13.0 The preferential issue of equity shares/ Fully Convertible Debentures (FCDs) / Partly Convertible Debentures (PCDs) or any other financial instruments which would be converted into or exchanged with equity shares at a later date, by listed companies whose equity share capital is listed on any stock exchange, to any select group of persons under section 81(1A) of the Companies Act 1956 on private placement basis shall be governed by these guidelines.

13.1 Such preferential issues by listed companies by way of equity shares/ Fully Convertible Debentures (FCDs) / Partly Convertible Debentures (PCDs) or any other financial instruments which would be converted into / exchanged with equity shares at a later date, shall be made in accordance with the pricing provisions mentioned below:

13.1.1 Pricing of the issue

13.1.1.1 The issue of shares on a preferential basis can be made at a price not less than the higher of the following:

i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date;

OR

ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date.

Explanation

a) "relevant date" for the purpose of this clause means the date thirty days prior to the date on which the meeting of general body of shareholders is held, in terms of Section 81(1A) of the Companies Act, 1956 to consider the proposed issue.

b) "stock exchange" for the purpose of this clause means any of the recognised stock exchanges in which the shares are listed and in which the highest trading volume in respect of the shares of the company has been recorded during the preceding six months prior to the relevant date.
 
 

13.1.2 Pricing of shares arising out of warrants, etc.

13.1.2.1 (a) Where warrants are issued on a preferential basis with an option to apply for and be allotted shares, the issuer company shall determine the price of the resultant shares in accordance with Clause 13.1.1.1 above.

(b) The relevant date for the above purpose may, at the option of the issuer be either the one referred in explanation (a) to Clause 13.1.1.1 above or a date 30 days prior to the date on which the holder of the warrants becomes entitled to apply for the said shares.

13.1.2.2 The resolution to be passed in terms of section 81(1A) shall clearly specify the relevant date on the basis of which price of the resultant shares shall be calculated.

13.1.2.3 (a) An amount equivalent to atleast ten percent of the price fixed in terms of Clause 13.1.1.1 above shall become payable for the warrants on the date of their allotment.
(b) The amount referred to in sub-clause (a), shall be adjusted against the price payable subsequently for acquiring the shares by exercising an option for the purpose.

(c) The amount referred to in sub-clause (a) shall be forfeited if the option to acquire shares is not exercised.

13.1.3 Pricing of shares on conversion

13.1.3.1 Where PCDs/FCDs/other convertible instruments, are issued on a preferential basis, providing for the issuer to allot shares at a future date, the issuer shall determine the price at which the shares could be allotted in the same manner as specified for pricing of shares allotted in lieu of warrants as indicated in Paras 13.1.2.1& 13.1.2.2 above.

13.2 Currency of financial instruments

13.2.1 In case of Warrants/PCDs/FCDs/or any other financial instruments with a provision for the allotment of equity shares at a future date, either through conversion or otherwise, the currency of the instruments shall not exceed beyond 18 months from the date of issue of the relevant instrument.

13.3 Non-transferability of financial instruments

13.3.1 (a) The instruments allotted on a preferential basis to the promoter / promoter group as defined in Chapter VI in Clause [6.4.2 (m)] of these guidelines, shall be subject to lock-in of 3 years from the date of their allotment.

(b) In any case, not more than 20% of the total capital of the company, including capital brought in by way of preferential issue, shall be subject to lock-in of three years from the date of allotment.

(c) The lock-in on shares acquired by conversion of the convertible instrument/exercise of warrants, shall be reduced to the extent the convertible instrument warrants have already been locked-in.

EXPLANATION:

(a) For the purpose of this clause "total capital" of the company shall mean -

(i) equity share capital issued by way of public/rights issue including equity shares emerging at a later date out of any convertible securities/exercise of warrants and

(ii) equity shares or any other security convertible at a later date into equity issued on a preferential basis in favour of promoter/promoter groups.

(b) (i) For computation of 20% of the total capital of the company, the amount of minimum promoters contribution held and locked-in, in the past as per guidelines shall be taken into account.

(ii) The minimum promoters contribution shall not again be put under fresh lock-in, even though it is considered for computing the requirement of 20% of the total capital of the company, in case the said minimum promoters contribution is free of lock-in at the time of the preferential issue.

13.3.2 These locked in shares/instruments can be transferred to and amongst promoter/promoter group subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, if applicable.

13.4 Currency of shareholders resolutions

13.4.1 (a) Allotment pursuant to any resolution passed at a meeting of shareholders of a Company granting consent for preferential issues of any financial instrument, shall be completed within a period of three months from the date of passing of the resolution.

(b) If allotment of instruments and dispatch of certificates is not completed within three months from the date of such resolution, a fresh consent of the shareholders shall be obtained and the relevant date referred to in explanation (a) in paragraph 13.1.1.1 above will relate to the new resolution.

13.5 Certificate from Auditors

13.5.1(a) In case of every issue of shares/warrants/FCDs/PCDs/ or other financial instruments having conversion option, the statutory auditors of the issuer Company shall certify that the issue of said instruments is being made in accordance with the requirements contained in these guidelines.
(b) Copies of the auditors certificate shall also be laid before the meeting of the shareholders convened to consider the proposed issue.

13.6 Preferential allotments to FIIs

13.6.1 Preferential allotments, if any to be made in case of Foreign Institutional Investors, shall also be governed by the guidelines issued by the Government of India/Board/Reserve Bank of India on the subject.

13.7 Non-Applicability of the guidelines

13.7.1 Clauses 13.1 to 13.5 shall not be applicable in the following cases:

1. where the further shares are allotted in pursuance to the merger and amalgamation scheme approved by the High court.

(b) In case, such persons are promoters or belong to promoter group as defined in Clause 6.4.2(m) of Chapter VI of these guidelines, the lock-in provisions shall continue to apply unless otherwise stated in the BIFR order.

(iii) where further shares are allotted to All India public financial institutions in accordance with the provision of the loan agreements signed prior to August 4, 1994.