RMB (Compendium) Series Circular No. 1 (2001- 2002) July 17, 2001

To All Registered Category I Merchant Bankers

Dear Sirs,

Section A : Foreign Venture Capital Investors registered with the Board and State Industrial Development Corporations have been included in the definition of Qualified Institutional Buyers in Explanation 2 (ii) to clause 2.2.2 of Chapter II. Thus the Foreign Venture Capital Investors registered with the Board and State Industrial Development Corporations shall also be eligible to participate in public issues through the book building route as Qualified Institutional Buyers.

Section B : This section provides for the exemption to Foreign Venture Capital Investors registered with the Board from lock -in requirements as specified in clause 4.14 of the Guidelines.

Therefore, pre- issue share capital of an unlisted company held by Venture Capital Funds and Foreign Venture Capital Investors registered with the Board shall not be subject to lock in as per the Guidelines. However, the provisions of the SEBI (Venture Capital Funds) Regulations, 1996 and the SEBI (Foreign Venture Capital Investors), Regulations 2000 and any amendment thereto, in this regard, shall be applicable.

Section C : This section lays down the revised requirements for filing the post issue monitoring reports with the Board for both book built portion and fixed price portion.

Section D : Clause (b) to sub-rule (2) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957 has been amended vide Government notification no. G.S.R. 415(E) dated June 7, 2001, providing for public offer of atleast 10% instead of 25% subject to certain conditions. Hence clause 8.3.4 granting sector wise exemption stands deleted.

Further, unlisted companies which have allotted shares to holders of securities in a listed company pursuant to a scheme of reconstruction or amalgamation sanctioned by the appropriate High Court, have been approaching the Board for seeking exemption from making a public offer for listing their shares. Exemptions, subject to fulfillment of certain conditions are already being granted by way of communication to the Stock Exchanges. For the sake of greater transparency, the requirements in this regard are stated in this section.

Section E The requirements related to issue of research reports by an issuer company in respect of public issues and rights issues have been laid down.

Section F : The restriction of a minimum public issue size of Rs 25 crore in case of an Initial Public Offer through the book building route has been removed.

It is again clarified that in terms of clause 11.3.5 (iv) of the Guidelines, for the under-subscribed portion of the fixed price portion in a book building issue, the issuer company has the option to allocate it to any category as it deems fit. Alternately, the issuer company has the option to let the under-subscribed portion lapse.

Section G: The requirement of documents to be submitted to the Board for issue of No Objection Certificate for the release of 1% security deposit kept with the regional stock exchange have been modified.

The amendments related to offer documents shall come into force for the offer documents filed with the Board after July 17, 2001 except Section C regarding post issue reporting requirement which would be applicable for all issues opening on or after July 17, 2001.
 

Please acknowledge receipt.
 
 

Yours faithfully,
 
 

R.M. Joshi
Executive Director
 
 

Enc: a/a

Section A : Chapter II- Eligibility norms for companies issuing securities

1. In clause (ii) of Explanation 2 to clause 2.2.2, after item (f), new items (g) and (h) shall be added as under:

1. In Clause 4.14.2, the existing sub clause i) shall be substituted by the following:

1. The existing clause 7.2.1.1 shall be substituted by the following:-

1. 3 day monitoring report in case of issue through book building route, for book built portion.

 

 
 
 

The due date of the report shall be 3^rd day from the date of allocation in the book built portion or one day prior to the opening of the fixed price portion whichever is earlier.

2. 3 day monitoring report in other cases, including fixed price portion of book built issue.

 

 
 
 

The due date for the report shall be the 3rd day from the date of closure of the issue.

3. Final post issue monitoring report for all issues.

1. The title of clause 7.2.1.2 shall be substituted by the following:

 

 
 
 

"7.2.1.2 - The due dates for submitting post issue monitoring report in case of Rights issues."

Section D : Chapter VIII

1. Clause 8.3.1 and clause 8.3.2 shall stand modified as under:

"8.3.1 - In case of a public issue by an unlisted company, the net offer to public shall be at least 10% or 25% as the case may be, of the post-issue capital."

"8.3.2 In case of a public issue by a listed company, the net offer to public shall be at least 10% or 25%, as the case may be, of the issue size."

2. The existing clause 8.3.3 shall stand modified as under:

"An infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II, inviting subscription from public shall not attract the provisions of Clauses 8.3.1 and 8.3.2 above."

2. The existing clause 8.3.4 shall be deleted.
3. Existing clause 8.3.5 shall be renumbered as clause 8.3.4.

1. Shares have been allotted by the unlisted company (transferee company) to the holders of securities of a listed company (transferor company) pursuant to a scheme of reconstruction or amalgamation under the provision of the Companies Act, 1956 and such scheme has been sanctioned by the High Court/s of the Judicature.
2. The listing of the shares of the unlisted transferee company is in terms of scheme of arrangement sanctioned by the High Court/s of the Judicature.
3. Atleast 25% of the paid up share capital, post scheme, of the unlisted transferee company seeking listing comprises shares allotted to the public holders of shares in the listed transferor company.
4. The unlisted company has not issued/reissued any shares, not covered under the scheme.
5. There are no outstanding warrants/instruments/agreements which gives right to any person to take the shares in the unlisted transferee company at any future date. If there are such instruments in the scheme sanctioned by the Court, the percentage referred to in point (iii) above, shall be computed after giving effect to the consequent increase of capital on account of compulsory conversions outstanding as well as on the assumption that the options outstanding, if any, to subscribe for additional capital will be exercised.
6. The share certificates have been despatched to the allottees pursuant to the scheme of arrangement or their names have been entered as beneficial owner in the records of the depositaries.
7. That the shares of the transferee company issued in lieu of the locked-in shares of the transferor company are subjected to the lock-in for the remaining period.
8. In addition to the requirements of Clause (vii) above, the following conditions are also to be complied with:

1. in case of a hiving off of a division of a listed company (say 'A') and its merger with a newly formed company or existing company (say 'B') there would not be any additional lock-in, if the paid up share capital of company 'B' is only to the extent of requirement for incorporation purposes.
2. in case of merger where the paid-up share capital of the company seeking listing (company 'B') is more than the requirement for incorporation; the promoters' shares shall be locked in to the extent 20% of the post merger paid-up capital of the unlisted company, for a period of 3 years from the date of listing of the shares of the unlisted company. The balance of the entire pre-merger capital of the unlisted company shall also be locked-in for a period of 3 years from the date of listing of the shares of the unlisted company.

1. After clause 9.2, a new clause 9.3 shall be added as under:

1. the research report is prepared only on the basis of published information as contained in the offer document.
2. no selective or additional information or information extraneous to the offer document shall be made available by the issuer or any member of the issue management team/ syndicate to only one section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports or at bidding centres etc.
3. no report or information, other than the contents of the draft offer document shall be circulated by the issuer or any member of the issue management team/ syndicate or their associates, after the date of receipt of observations from SEBI.
4. the advertisement code is observed while circulating the research reports, and that the risk factors are reproduced wherever highlights are given, as in case of an advertisement."

1. Clause 11.3.1(i) shall be deleted.

1. Item 1(i) in schedule XXIV shall be substituted with the following:

1. "First and last date of sending security certificates to NRIs (Enclose RBI acknowledgement letter. If acknowledgement is not received, date of filing the documents with RBI along with a copy of a letter forwarded to RBI)"

1. Item 7 in schedule XXIV shall be substituted with the following;

 

 
 
 

7. " Certificate from the Registrars countersigned by the post issue lead manager that the certificates to the NRIs have been dispatched".

2. After schedule XXVII a new schedule XXVIII shall be added as under:

Contents of the advertisement to be issued in terms of Clause 8.3.5.4

1. Name and address of registered office of the company.
2. Details of change of name and /or object clause.
3. Capital structure - Pre and post scheme of amalgamation. This shall provide details of the authorised, issued, subscribed and paid up capital (Number of instruments, description, aggregate nominal value)
4. Shareholding pattern giving details of promoter group shareholding, group companies.
5. Names of ten largest shareholders of the company - number and percentage of shares held by each of them, their interest, if any, in the company.
6. Details of promoters of the company - educational qualifications, experience, address.
7. Business of company and management.
8. Reason for the amalgamation.
9. Financial statement for the previous 3 years prior to the date of listing.
10. Latest audited financial statements along with notes to accounts and any audit qualifications. Change in accounting policies in the last 3 years and their effect on profits and reserves of the company {Financial statements should not be later than 6 months prior to the date of listing}
11. Details of other group companies including their capital structure and financial statements.
12. Outstanding litigations and defaults of the company, promoters, directors or any of the group companies.
13. Particulars of high, low and average prices of the shares of the listed company during the preceding 3 years.
14. Any material development after the date of the balance sheet.
15. Such other information as may be prescribed by SEBI from time to time.

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