
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(iii) Net Asset Value per share: This ratio shall be calculated excluding
revaluation reserves.
(b) Accounting and other ratios shall be based on the financial statements
prepared on the basis of Indian Accounting Standards.
6.42.10.5 Capitalisation Statement:
(a) A Capitalisation Statement showing total debt, net worth, and the debt/
equity ratios before and after the issue is made shall be incorporated.
(b) In case of any change in the share capital since the date as of which the
financial information has been disclosed in the Letter of Offer, a note
explaining the nature of the change shall be given.
(c) An illustrative format of the Capitalisation Statement is specified
hereunder:
Particulars Pre-issue as at
30-6-2009
As Adjusted for
issue
(Rupees in lakhs)
Short-Term Debt
1870 1870
Long Term Debt 4370 4370
Shareholders Funds
Share Capital 4000 4450
Reserves
14570 37520
Total Shareholders Funds 18570 41940
Long Term Debt/Equity 0.24:1 0.10:1
Note: Since 31-3-2009 (which is the last date as of which financial
information has been given in para … of this document), share capital
was increased from Rs.3000 lacs to Rs.4000 lacs by the issue of bonus
shares in the ratio of 1 share for every 3 shares.
6.42.10.6 One standard financial unit shall be used in the Letter of Offer
6.42.11 A statement to the effect that the price has been arrived at in consultation
between the issuer company and the Merchant banker.
6.42.12 Outstanding Litigations and Defaults
6.42.12.1 The following details shall be disclosed by the issuer company:
(a) Pending matters which, if they result in an adverse outcome, would
materially and adversely affect the operations or the financial position of
the issuer company.
(b) Matters which are pending or which have arisen in the immediately
preceding ten years involving:
(i) Issues of moral turpitude or criminal liability on the part of the issuer
company
Page 18 of 25
(ii) Material violations of statutory regulations by the issuer company
(iii) Economic offences where proceedings have been initiated against the
issuer company.
(c) For the purpose of determining materiality, the following tests or
parameters shall be applied:
(i) For the outstanding litigations which may not have any impact on the
future revenues, the disclosure is required:
a. Where the aggregate amount involved in such individual litigation
exceeds one per cent. of the net worth of the issuer company as
per last completed financial year; or
b. Where the decision in one case is likely to affect the decision in
similar cases, even though the amount involved in single case
individually may not exceed one per cent. of the net worth of the
issuer company as per the last completed financial year.
(ii) For the outstanding litigations which may have any impact on the future
revenues, the disclosure is required:
a. Where the aggregate amount involved in such individual litigation is
likely to exceed one per cent. of the total revenue of the issuer
company as per last completed financial year; or
b. Where the decision in one case is likely to affect the decision in
similar cases, even though the amount involved in single case
individually may not exceed one per cent of the total revenue of the
issuer company, if similar cases put together collectively exceed
one per cent. of total revenue of the issuer company as per last
completed financial year.
(d) These disclosures shall be made in respect of the issuer company and the
subsidiary companies of the issuer company whose financial statements
are included in the offer document, either separately or in consolidated
form.
6.42.13 Government Approvals or Licensing Arrangements
6.42.13.1 In case of a new line of activity/project, all pending government and
regulatory approvals; In case of an existing line of activity/project, al
pending regulatory and government approvals and pending renewals of
licences.
6.42.14 Material Development
6.42.14.1 Any material development after the date of the latest balance sheet and its
impact on performance and prospects of the issuer company.
6.42.15 Other Regulatory and Statutory Disclosures
6.42.15.1 Authority for the issue and details of resolution passed for the issue.
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6.42.15.2 A statement by the issuer company that the issuer company, promoters,
promoter group, directors or person(s) in control of the promoter have not
been prohibited from accessing or operating in the capital markets or
restrained from buying, selling or dealing in securities under any order or
direction passed by the Board.
6.42.15.3 A confirmation whether any of the directors of the issuer company are
associated with the securities market in any manner, if yes, whether the
Board has initiated any action against the said entities and the related
details.
6.42.15.4 It may be disclosed whether the issuer company, promoters, group
companies, the relatives (as per Companies Act,1956) of promoters,
group companies are identified as wilful defaulters by Reserve Bank of
India or other authorities.
6.42.15.5 A statement to the effect that the issuer company is in compliance with
provisions specified in clause 6.42.
6.42.15.6 Details of compliance with eligibility requirements to make a fast track
issue, if applicable.
6.42.15.7 Disclaimer clauses:
(a) The letter of offer shall contain the following disclaimer clause in bold
capital letters:
"It is to be distinctly understood that submission of Letter of Offer to SEBI
should not in any way be deemed or construed that the same has been
cleared or approved by SEBI. SEBI does not take any responsibility either
for the financial soundness of any scheme or the project for which the
issue is proposed to be made or for the correctness of the statements
made or opinions expressed in the Letter of Offer. Lead Merchant Banker,
______________ has certified that the disclosures made in the Letter of
Offer are generally adequate and are in conformity with SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2009 in force for the
time being. This requirement is to facilitate investors to take an informed
decision for making investment in the proposed issue.
It should also be clearly understood that while the issuer company is
primarily responsible for the correctness, adequacy and disclosure of all
relevant information in the letter of offer, the lead merchant banker is
expected to exercise due diligence to ensure that the issuer company
discharges its responsibility adequately in this behalf and towards this
purpose, the lead merchant banker _______________________ has
furnished to the Securities and Exchange Board of India (SEBI) a due
diligence certificate dated ________________ (which reads as follows:
(due diligence certificate submitted to the Board to be reproduced here)
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The filing of the letter of offer does not, however, absolve the issuer
company from any liabilities under section 63 or section 68 of the
Companies Act, 1956 or from the requirement of obtaining such statutory
or other clearances as may be required for the purpose of the proposed
issue. SEBI further reserves the right to take up, at any point of time, with
the lead merchant banker any irregularities or lapses in letter of offer."
(b) Disclaimer Statement from the issuer company and lead merchant banker:
A statement to the effect that the issuer company and the lead merchant
banker accept no responsibility for statements made otherwise than in the
Letter of Offer or in the advertisement or any other material issued by or at
the instance of the issuer company and that anyone placing reliance on
any other source of information would be doing so at his own risk.
Investors who invest in the issue will be deemed to have been
represented by the issuer company and lead manager and their respective
directors, officers, agents, affiliates and representatives that they are
eligible under all applicable laws, rules, regulations, guidelines and
approvals to acquire equity shares of our company, and are relying on
independent advice / evaluation as to their ability and quantum of
investment in this issue.
(c) Disclaimer in respect of jurisdiction: A brief paragraph mentioning the
jurisdiction under which provisions of law and the rules and regulations are
applicable to the letter of offer.
(d) Disclaimer clause of the stock exchanges, if any.
(e) Disclaimer clause of the Reserve Bank of India (if applicable).
6.42.15.8 The fact of filing the letter of offer with the Board and the stock
exchange(s) and the office of the Board where the letter of offer has been
filed.
6.42.15.9 Details of fees payable to (in terms of amount, as a percentage of total
issue expenses and as a percentage of total issue size):
(a) Lead merchant bankers.
(b) Co-lead merchant bankers, if any
(c) Co-managers, if any
(d) Other merchant bankers
(e) Registrars to the issue
(f) Advisors
(g) Bankers to the issue
(h) Trustees for the debt instrument holders.
(i) Others
(j) Underwriting commission, brokerage and selling commission.
6.42.15.10 Arrangements or any mechanism evolved by the issuer company for
redressal of investor grievances and the time normally taken by it for
disposal of various types of investor grievances.
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6.42.16 Offering Information
6.42.16.1 Terms of payments and procedure and time schedule for allotment and
issue of certificates, credit of securities to the investors’ demat account.
6.42.16.2 How to apply, availability of application forms and letter of offer and mode
of payment, including the following:
(a) Applications by mutual funds:
(i) The necessary disclosures under the heads "Procedure for applications by
mutual funds" and "Multiple Applications" shall be incorporated to indicate
that a separate application can be made in respect of each scheme of an
Indian mutual fund registered with the Board and that such applications
shall not be treated as multiple applications.
(ii) A disclosure that the applications made by asset management companies
or custodians of a mutual fund shall clearly indicate the name of the
concerned scheme for which application is being made.
(b) Applications by non-resident Indians: The following disclosures shall be
made:
(i) The name and address of at least one place in India from where individual
non-resident Indian applicants can obtain the application forms.
(ii) A statement that: "non-resident Indian applicants may please note that
only such applications as are accompanied by payment in free foreign
exchange shall be considered for allotment under the reserved category.
The non-resident Indians who intend to make payment through Non-
Resident Ordinary (NRO) accounts shall use the form meant for Resident
Indians and shall not use the forms meant for reserved category."
(c) Application by ASBA investors: Disclosures regarding details of
Application Supported by Blocked Amount process including specific
instructions for submitting Application Supported by Blocked Amount.
(d) A statement that the shareholders who have not received the application
form may, along with the requisite application money, apply in writing on a
plain paper.
(e) The format to enable the shareholders to make the application on plain
paper specifying therein necessary particulars such as name, address,
ratio of rights issue, issue price, number of equity shares held, ledger folio
numbers, depository participant ID, client ID, number of equity shares
entitled and applied for, additional shares if any, amount to be paid along
with application, and particulars of cheque, etc. to be drawn in favour of
the issuer company’s account;
(f) A statement that the shareholders making the application otherwise than
on the application form shall not renounce their rights and shall not utilise
Page 22 of 25
the application form for any purpose including renunciation even if it is
received subsequently.
(g) Provisions of sub-section (1) of section 68A of the Companies Act, 1956
relating to punishment for fictitious applications, including the disclosures
that any person who:
(i) makes in a fictitious name an application to a company for
acquiring, or subscribing for, any shares therein, or
(ii) otherwise induces a company to allot, or register any transfer of,
shares therein to him, or any other person in a fictitious name,
shall be punishable with imprisonment for a term which may extend to five
years.
(h) Declaration about the credit of securities to the demat account / refunds
within a period of fifteen days and interest in case of delay in refund at the
prescribed rate.
(i) Mode of making refunds:
(i) The mode in which the issuer company shall make refunds to applicants in
case of oversubscription.
(ii) If the issuer company proposes to use more than one mode of making
refunds to applicants, the respective cases where each such mode will be
adopted shall be disclosed.
(iii) The permissible modes of making refunds are as follows:
(a) In case of applicants residing in any of the centres specified by the
Board: by crediting of refunds to the bank accounts of applicants
through electronic transfer of funds by using ECS (Electronic
Clearing Service), Direct Credit, RTGS (Real Time Gross
Settlement) or NEFT (National Electronic Funds Transfer), as is for
the time being permitted by the Reserve Bank of India;
(b) In case of other applicants: by despatch of refund orders by
registered post, where the value is Rs 1500/- or more, or under
certificate of posting in other cases, (subject however to postal
rules); and
(c) In case of any category of applicants specified by the Board:
crediting of refunds to the applicants in any other electronic manner
permissible under the banking laws for the time being in force
which is permitted by the Board from time to time.
6.42.17 Undertakings by the issuer company in connection with the issue
6.42.17.1 The issuer company shall undertake that:
(a) the complaints received in respect of the Issue shall be attended to by the
issuer company expeditiously and satisfactorily.
(b) that steps for completion of the necessary formalities for listing and
commencement of trading at all stock exchanges where the securities are
Page 23 of 25
to be listed are taken within seven working days of finalisation of basis of
allotment.
(c) funds required for making refunds to unsuccessful applicants as per the
mode(s) disclosed shall be made available to the Registrar to the issue by
the issuer company.
(d) that where refunds are made through electronic transfer of funds, a
suitable communication shall be sent to the applicant within 15 days of
closure of the issue giving details of the bank where refunds shall be
credited along with amount and expected date of electronic credit of
refund.
(e) that adequate arrangements shall be made to collect all ASBA
applications and to consider them similar to non-ASBA applications while
finalizing the basis of allotment.
(f) In case of convertible debt instruments, the issuer company shall
additionally undertake that:
(i) the issuer company shall forward the details of utilisation of the funds
raised through the convertible debt instruments duly certified by the
statutory auditors of the issuer company, to the debenture trustees at the
end of each half-year.
(ii) the issuer company shall disclose the complete name and address of the
debenture trustee in the annual report.
(iii) the issuer company shall provide a compliance certificate to the
convertible debt instrument holders (on yearly basis) in respect of
compliance with the terms and conditions of issue of debentures as
contained in the Letter of Offer, duly certified by the debenture trustee.
(iv) the issuer company shall furnish a confirmation certificate that the security
created by the company in favour of the convertible debt instrument
holders is properly maintained and is adequate to meet the payment
obligations towards the convertible debt instrument holders in the event of
default.
(v) necessary cooperation with the credit rating agency (ies) shall be
extended in providing true and adequate information till the debt
obligations in respect of the instrument are outstanding.
6.42.18 Utilisation of Issue Proceeds
6.42.18.1 The letter of offer for an issue other than a rights issue made by any bank
or public financial institution shall contain a statement of the board of
directors of the issuer company to the effect that:
(a) all monies received out of issue of shares to public shall be transferred to
separate bank account.
Page 24 of 25
(b) details of all monies utilised out of the issue referred to in sub-clause (a)
shall be disclosed under an appropriate separate head in the balance
sheet of the issuer company indicating the purpose for which such monies
had been utilised; and
(c) details of all unutilised monies out of the issue of shares referred to in subclause
(a) shall be disclosed under an appropriate separate head in the
balance sheet of the issuer company indicating the form in which such
unutilised monies have been invested.
6.42.19 Restrictions on foreign ownership of Indian securities, if any
6.42.19.1 Investment by NRIs.
6.42.19.2 Investment by FIIs.
6.42.20 Statement regarding minimum subscription clause
6.42.20.1 The following statements shall appear in the letter of offer:
(a) "If the issuer company does not receive the minimum subscription of
ninety per cent. of the issue (including devolvement of underwriters where
applicable), the entire subscription shall be refunded to the applicants
within fifteen days from the date of closure of the issue."
(b) "If there is delay in the refund of subscription by more than 8 days after the
company becomes liable to pay the subscription amount (i.e. fifteen days
after closure of the issue), the issuer company will pay interest for the
delayed period, at rates prescribed under sub-sections (2) and (2A) of
Section 73 of the Companies Act, 1956."
6.42.21 Statutory and other information
6.42.21.1 Option to subscribe in the issue:
(a) The details of option, if any, to receive the securities subscribed for either
in demateralised form or physical form.
(b) The lead merchant banker shall incorporate a statement in the offer
document and in the application form to the effect that the investor shall
have an option either to receive the security certificates or to hold the
securities in dematerialised form with a depository.
6.42.21.2 Material contracts and time and place of inspection which shall include
copies of the Annual Reports of the issuer company for the last five years.
6.42.21.3 Any other material disclosures, as deemed necessary.
6.42.22 Declaration
6.42.22.1 The draft letter of offer (in case of issues other than fast track issues) and
letter of offer shall be approved by the Board of Directors of the issuer
company and shall be signed by all directors, the Chief Executive Officer,
i.e., the Managing Director or Manager within the meaning of the
Companies Act, 1956 and the Chief Financial Officer, i.e., the whole-time
Page 25 of 25
finance director or any other person heading the finance function and
discharging that function.
6.42.22.2 The following statement shall be disclosed:
“No statement made in this letter of offer contravenes any of the
provisions of the Companies Act, 1956 and the rules made thereunder. All
the legal requirements connected with the issue as also the guidelines,
instructions, etc., issued by SEBI, Government and any other competent
authority in this behalf, have been duly complied with.”
6.42.22.3 The signatories shall further certify that all disclosures made in the letter of
offer are true and correct.
6.43 A listed issuer company making disclosures in the letter of offer as per this
Part shall make a copy of the offer document of the immediately preceding
public issue or rights issue available to the public in the manner specified
in sub-clause (ii) of clause 5.6.2 and shall also make such document
available as a material document for inspection.”
10. In chapter VI, Section IV shall be substituted with the following section as under:-
“SECTION IV - CONTENTS OF THE ABRIDGED LETTER OF OFFER
6.44 The abridged letter of offer shall contain disclosures as specified in Section II of this
Chapter.
Provided that where the conditions laid down in clauses 6.39 (a) and 6.39 (b) are
satisfied, clauses 6.18.2, 6.19.3, 6.21, 6.22, 6.23, 6.26, 6.27, 6.30, 6.31 and 6.32,
specified under Section II of this Chapter shall not apply to the abridged letter of offer.
6.45 The order in which items shall appear in the abridged letter of offer shall correspond,
wherever applicable, to the order in which items appear in the letter of offer.
6.46 The abridged letter of offer shall also include the following disclosures:
(a) Provisions pertaining to applications referred to in clause 5.11;
(b) Rights entitlement ratio;
(c) Fractional entitlements;
(d) Renunciation;
(e) Application for Additional equity shares;
(f) Intention of promoters to subscribe to their rights entitlement;
(g) Statement that a copy of the offer document of the immediately preceding public
or rights issue is made available to the public as specified under clause 5.6.2(ii)
and also as a document for public inspection.”
Chapter VIII
OTHER ISSUE REQUIREMENTS
11. for clause 8.19.1, the following clause shall be substituted, namely:-
“The issuer company may utilise the funds collected in the rights issue only after the
basis of allotment is finalized.”
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