SEBI SECURITIES & EXCHANGE BOARD OF INDIA

CONTENTS
INTRODUCTION OBJECTIVES

FUNCTIONS
POWERS GUIDELINES FOR IPO (INITIAL PUBLIC OFFER)

INTRODUCTION
Securities and Exchange Board of India (SEBI) was first established in year 1988 as a non-statutory body for regulating the securities market.

INTRO. CONT.
It become an autonomous body in accordance with the provisions of the Securities and Exchange Board of India Act, 1992 and more powers where given through an ordinance. Since then it regulates the market through its independent powers.
An Act to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto.

OBJECTIVES
The primary objective of SEBI is to promote healthy and orderly growth of the securities market and secure investors protection. The objectives of SEBI as follows: To protect the interest of investors, so that, there is a steady flow of savings into capital market. To regulate the securities market and ensure fair practices. It makes rules and regulations for the market. To promote efficient services by brokers, merchant bankers and other intermediaries, so that, they become competitive and professional.

FUNCTIONS
The SEBI Act, 1992 has entrusted with two functions, they are:
Regulatory functions. Developmental functions.

REGULATORY FUNCTIONS
Regulation of stock exchange, self regulatory organizations and any other securities market. Registration and regulation of stock brokers, subbrokers, Registrars to all issues, merchant bankers, underwriters, portfolio mangers etc. Registration and regulation of the working of collective investment schemes including mutual funds. Prohibition of fraudulent and unfair trade practices relating to securities market. Prohibition of insider trading. Regulating substantial acquisition of shares and takeover of companies.

DEVELOPMENTAL FUNCTIONS
Promoting investors education. Training of intermediaries. Conducting research and publishing information useful to all market participants. Promotion of fair practices. Promotion of self regulatory organizations.

POWERS
Call periodical returns from stock exchanges. Call information or explanation from stock exchanges or their members. Direct enquiries of the affairs of stock exchanges or their members.. Power to compel listing of securities by public companies. Power to grant approval to bye-laws of recognized stock exchanges. Power to make or amend bye-laws of recognized stock exchanges.

POWERS
Power to regulate and control stock exchanges. Power to grant registration to market intermediaries. Power to levy fees or other charges for carrying out the purpose of regulation. Power to declare applicability of Section 17 of the Securities Contract (Regulation) Act 1956, in any State or area, to grant licenses to dealers in securities.

ABOUT IPO
Initial public offering (IPO), referred to simply as an "offering" or "flotation", is when a company makes either a fresh issue of securities or on offer for sale of existing securities or both for the first time to the public. This paves way for listing and trading of the issuers securities.

IPO CONT..
The main objectives are to use the proceeds from the issue to fund the companys plans for the expansion of operations and to meet the expenses of the issue. IPO in India is done through different methods like fixed price method, book building method, or a mixture of both.

SEBI GUIDELINES FOR IPO

Eligibility Norms of the Issuer. Size of the Public Issue. Promoter Contribution. Prospectus. IPO Grading. Collection centers for receiving application. Regarding allotment of shares. Timeframes for the Issue and Post-Issue formalities. Dispatch of Refund Orders. Other regulations pertaining to IPO. Restrictions on other allotments.

GUIDELINES CONT..
Eligibility Norms of the Issuer: The company shall meet the following requirements Net Tangible Assets is greater than / equal to 3 crores (for 3 full years). Net worth is greater than / equal to 1 crore in 3 years. If change in name, atleast 50% revenue for preceding 1 year should be from the activity under new name.

GUIDELINES CONT..
Size of the Public Issue: Issue of shares to public is greater than / equal to 25% of the total issue. The issue size should not be more that 5 times the pre-issue net worth. Promoter contribution: Minimum Promoters contribution is 2025% of public issue. Minimum Lock in period for Promoters contribution is 5 years.

GUIDELINES CONT..
Prospectus: Abridged prospectus must be attached with every application form. Risk factors must be highlighted. Objectives of the issue and the cost of the project should be disclosed. Companys management, past history, and present business of the firm should be disclosed. Particulars of the company and other listed companies under the same management who have made public issues during the past 3 years are to be disclosed.

GUIDELINES CONT..
IPO Grading: A company which has filed the draft offer document for its IPO with SEBI is required to obtain a grade from atleast one CRA registered with SEBI like : CARE (Credit Analysis and Research) ICRA (Investment Information and Credit Rating Agency of India) CRISIL (Credit Rating and Information Services of India Ltd.)

GUIDELINES CONT..
Collection centers for receiving applications: There should be atleast 30 mandatory collection centers. For issues less than / equal to 10 crores, the collection centers shall be situated at: The 4 metropolitan centers viz. Mumbai, Delhi, Madras, Kolkata; At all such centers where stock exchanges are located in the region in which the registered office of the company is situated.

GUIDELINES CONT..
Regarding allotment of shares: In an issue of more than 25 crores the issuer is allowed to place the whole issue by Book - building. Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares. There should be atleast 5 investors for every 1 lakh of equity offered.

GUIDELINES CONT..
Timeframes for the Issue and Post-Issue formalities: The min. period = 3 working days and max. = 10 working days. A public issue is effected if the issue is able to procure 90% of the Total issue size within 60 days from the date of earliest closure of the Public Issue. In case of over-subscription the company may have the right to retain the excess application money and allot shares more than the proposed issue, which is referred to as the green-shoe option. Allotment has to be made within 30 days of the closure of the Public Issue. All the listing formalities for a public issue has to be completed within 70 days from the date of closure of the subscription list.

GUIDELINES CONT..
Dispatch of Refund Orders: Refund orders have to be dispatched within 30 days of the closure of the Public Issue. Refunds of excess application money i.e. for un-allotted shares have to be made within 30 days of the closure of the Public Issue.

GUIDELINES CONT..
Other regulations pertaining to IPO: Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public except in disinvestment. If the issue is undersubscribed then the collected amount should be returned back (not valid for disinvestment issues). If the issue size is more than 500 crores, voluntary disclosure should be made regarding the deployment of the funds and an adequate monitoring mechanism to be put in place to ensure compliance. Code of advertisement specified by SEBI should be adhered to.