Raising of Funds from Equity and Procedural Aspects: Public Funding

As per Regulation 47 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, a person shall not make an application in the net offer category for a number of specified securities that exceeds the total number of securities offered to the public. However, the maximum application by non-institutional investors shall not exceed total number of specified securities offered in the issue less total number of specified securities offered in the issue to qualified institutional buyers.

i.Thus, Arjun Patel, being an individual, can apply as a Retail Individual Investor (RII) for specified securities for a value of up to ₹ 2 Lakhs in the category of RII which is 40 lakh specified securities in the given case. Since applications must be in multiples of ₹ 12,000, Arjun Patel can apply for maximum 16 applications (₹ 2,00,000/ ₹ 12,000 i.e 16.67), which equals to 480 shares at ₹ 400 per share (16 applications x ₹ 12,000 /400) Therefore, Arjun Patel can apply maximum 480 shares in the net offer category.

The maximum number of specified securities which a non-institutional investor can apply are:

Thus, non-institutional investors can apply for a maximum of 1.5 crore specified securities in this issue.

iii.Minimum application size:

Minimum application value

Minimum shares = Issue price per share ₹ 12,000

Therefore, an investor must apply for at least 30 shares, and applications must be made in multiples of 30.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(a) (Syllabus 2022).

SEBI has made certain amendments in Schedule XIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 pertaining to allocation of equity shares to the anchor investors. According to the amended regulations, the allocation to the anchor investors shall be on a discretionary basis, subject to the following:

In case of public issue on the main board, through the book building process:

(i)minimum of 2 and maximum of 15 such investors shall be permitted for allocation up to ₹ 250 crores, subject to minimum allotment of ₹ 5 crores per such investor;

(ii)in case of allocation above ₹ 250 crores, a minimum of 5 such investors and a maximum of 15 s uch investors for allocation up to ₹ 250 crores and an additional 15 such investors for every additional ₹ 250 crores or part thereof, shall be permitted, subject to a minimum allotment of ₹ 5 crores per such investor.

Further, 40% of the anchor investor portion, shall be reserved as under:

•33.33% of the anchor investor portion shall be reserved for domestic mutual funds and

•6.67% shall be reserved for life insurance companies and pensions funds.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6(a) (Syllabus 2022).

(i)Eligibility under Regulation 6(1) of SEBI (ICDR) Regulations, 2018 – Track Record Route

a)Net Tangible Assets:

•Condition - at least three crore rupees, calculated on a restated and consolidated basis, in each of the preceding three full years (of twelve months each).

•Given – 2022: ₹ 4 Crore, 2023: ₹ 3.5 crore, 2024: ₹ 2.8 crore

Condition not satisfied.

b)Average Operating Profits:

•Condition – at least ₹ 15 crore, calculated on a restated and consolidated basis, during the preceding three years (of 12 months each), with operating profit in each of these preceding 3 years.

•Given – 2022: ₹ 5 Crore, 2023: ₹ 6 crore, 2024: ₹ 4crore

Average = ( ₹ 5 cr + ₹ 6 cr + ₹ 4 cr) ÷ 3 = ₹ 5 crore.

Condition not satisfied.

c)Net Worth

•Condition – at least ₹ 1 crore in each of the preceding three full years (of 12 months each), calculated on a restated and consolidated basis.

•Given – 2022: ₹ 1.5 Crore, 2023: ₹ 1.2 crore, 2024: ₹ 1.3 crore

Condition satisfied.

d)Condition for Name Change by the Company- If the company has changed its name within the last one year, at least 50% of the revenue, calculated on a restated and consolidated basis, for the preceding one full year has been earned by it from the activity indicated by its new name.

In Financial Year 2024, the company earns 55% of total revenue from the new line of business. Hence, the Company satisfies the condition.

Since the company fails 2 out of 4 conditions, it is not eligible under Track record route under Regulation 6(1) of SEBI (ICDR) Regulations, 2018.

(ii)Eligibility under Regulation 6(2) of SEBI (ICDR) Regulations, 2018– Book Building Route

An issuer not satisfying the condition stipulated in Regulation 6(1) of SEBI (ICDR) Regulations, 2018 shall be eligible to make an initial public offer only if the issue is made through the bookbuilding process and the issuer undertakes to allot at least 75% of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to do so.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 4(c) (Syllabus 2022).

a)Computation of quantum of shares available for allocation to Anchor Investors

Up to 60% of the portion available for allocation to qualified institutional buyers shall be available for allocation/allotment to the anchor investor(s).

Issue size 800 crore equity shares of Neel Ltd.

Portion available to QIBs = 50% of total issue size i.e 400 crore equity shares

Anchor Investor portion up to 60% of portion available to QIBs, i.e 240 crore equity shares

b)Quantum of Shares reserved for domestic Mutual Funds in the portion of Anchor Investors

One-third of the anchor investor portion shall be reserved for domestic mutual funds. One third of Anchor Investor portion, i.e 1/3 x 240 crore equity shares = 80 crore equity shares

c)Computation of amount required to be brought in by Anchor Investors, when Book building price is ₹ 440 and Anchor Investor price is ₹ 435

If the price fixed as a result of book building is higher than the price at which the allocation is made to the anchor investors, the anchor investors shall pay the additional amount. Since the Book Building price is higher than Anchor Investor price, the Anchor investor has to bring the additional amount of ₹ 5 per share. That is, the Anchor Investors have to pay Rs.440 per share.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2A(iii) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

In order to streamline and align the process of applying in the public issue of debt securities, non-convertible redeemable preference shares, municipal debt securities and securitised debt instruments with that of public issue of equity shares and convertibles, it has been decided that all individual investors applying in public issues of such securities through intermediaries (viz. syndicate members, registered stock brokers, registrar to an issue and transfer agent and depository participants), where the application amount is upto ₹ 5 Lakh, shall only use UPI for the purpose of blocking of funds and provide his/ her bank account linked UPI ID in the bid-cum-application form submitted with intermediaries.

Further, individual investors shall continue to have the choice of availing other modes (viz. through SCSBs and Stock Exchange Platform) for making an application in the public issue.

These provisions are applicable to public issues of debt securities, non-convertible redeemable preference shares, municipal debt securities and securitised debt instruments opening w.e.f. November 01, 2024.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Differential Pricing [Regulations 30 & 128 of SEBI (ICDR) Regulations, 2018]

An issuer may offer specified securities at different prices, subject to the following:

i.retail individual investors or retail individual shareholders or employees entitled for reservation made under regulation 33 & 130 of the ICDR Regulations, may be offered specified securities at a price not lower than by more than 10% of the price at which net offer is made to other categories of applicants, other than anchor investors;

ii.in case of a book-built issue, the price of the specified securities offered to an anchor investor shall not be lower than the price offered to other applicants;

iii.In case the issuer opts for the alternate method of book building as specified under ICDR Regulations, 2018, the issuer may offer specified securities to its employees at a price not lower by more than 10% of the floor price.

iv.In case of FPO, an additional condition is that in case of a composite issue, the price of the specified securities offered in the public issue may be different from the price offered in rights issue and justification for such price difference shall be given in the offer document.

v.Discount, if any, shall be expressed in rupee terms in the offer document.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4(d) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Material Contracts Documents which would be required for the public issue for raising capital:

(i)Offer/Issue Agreement between Company, the Merchant Banker and Selling Shareholders (if any).

(ii)Memorandum of Understanding or Agreement between Company and the Registrar to the Issue.

(iii)Bankers to the Issue Agreement between Company, Merchant Banker and the Banker to the Issue.

(iv)Underwriting Agreement between Company, Merchant Banker & other Underwriters (if any).

(v)Market Making agreement between Company, the Lead Managers and the Marker Maker to the Issue (If applicable).

(vi)Syndicate Agreement between Company, Merchant Banker & Syndicate Members.

(vii)Copy of Tripartite agreement entered into between Company, CDSL and the Registrar to the Issue.

(viii)Copy of Tripartite agreement entered into between Company, NSDL and the Registrar to the Issue.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

a)Regulation 32 (1) and 129 (2) of SEBI(ICDR) Regulations, 2018 provides that in a book-built offer, where the issuer fulfils the eligibility criteria regarding net tangible assets, average operating profit, net worth etc, the allocation pattern of the net offer shall be as follows:

1.Not less than 35% to retail individual investors

2.Not less than 15% to non-institutional investors

3.Not more than 50% to QIBs of which 5% shall be reserved for mutual funds.

However, the unsubscribed portion in category 1 & 2 above may be allocated to applicants in any other category.

Further in addition to 5% allocation available in terms of 3 above, mutual funds shall be eligible for allocation under the balance available for QIBs.

b)In case the criteria are not fulfilled

As per the above regulations if the company does not meet the eligibility criteria, the allocation pattern shall be as follows:

i)Not more than 10% to the retail individual investors

ii)Not more than 15% to non-institutional investors

iii)Not less than 75% to the QIBs of which 5% shall be reserved for MFs.

However, the unsubscribed portion in either of the categories specified in i) & ii) above may be allocated to applicants in the other category. Further in addition to 5% allocation available in terms of clause iii) above mutual funds shall be eligible for allocation under the balance available for QIBs.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(c) (Syllabus 2022).

(i)Since total number of shares for which application received is 1600, the allotment shall be made as follows:

(ii)Since both bidders 1 and 3 have been allotted 154 and 76 shares respectively, a sum of ₹ 46,200 (154 shares x ₹ 300 per share) and ₹ 22,800 (76 shares x ₹ 300 per share) shall be charged from them.

The balance amount of ₹ 43,800 ( ₹ 360 x 250 - ₹ 46,200) shall be refunded to bidder 1 and an amount of ₹ 12,200 ( ₹ 350 x 100 - ₹ 22,800) shall be refunded to Bidder 3.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(a) (Syllabus 2022).

(i)Maximum number of shares which can be issued through the green shoe option

= 10,00,000 x 15% = 1,50,000 equity shares

(ii)If the market price post listing comes down to ₹ 90, the stabilizing agent will purchase shares from the market to boost up the demand for the shares. This will induce the investors to start purchasing the shares of XYZ Ltd. and consequently, the market price of shares will go up. So, basically, green shoe option is a price stabilizing mechanism. The shares borrowed from the promoters will then be returned to them.

(iii)If the market price post listing goes up to ₹ 110, the stabilizing agent will do the same thing as discussed in point (ii) above. However, if the post listing market price goes above ₹ 120, the best course of action for the stabilizing agent is to wait for 30 days after the date of listing and then take steps to allot further shares. The shares borrowed from the promoters will then be returned to them.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(c) (Syllabus 2022).

(i)As per Regulation 2(1)(z)(vv) of SEBI (Issue of Capital and Disclosures) Requirements Regulations, 2018, ‘retail individual shareholder’ means a shareholder who applies or bids for specified securities for a value of not more than two lakhs rupees. Mr. X as an Retail Individual Investor (RII), can apply for specified securities for a value of up to ₹ 2 Lakhs in the category of RII which is 50 lakh specified securities in the given case.

(ii)As per Regulation 47 of SEBI (Issue of Capital and Disclosures Requirements) Regulations, 2018 a person shall not make an application in the net offer category for a number of specified securities that exceeds the total number of specified securities offered to the public. However, the maximum application by non-institutional investors shall not exceed total number of specified securities offered in the issue less total number of specified securities offered in the issue to qualified institutional buyers.

Accordingly, the maximum number of specified securities which a non-institutional investor can apply are:

Thus, the number of specified securities which non-institutional investors can apply shall not exceed 2 crore.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Green Shoe Option means an option of allotting equity shares in excess of the equity shares offered in the public issue as a post-listing price stabilizing mechanism in accordance with the provisions of SEBI (ICDR) Regulations, 2018. There is a provision in an Initial Public Offering (IPO) underwriting agreement that grants the underwriter the right to sell more shares than originally planned, if the demand for a security issued proves higher than expected. It is also called an over-allotment option.

According to SEBI, Green Shoe Option is a price stabilizing mechanism in which shares are issued more than the issue size, i.e. a maximum of 15%. It is a mechanism to stabilize the issue price post listing.

PART-B

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(e) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Documents to be submitted to stock exchanges by the company prior to listing under T+2 days category (i.e. within 2 working days from the closure of the issue)

•All due diligence certificates with SEBI by Merchant banker(s).

•Observation Letter issued by SEBI pursuant to filing of draft offer document.

•List of authorized signatories along with their specimen signatures.

•Confirmation from Lead Managers that devolvement notices have been sent to underwriters (applicable if the issue has devolved).

•Certificate from the Book Running Lead Manager(s) that the issue has received minimum subscription as specified under Regulation 45 (1) of SEBI (ICDR) Regulations, 2018.

•Confirmation from the company regarding the email ID for Investor Grievances as per Regulation 46 of SEBI (LODR), Regulations, 2015.

•Copies of all advertisements published in connection with the issue up to T+1 stage.

•Confirmation from the company stating that they have obtained authentication for SCORES from SEBI as per Regulation 13 of SEBI (LODR) Regulations, 2015.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The draft offer document/draft letter of offer filed with the SEBI for public issue/rights issue (hereinafter “draft offer document”) of securities shall be scrutinized based on the broad SEBI guidelines and such documents which are not compliant with the instructions provided under Schedule VI of SEBI (ICDR) Regulations, 2018 and guidelines provided, shall be returned to the Issuer. The broad guidelines for returning of draft offer document and its re-submission are provided below:

Return of Draft Offer Document

The following shall be ensured while preparing offer documents failing which it could be returned:

•The Draft offer document is drafted in simple language with visual representation of data, so as to ensure ease of understanding of its contents.

•The information in the draft offer document is presented in a clear, concise, and intelligible manner.

•The draft offer document avoids complex presentations, vague, ambiguous and imprecise explanations, complex information, repetition of disclosures and inconsistency.

•The risk factors are appropriately worded in simple, clear and unambiguous language to bring out clearly the risk to the investor, without undermining the same.

Resubmission of Draft Offer Document

•While there shall be no requirement for payment of any fees on account of resubmission of draft offer document, the requirement for paying applicable fees for the changes, if any, in terms of changes specified in Schedule XVI of the SEBI (ICDR) Regulations, 2018 for the updated offer document shall continue to apply as is applicable to issuer for updation in offer document.

•There shall be no refund of the filing fees on account of non-submission of draft offer document by the issuer after return.

•The issuer, within two days of resubmission of draft offer document with the Board, shall make a public announcement in the mode and manner as prescribed under SEBI (ICDR) Regulations, 2018, as applicable, and the issuer shall also include a disclosure that it is a resubmitted document.

•The Issuer shall make written intimation to its sectoral regulator, if any, informing about the return and resubmission of the draft offer document, as applicable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(a) (Syllabus 2022).

Fast Track Follow-on Public Offer

An Issuer Company whose shares are already listed, need not file the draft offer document with SEBI and obtain observations from SEBI, or make a security Deposit with the Stock Exchanges for its follow-on public offer (FPO) if it satisfies the following conditions:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(b) (Syllabus 2022).

Entities not eligible to make a FPO (Regulation 102 of SEBI (ICDR) Regulations, 2018

An issuer shall not be eligible to make a FPO of specified securities if: -

a)The issuer or any of its promotors/promotor group/directors/selling shareholders are debarred from accessing the capital market by SEBI

b)If any of the promotors/directors of the issuer is a promotor or a director of any other company which is debarred from accessing the capital market by SEBI

c)If the issuer or any of its promotors/directors is a willful defaulter or a fraudulent borrower

d)If any of the promotors/directors is a fugitive economic offender.

Restrictions under (a) and (b) above shall not apply to the persons or entities mentioned therein, who were debarred in the past by SEBI and the period of debarment is already over as on the date of filing of the draft offer document with SEBI.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

1.As per Regulation 2(1)(z)(vv) of SEBI (Issue of Capital and Disclosures) Requirements Regulations,

2018, “retail individual shareholder” means a shareholder who applies or bids for specified securities for a value of not more than two lakhs rupees. Assuming Romesh as Retail Individual Investor (RII), he can apply for specified securities for a value of up to ₹ 2 Lakhs in the category of RII which is ₹ 1 crore specified securities in the given case.

2.As per Regulation 47 of SEBI (Issue of Capital and Disclosures) Requirements Regulations,

2018 a person shall not make an application in the net offer category for a number of specified securities that exceeds the total number of specified securities offered to the public. However, the maximum application by non-institutional investors shall not exceed total number of specified securities offered in the issue less total number of specified securities offered in the issue to qualified institutional buyers.

Accordingly, the maximum number of specified securities which a non-institutional investor can apply are:

Thus, the total number of specified securities to non-institutional investors shall not exceed ₹ 3.34 crore.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The SME Platform of a Stock Exchange need to obtain confirmation from the Issuer Company and BRLM (s)/ Lead Manager(s) that:

a)The Company is eligible to make an issue under SEBI (ICDR) Regulations, 2018 and is in compliance with Regulation 228 and 230 of said regulations.

b)For the proposed IPO, the Company is in compliance with the eligibility requirement for an SME to make an IPO as laid down under Regulation 229 of SEBI (ICDR) Regulations 2018.

c)The Company is in compliance with the eligibility criteria of the Exchange for listing on BSE/ NSE SME Platform. (Point wise compliance with Exchange requirement shall be given as separate Annexure to the application.)

d)There are no restrictive clauses in the Articles of Association (AoA) of the Company.

e)The provisions of the Memorandum and Articles of Association (MoA) are not inconsistent with the clauses of the Listing agreement or any other applicable law, Rules or Regulations.

f)For the proposed IPO, the company has complied with all the statutory requirements including requirements of the Companies Act, 2013, SEBI Act, RBI Guidelines, SEBI (ICDR) Regulations, 2018 etc. and no statutory authority has restrained the company from issuing its securities to public through IPO.

g)The company has appointed <name> as compliance officer in term of Regulation 244(8) of SEBI (ICDR) Regulations, 2018 and his/her contact details are provided.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

a)Where all Green Shoe Shares are bought back: In this situation, funds in the Green Shoe Escrow Account (30,000 shares x ₹ 100 i.e ₹ 30,00,000) would be deployed by the stabilising agent towards buying up shares from the open market. Given that the prices prevalent in the market would be less than the issue price of ₹ 100, the stabilising agent would have sufficient funds lying at his disposal to complete this operation.

Having bought back all of the 30,000 shares, these shares would be temporarily held in a special depository account with the depository participant (Green Shoe Demat Account), and would then be returned to the lender shareholders, within a maximum period of two days after the stabilisation period.

b)Where none of the Green Shoe Shares are bought back: This situation would arise in the event that the share prices have fallen below the Issue Price, but the stabilising agent is unable to find any sellers in the open market, or in an event where the share prices continue to trade above the listing price, and therefore there is no need for the stabilising agent to indulge in price stabilisation activities.

In either of the above-said situations, the stabilising agent is under a contractual obligation to return the 30,000 shares that had initially been borrowed from the lending shareholder(s). Towards meeting this obligation, the issuer company would allot 30,000 shares to the stabilising agent into the Green Shoe Demat Account (the consideration being the funds lying the Green Shoe Escrow Account), and these shares would then be returned by the stabilising agent to the lending shareholder(s), thereby squaring off.

c)Where some of the Green Shoe Shares are bought back, say 20,000 shares: This situation

could arise in an event where the share prices witness a drop in the initial stages of the price stabilization period, but recover towards the later stages, generally after such purchase.

In this situation, the stabilising agent has a responsibility to return 30,000 shares to the lending shareholder(s), whereas the stabilising activities have yielded only 20,000 shares.

Similar to the instance mentioned in Situation (b) above, the issuer company would allot the differential 10,000 shares into the Green Shoe Demat Account to cover up the shortfall, and the stabilising agent would discharge his obligation to the lending shareholder(s) by returning the 30,000 shares that had been borrowed from them.

In both Situation (b) and (c), the issuer company would need to apply to the exchanges for obtaining listing/ trading permissions for the incremental shares allotted by them, pursuant to the Green Shoe mechanism.

Any surplus lying in the Green Shoe Escrow Account would then be transferred to the Investor Protection and Education Fund established by SEBI, as required under ICDR Regulations and the account shall be closed thereafter.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 3 (Syllabus 2022).

Initial Public Offering (IPO) means an offer of specified securities by an unlisted issuer to the public for subscription and which includes fresh issuance of shares by the company or includes an Offer for Sale (OFS) of specified securities to the public by any existing holder of such securities in an unlisted issuer. In order to qualify as an Initial public offer, the offer of securities must be by an unlisted issuer company and such an issue shall be made to the public and not to the existing shareholders of the unlisted issuer company or to selected group of investors.

Eligibility requirements for an Initial Public Offer [Regulation 6(1) of SEBI (ICDR) Regulations, 2018]

An issuer shall be eligible to make an IPO only if:

a)the issuer has net tangible assets of at least ₹ 3 Cores on a restated and consolidated basis, in each of the preceding three full years of (12 months each) of which not more than 50% is held in monetary assets;

However, if more than 50% of the net tangible assets are held in monetary assets, the issuer has utilized or made firm commitments to utilize such excess monetary assets in its business or project. This limit of 50% shall not apply in case of IPO is made entirely through an offer for sale.

b)the issuer has an average operating profit of at least ₹ 15 Cores, calculated on a restated and consolidated basis, during the three preceding years with operating profit in each of the three preceding years;

c)the issuer has a net worth of at least ₹ 1 crore in each of the preceding three full years, calculated on a restated and consolidated basis;

d)in case the issuer has changed its name within the last one year, at least 50% of the revenue calculated on a restated and consolidated basis, for the preceding one full year has been earned by it from the activity indicated by the new name.

An issuer who does not meet the above criteria can still make an IPO provided it offers 75% of its issue to QIBs and follows book building process for discovery of price.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(c) (Syllabus 2022).

Differential Pricing

1.Under Regulation 30 of the SEBI (ICDR) Regulations, 2018, an issuer may offer its specified securities at different prices, subject to the following:

a)A retail individual investors or retail individual shareholders or employees entitled for reservation made under Regulation 33 of the SEBI (ICDR) Regulations 2018, may be offered specified securities at a price not lower than by more than 10% of the price at which net offer is made to other categories of applicants, excluding anchor investors.

b)In case of a book built issue, the price of the specified securities offered to an anchor investor shall not be lower than the price offered to other applicants.

c)In case the issuer opts for the alternate method of book building as specified under ICDR Regulations, 2018, the issuer may offer the specified securities to its employees at a price not lower by more than 10% of the floor price.

d)As per Regulation 128 of the SEBI (ICDR) Regulations, 2018, in case of a further public offer which is part of a composite issue, the price of the specified securities offered in the public issue may be different from the price offered in rights issue and justification for such price difference shall be given in the offer document.

2.Discount, if any, shall be expressed in rupee terms in the offer document.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 2(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Material Documents which would be required for the IPO

1.Certified copies of the updated Memorandum of Association and Articles of Association of Company, as amended from time to time.

2.Certificate of Incorporation of Company.

3.Certificate of commencement of business.

4.Copies of the Board and shareholder's resolutions authorizing the Issue.

5.Report of the Statutory Auditors/Peer Review Auditor on Company's Restated Financial Statements (Standalone) for past 3 financial years and stub period not older than 6 months from the date of filing & opening of IPO.

6.Report of the Peer Review Auditor on Company's Restated Financial Statements (Consolidated) for past 3 financial years and stub period not older than 6 months from the date of filing & opening of IPO.

7.Statement of Tax Benefits from Chartered Accountants.

8.Copies of annual reports of Company for the past three Financial Years.

9.Consents of Statutory Auditors, Peer Review Auditors, Bankers to Company, Merchant Banker, Registrar to the Issue, Legal Advisor to the Issue, Directors of Company, Company Secretary and Compliance Officer, as referred to, in their respective capacities.

10.In-principle approval from the Stock Exchanges for listing of the securities.

11.Due Diligence certificate to SEBI from the Merchant Banker.

12.Observation Letter issued by the Securities and Exchange Board of India and reply to the observation by Merchant Banker.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 6A(i) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Eligibility of Fast Track Further Public Offer (FPO)

The equity shares of the issuer have been listed on any stock exchange for a period of at least three years immediately preceding the reference date. Since Jupiter Ltd. got its equity shares listed on 1st April, 2020 and wants to issue further shares during the financial year 2022-23 which is within 3 years of its initial listing and hence, the company is not eligible to issue shares under Fast track FPO process.

Other conditions to be satisfied in order to be eligible for issuing shares under Fast Track FPO are mentioned hereunder:

i)entire shareholding of the promoter group of the issuer is held in dematerialised form on the reference date;

ii)the average market capitalisation of public shareholding of the issuer is at least one thousand crore rupees in case of public issue and two hundred and fifty crore rupees in case of rights issue;

iii)the annualised trading turnover of the equity shares of the issuer during six calendar months immediately preceding the month of the reference date has been at least 2% of the weighted average number of equity shares listed during such six months’ period. However, if the public shareholding is less than 15% of its issued equity capital, the annualised trading turnover of its equity shares has been at least 2% of the weighted average number of equity shares available as free float during such six months’ period;

iv)annualized delivery-based trading turnover of the equity shares during six calendar months immediately preceding the month of the reference date has been at least 10% of the annualised trading turnover of the equity shares during such six months’ period;

v)The issuer has been in compliance with the equity listing agreement or SEBI (LODR) Regulations, 2015, as applicable, for a period of at least three years immediately preceding the reference date. However, if the issuer has not complied with the provisions of the listing agreement or SEBI Listing Regulations, 2015, as applicable, relating to composition of board of directors, for any quarter during the last three years immediately preceding the reference date, but is compliant with such provisions at the time of filing of red herring prospectus with Registrar of Companies, and adequate disclosures are made in the red herring prospectus about such non-compliances during the three years immediately preceding the reference date, it shall be deemed as compliance with the condition; Further,

imposition of monetary fines by stock exchange on the issuer shall not be a ground for ineligibility for undertaking issuances under this regulations.

vi)the issuer has redressed at least 95% of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date;

vii)that no show-cause notices, excluding proceedings for imposition of penalty, have been issued by the SEBI and pending against the issuer or its promoters or whole time directors as on the reference date: In cases where against the issuer or its promoters or whole time directors, (i) show-cause notice(s) has been issued by the SEBI or the Adjudicating Officer, in a proceeding for imposition of penalty; or (ii) prosecution proceedings have been initiated by the SEBI; necessary disclosures in respect of such action(s) along with its potential adverse impact on the issuer shall be made in the offer document;

viii)if the issuer or the promoter or the promoter group or the director of the issuer has settled any alleged violations of securities laws through the settlement mechanism of the SEBI in the past three years immediately preceding the reference date, then the disclosure of such compliance of the settlement order, shall be made in the offer document;

ix)equity shares of the issuer have not been suspended from trading as a disciplinary measure during last three years immediately preceding the reference date;

x)There shall be no conflict of interest between the lead merchant banker(s) and the issuer or its group or associate company in accordance with applicable regulations.

xi)For audit qualifications, if any, in respect of any of the financial years for which accounts are disclosed in the offer document, the issuer shall provide the restated financial statements adjusting for the impact of the audit qualifications.

Further, for the qualifications wherein impact on the financials cannot be ascertained, the same shall be disclosed appropriately in the offer document.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 2A(iii) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Issuer eligibility for making an IPO

An issuer shall be eligible to make an IPO only if:

a)the issuer has net tangible assets of at least ₹ 3 crores on a restated and consolidated basis, in each of the preceding three full years (of 12 months each) of which not more than 50% is held in monetary assets; However, if more than 50% of the net tangible assets are held in monetary assets, the issuer has utilized or made firm commitments to utilize such excess monetary assets in its business or project. This limit of 50% shall not apply in case of IPO is made entirely through an offer for sale.

b)the issuer has an average operating profit of at least ₹ 15 crores, calculated on a restated and consolidated basis, during the three preceding years (of 12 months each) with operating profit in each of the three preceding years;

c)the issuer has a net worth of at least ₹ 1 crore in each of the preceding three full years, (of 12 months each) calculated on a restated and consolidated basis.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 4(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Material Contracts to the Issue that should be available for inspection at the registered office of the company from the draft stage till the closure of the IPO are as under:

1.Offer/Issue Agreement between Company, the Merchant Banker and Selling Shareholders (if any).

2.Memorandum of Understanding or Agreement between Company and the Registrar to the Issue.

3.Bankers to the Issue Agreement between Company, Merchant Banker and the Banker to the Issue.

4.Underwriting Agreement between Company, Merchant Banker & other Underwriters (if any).

5.Market Making agreement between Company, the Lead Managers and the Marker Maker to the Issue (If applicable).

6.Syndicate Agreement between Company, Merchant Banker & Syndicate Members.

7.Copy of Tripartite agreement entered into between Company, CDSL and the Registrar to the Issue.

8.Copy of Tripartite agreement entered into between Company, NSDL and the Registrar to the Issue.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The offer is filled up at the cut-off price of ₹ 138. All investors who bid at ₹ 138 and higher are eligible for allotment in their respective categories.

The company may decide the cut-off price at a price lower than the price at which the issue is subscribed for the benefit of the investors.

Book built issue may also have a clause which allows allotment to retail investors at a price, which is at a discount to the cut off price, which cannot, however exceed 10% of the price at which shares are allotted to the other category of investors.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 1(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Regulation 32(1) & 129 (1) of SEBI (ICDR) Regulations, 2018 provides that in a book built offer, where the issuer fulfils the eligibility criteria regarding net tangible assets, average operating profit, net worth etc., the allocation pattern in the net offer shall be as follows:

a)Not less than 35% to the retail individual investors.

b)Not less than 15% to non-institutional investors

c)Not more than 50% to the QIBs of which 5 per cent shall be reserved for mutual funds.

However, the unsubscribed portion in either of the categories specified in (a) & (b) may be allocated to applicants in any other category.

Further, in addition to 5% allocation available in terms of clause (c), mutual funds shall be eligible for allocation under the balance available for qualified institutional buyers.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 1(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Regulation 32(2) & 129 (2) of SEBI (ICDR) Regulations, 2018 provides that in bookbuilt offer, where a company does not meet the eligibility criteria regarding net tangible assets, average operating profit, net worth etc., the allocation pattern shall be as follows:

a)Not more than 10% to the retail individual investors

b)Not more than 15% to non-institutional investors

c)Not less than 75% to the QIBs of which 5% shall be reserved for mutual funds.

However, the unsubscribed portion in either of the categories specified in (a) & (b) may be allocated to applicants in the other category.

Further, in addition to 5% allocation available in terms of clause (c), mutual funds shall be eligible for allocation under the balance available for qualified institutional buyers.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 1(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

As per SEBI (Issue of Capital and Disclosure Requirements (Second Amendment) Regulations, 2021 -

— An issuer company whose specified securities are traded on the Innovators Growth Platform pursuant to an initial public offer may exit from the Innovators Growth Platform.

•if such an exit is approved by the Board of directors of the company in its meeting.

•if such an exit is approved by the shareholders of the company by a special resolution passed through postal ballot or e-voting, by majority of public shareholders after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution.

However, the special resolution shall be acted upon only if the votes cast by the majority of public shareholders are in favour of such exit proposal.

— Delisting price is based on a floor price determined in terms of Regulation 8 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as may be applicable, and an additional delisting premium justified by the acquirer / promoter.

— The post-offer acquirer / promoter shareholding (along with the persons acting in concert with the acquirer / promoter), taken together with the shares tendered reaches 75% of the total issued shares of that class and at least 50% shares of the public shareholders as on date of the meeting referred are tendered and accepted; and Recognised stock exchange(s) where its shares are listed approves of such an exit. — Exit shall be pursuant to the SEBI (Delisting of Equity Shares) Regulations.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 2(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The eligibility conditions for the Fast Track Follow-on Public Offer (FPO) are as follows:

1)Listing : Equity shares of the issuer have been listed on any stock exchange for a period of at least three years immediately preceding the reference date;

2)Demat Form : Entire shareholding of the promoter group of the issuer is held in dematerialised form on the reference date;

3)Market Capitalisaton : Average market capitalisation of public shareholding of the issuer is at least one thousand crore rupees in case of public issue and two hundred and fifty crore rupees in case of rights issue;

4)Trading Turnover : Annualised trading turnover of the equity shares of the issuer during six calendar months immediately preceding the month of the reference date has been at least two per cent of the weighted average number of equity shares listed during such six month's period. However if the public shareholding is less than 15% of its issued equity capital, the annualised trading turnover of its equity shares has been at least 2% of the weighted average number of equity shares available as free float during such six months’ period;

5)Delivery based Trading : Annualized delivery-based trading turnover of the equity shares during six calendar months immediately preceding the month of the reference date has been at least ten per cent of the annualised trading turnover of the equity shares during such six months period;

6)Compliance with LODR : Issuer has been in compliance with the equity listing agreement or the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as applicable, for a period of at least three years immediately preceding the reference date;

7)Investor Complaints : Issuer has redressed at least ninety- five per cent of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date;

8)No show cause Notices : No show-cause notices have been issued or prosecution proceedings have been initiated by SEBI and pending against the issuer or its promoters or whole-time directors as on the reference date:

9)No alleged Violations : Issuer or promoter or promoter group or director of the issuer has not settled any alleged violation of securities laws through the consent or settlement mechanism with SEBI during three years immediately preceding the reference date;

10)Disciplinary Measures : Equity shares of the issuer have not been suspended from trading as a disciplinary measure during last three years immediately preceding the reference date:

11)Conflict of Interest : There shall be no conflict of interest between the lead manager(s) and the issuer or its group companies in accordance with the applicable regulations.

12)Audit Qualification : Impact of audit qualifications, if any and where quantifiable, on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed in the letter of Offer does not exceed five per cent of the net profit or loss after tax of the issuer for the respective years.

Point no. 8, 9 and 12 have been substituted by the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2022 w.e.f. 14.1.2022. Substituted points are as under:

8.no show-cause notices, excluding proceedings for imposition of penalty, have been

issued by the Board and pending against the issuer or its promoters or whole time directors as on the reference date:

In cases where against the issuer or its promoters or whole time directors,

(i)show-cause notice(s) has been issued by the Board or the Adjudicating Officer, in a proceeding for imposition of penalty; or

(ii)prosecution proceedings have been initiated by the Board;

necessary disclosures in respect of such action(s) along with its potential adverse impact on the issuer shall be made in the offer document

9.if the issuer or the promoter or the promoter group or the director of the issuer has

settled any alleged violations of securities laws through the settlement mechanism of the Board in the past three years immediately preceding the reference date, then the disclosure of such compliance of the settlement order, shall be made in the offer document.

12.for audit qualifications, if any, in respect of any of the financial years for which

accounts are disclosed in the offer document, the issuer shall provide the restated financial statements adjusting for the impact of the audit qualifications. Further, for the qualifications wherein impact on the financials cannot be ascertained, the same shall be disclosed appropriately in the offer document.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 3(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

List of documents to be submitted on (T+2 days) for listing of IPO are as under:

•All due diligence certificates filed with SEBI by Merchant banker(s).

•Observation Letter issued by SEBI pursuant to filing of draft offer document.

•List of authorized signatories along with their specimen signatures.

•Confirmation from Lead Managers that devolvement notices have been sent to underwriters (applicable if the issue has devolved).

•Certificate from the BRLM(s) that the issue has received minimum subscription as specified under Regulation 45 (1) of SEBI (ICDR) Regulations, 2018.

•Confirmation from the company regarding the email ID for Investor Grievances as per Regulation 46 of SEBI (LODR), Regulations, 2015.

•Copies of all advertisements published in connection with the issue up to T+1 stage.

•Confirmation from the company stating that they have obtained authentication for SCORES from SEBI as per Regulation 13 of SEBI (LODR) Regulations, 2015.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 6(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The eligibility requirements for initial public offer are provided under Regulation 6(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018. The said Regulation inter-alia, provides that an issuer shall be eligible to make an IPO only if, in case the issuer has changed its name within the last one year, at least 50% of the revenue calculated on a restated and consolidated basis, for the preceding one full year has been earned by it from the activity indicated by the new name.

Hence, based on the above it can be concluded that as the Company has changed its name in the previous year, it would be eligible for an IPO, if at least 50% of the revenue calculated on a restated and consolidated basis, for the preceding one full year has been earned from its aeronautical designing business.

Nonetheless, in terms of the Regulation 6(2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, an issuer not satisfying the condition stipulated above shall be eligible to make an initial public offer if the issue is made through the book-building process and the issuer undertakes to allot at least 75% of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to do so. Therefore, Ultra Aero Technology Services Limited may also opt for this route if the conditions above are not satisfied.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

As per Regulation 14(3) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, the promoters shall bring full amount of the promoters' contribution including premium at least one day prior to the date of opening of the issue. In terms of the Regulation 14(4) of the said Regulations where the promoters have to subscribe to equity shares or convertible securities towards minimum promoters' contribution, the amount of promoters' contribution shall be kept in an escrow account with a scheduled commercial bank, which shall be released to the issuer along with the release of the issue proceeds. However, where the promoters' contribution has already been brought in and utilised, the issuer shall give the cash flow statement disclosing the use of such funds in the offer document. Further, where the minimum promoters' contribution is more than Rs.100 crore and the initial public offer is for partly paid shares, the promoters shall bring in at least Rs. 100 crore before the date of opening of the issue and the remaining amount may be brought on a pro-rata basis before the calls are made to the public. Regulation 14(4) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 further clarified that Promoters' contribution shall be computed on the basis of the post-issue expanded capital:

a)assuming full proposed conversion of convertible securities into equity shares;

b)assuming exercise of all vested options, where any employee stock options are outstanding at the time of initial public offer.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, an issuer, whose specified securities are listed on a SME Exchange and whose post issue face value capital is more than ten crore rupees and up to twenty five crore rupees, may migrate:

•its specified securities to Main Board if its shareholders approve such migration by passing a special resolution through postal ballot to this effect; and

•if such issuer fulfils the eligibility criteria for listing laid down by the Main Board.

However, the special resolution shall be acted upon if and only if the votes cast by shareholders other than promoters in favour of the proposal amount to at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal which means that resolution shall be approved by majority of minority.

Where the post issue face value capital of an issuer listed on SME exchange is likely to increase beyond twenty five crore rupees by virtue of any further issue of capital by the issuer by way of rights issue, preferential issue, bonus issue, etc. the issuer shall first migrate its specified securities listed on SME exchange to Main Board and seek listing of specified securities proposed to be issued on the Main Board subject to the fulfilment of the eligibility criteria for listing of specified securities laid down by the Main Board.

However, no further issue of capital by the issuer shall be made unless:

•the shareholders of the issuer have approved the migration by passing a special resolution through postal ballot wherein the votes cast by shareholders other than promoters in favour of the proposal amount to at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal;

•the issuer has obtained in- principle approval from the Main Board for listing of its entire specified securities on it.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Under the SEBI Regulations as well as the provisions of the Companies Act, 2013, the copies of standard material contracts and documents for inspection are required to be attached to the copy of offer document delivered to ROC and said documents are also required to be made available for inspection at registered office of the Company from draft offer document stage till the closure of the IPO.

The standard material contracts to be attached with copy of Offer Documents are as follows:

1.Offer/Issue Agreement between Company, the Merchant Banker and Selling Shareholders (if any).

2.Memorandum of Understanding or Agreement between Company and the Registrar to the Issue.

3.Bankers to the Issue Agreement between Company, Merchant Banker and the Banker to the Issue.

4.Underwriting Agreement between Company, Merchant Banker & other Underwriters (if any).

5.Market making agreement between Company, the Lead Managers and the Marker Maker to the Issue (If applicable).

6.Syndicate Agreement between Companies, Merchant Banker & Syndicate Members.

7.Copy of Tripartite agreement entered into between Company, CDSL and the Registrar to the Issue.

8.Copy of Tripartite agreement entered into between Company, NSDL and the Registrar to the Issue.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The documents that needs to be submitted to Stock Exchange at the time of approval of finalisation of basis of allotment in India are as under:

1)Copy of Prospectus filed with the ROC (also in soft copy CD) along with letter from all the merchant bankers involved in the issue specifying details of amendments/ changes made in Red Herring Prospectus (which were subsequently incorporated in Prospectus). To submit the same in track changes mode also.

2)Proceeding details / minutes of basis of allotment, verified and signed by R & T Agent, BRLM (Responsible for post issue) and the Issuer along with the reasons for exception to rejection cases.

3)Category wise, summary of list of "technical rejection” cases Specifying - Application No., Category, Name & Add., Pan, DP ID, CL ID, Quantity, price Amount and reason for rejection along with photo-copies of Application forms.

4)Confirmation from registrar regarding withdrawal of applications received, considered in the basis, indicating date and time (should not be more than 12 hours from time of submission of basis).

5)Statements giving branch wise/bank wise/city wise/state wise/zone wise details of the total collections with a breakup of ASBA fund received at the various participating bank branches in response to the public issue / offer for sale.

6)Category wise, Bid lot wise, two copies of Calculation sheet of proposed basis of allotment of equity shares to the Qualified Institutional Buyers, Non- Institutional Bidders and Retail Bidders, Reserved category etc. duly signed by RTA, BRLM & Issuer.

7)Photo copy of the final certificate issued by the controlling branch of ASBA bankers giving branch wise details of collections received.

8)Undertakings from the company, lead managers and the registrars & transfer agents in respect of the basis of allotment.

9)Copy of the statutory advertisement released in respect of the public issue / offer for sale, opening and closing of the issue, price revision, if any etc. up to the stage of basis of allotment.

10)Auditors certificate with regard to the promoters contribution, if applicable.

11)Declaration from the Managing Director / Company Secretary that there is no injunction / prohibition order of a competent court of law on the issue or on a part of any particular category of the issue.

12)Confirmation that:

-Only Qualified Institutional Buyers as mentioned under the definition in Regulation 2 (zd) of the SEBI (Issue of Capital and Disclosure Requirements), Regulations, 2018 are proposed to be allotted equity shares under QIB category.

-No QIB has Bid and proposed to be allotted equity shares under non-QIB or retail category.

13)List of all prospective allottees (valid) along with number of shares applied, amount paid, bank account details, PAN number, Demat account details etc. (in soft copy CD)

14)If Approval from the SEBI is sought for relaxation in PAN mismatch applications, then copy of the SEBI approval letter as well as the true copy of request letter to the SEBI, should be submitted.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Eligibility criteria for listing on Innovators Listing Growth Platform are as under:

An issuer which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition shall be eligible for listing on the innovators growth platform, provided that as on the date of filing of draft information document or draft offer document with the Board, as the case may be, twenty five per cent of the pre-issue capital of the Issuer Company for at least a period of two years, should have been held by:

I.Qualified Institutional Buyers.

II. Family trust with net-worth of more than five hundred crore rupees, as per the last audited financial statements. III. Accredited Investors for the purpose of Innovators Growth Platform. IV. The following regulated entities:

a.Category III Foreign Portfolio Investor

b.An entity meeting all the following criteria:

i.It is a pooled investment fund with minimum assets under management of one hundred and fifty million USD.

ii.It is registered with a financial sector regulator in the jurisdiction of which it is a resident.

iii.It is resident of a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to Bilateral Memorandum of Understanding with the Board.

iv.It is not resident in a country identified in the public statement of Financial Action Task Force as:

(a)a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply or

(b)a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

Explanation:

(a)The following entities shall be eligible to be considered as accredited investors for the purpose of innovators growth platform:

(i)any individual with total gross income of fifty lakhs rupees annually and who has minimum liquid net worth of five crore rupees; or

(ii)anybody corporate with net worth of twenty five crore rupees.

(b)Not more than ten per cent of the pre-issue capital may be held by Accredited Investors.

(c)For the purpose of accreditation: The persons /corporate bodies who wish to get accreditation for the purpose of innovators growth platform, shall approach the stock exchanges or depositories and follow the procedures prescribed by the Board and / or such stock exchange or depository for the purpose of accreditation as an Accredited Investor, from time to time.

An issuer shall be eligible for listing on the institutional trading platform if none of the promoters or directors of the issuer company is a fugitive economic offender.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 1(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

As per Regulation 28 of the Listing Obligation and Disclosure Requirements, 2015 issued by Securities and Exchange Board of India, the listed entity, before issuing securities, shall obtain an 'in-principle' approval from recognised stock exchange(s) in the following manner:

•Where the securities are listed only on recognized stock Exchange having nationwide trading terminals from all such stock exchanges.

•Where the securities are not listed on any recognised stock exchange having nationwide trading terminals, from all the stock exchange(s) in which the securities of the issuer are proposed to be listed.

•Where the securities are listed on recognised stock exchange(s) having nationwide trading terminals as well as on the recognised stock exchange(s) not having nationwide trading terminals, from all recognised stock exchange(s) having nationwide trading terminals.

•The requirement of obtaining in-principle approval from recognised stock exchange(s), shall not be applicable for securities issued pursuant to the scheme of arrangement for which the listed entity has already obtained No-Objection Letter from recognised stock exchange(s) in accordance with regulation 37 of the Listing Obligation and Disclosure Requirements, 2015 issued by Securities and Exchange Board of India.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

•The Regulatory framework governing an IPO are :

timeframe within which an IPO should be completed, modes of making payments in an IPO, roles and responsibilities of various intermediaries involved in an IPO etc.

•The SEBI Regulations requires a Merchant Banker, amongst other things, to exercise due diligence, ensure proper care and exercise independent professional judgment. Further, it requires Merchant Banker to ensure that adequate disclosures are made to potential investors in a timely manner in accordance with the applicable regulations and guidelines so as to enable them to make a balanced and informed investment decision. The SEBI Regulations requires Merchant Banker to maintain records and documents pertaining to due diligence exercised in pre-issue and post-issue matters. The ICDR Regulations require that Offer Documents should contain all material disclosures, which are true and adequate to enable prospective investors to take an informed decision.

Furthermore, the SEBI ICDR Regulations, 2018 require due diligence certificate to be issued by the Merchant Banker.

•Whilst the regulatory framework does not specifically define what constitutes due diligence, as a matter of practice, the objective of due diligence is to collect information about the issuer company that helps the Merchant Banker draft as well as assess disclosures that are made in the Offer Document. It is pertinent to understand that while the Merchant Banker continues to be responsible for due diligence, external expert assistance is necessary. Whilst under the applicable Code of Conduct, the Merchant Bankers are required to demonstrate that all reasonable steps were taken to exercise due diligence and ensure adequate disclosures were made to potential investors, they should have the flexibility regarding the manner in which the due diligence exercise is conducted as they may not possess the expertise with respect to certain aspects of due diligence, such as technical, legal and accounting matters.

•In terms of the ICDR Regulations, the Merchant Bankers are required to submit due diligence certificate to SEBI and the formats for such certificate have been provided in the ICDR Regulations. An examination of the format of the due diligence certificate provides clarity of expectations from the Merchant Bankers, to a certain extent, and can act as guiding principles for the diligence to be exercised.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

In case of listing and trading on SME-Initial Public Offer (IPO) following documents are required to be submitted before T+4 days (i.e. within 4 working days from the closure of the issue):

1.Copy of Prospectus (also in soft copy CD).

2.Copy of the ROC filing acknowledgement for filing of Prospectus.

3.Certified true copy of the additional material contracts and documents (mentioned in the final offer document/Prospectus) which have not been submitted earlier with the Exchange. (Soft copy for all the material contracts and documents)

4.Certified true copy of Table showing region- wise collection of application money.

5.Certificate from the bankers to the issue regarding the collection of application money.

6.Certified true copy of the basis of allotment approved by the Designated Stock Exchange.

7.Copy of the letter from Registrar addressed to Merchant bankers regarding the details they have verified with the depositories (NSDL/ CDSL).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6(d) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Yes. Regulation 282(1) of the SEBI (ICDR) Regulations, 2018 provides that the provisions of Chapter X of SEBI (LODR) Regulations shall apply to issuers seeking listing of their specified securities pursuant to an initial public offer or for only trading on a stock exchange of their specified securities without making a public offer. Regulation 284 (3) of the SEBI (ICDR) Regulations, 2018 lays down that the regulations relating to the following as stated under the Chapter of Initial Public Offer on Main Board shall not be applicable:

(a)allotment;

(b)issue opening or closing;

(c)advertisements;

(d)underwriting;

(e)sub-regulation (2) of regulation 5;

(f)pricing;

(g)dispatch of issue material; and

(h)other such provisions related to offer of specified securities to the public.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 4(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Company Secretary being Key Managerial Person under the Companies Act 2013 is an important personnel as far as compliance of various legislation is concerned. Company Secretary assumes a significant importance when he/she is required to be a part of the Company which proposes to attain ‘listed’ status. Besides complying with provisions of the Companies Act, a Company Secretary of an IPO bound Company is required to be aware and well versed with atleast fundamental requirements as far as preparation for IPO as well as continuation of being listed is concerned. The Key Managerial Personnel/ Management shall consider the following measures while preparing for an IPO issue :

•Due Diligence

•Setting up of Relevant Teams

•Management Structure

•Data Room

•Financial Information & Reporting Process

•Other Regulatory Compliances

•Industry data

•Management Discussion & Analysis

•Publicity & Advertising

•Road shows

•Material Contracts & Documents

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Listing and Trading of SME- Initial Public Offer (IPO)

Documents to be submitted by the Company Secretary on T+2 days (i.e. within 2 working days from the closure of the issue):

•All due diligence certificates filed with SEBI by Merchant bankers.

•List of authorized signatories along with their specimen signatures.

•Confirmation from Lead Managers that devolvement notices have been sent to underwriters (applicable if the issue has devolved).

•The company should inform that the dividend entitlement for the current year for all the existing shares including the shares issued in the public issue shall rank pari-passu.

•Confirmation from the company regarding the email ID for Investor Grievances as per Regulation 46 of SEBI (LODR), Regulations, 2015.

•Copies of all advertisements published in connection with the issue upto T+2 stage.

•Confirmation from the company stating that they have obtained authentication for SCORES from SEBI as per SEBI Circular dated April 13, 2012.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6(d) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Documents to be submitted on T+2 days for listing are as follows:-

— All due diligence certificates filed with SEBI by Merchant banker(s).

— Observation Letter issued by SEBI pursuant to filing of draft offer document.

— List of authorized signatories along with their specimen signatures.

— Confirmation from Lead Managers that devolvement notices have been sent to underwriters (applicable if the issue has devolved).

— Certificate from the BRLM(s) that the issue has received minimum subscription as specified under Regulation 45 (1) of SEBI (ICDR) Regulations, 2018.

— Confirmation from the company regarding the email ID for Investor Grievances as per Regulation 46 of SEBI (LODR), Regulations, 2015.

— Copies of all advertisements published in connection with the issue upto T+1 stage.

— Confirmation from the company stating that they have obtained authentication for SCORES from SEBI as per Regulation 13 of LODR, Regulations, 2015.

***

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6A(iv) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Ex-right value of the shares:

= [Cum-right value of the existing shares + (Right shares x Issue Price)] Existing number of shares + No. of right shares

= [( ₹ 150 x 4 shares) + ( ₹ 125 x 1 share)] (4 + 1 shares)

= ₹ 725/5 shares = ₹ 45 per share

Value of right = Cum-right value of the share – Ex-right value of the share

= 150 – 145

= ₹ 5 per share

Hence, any one desirous of having a confirmed allotment of one share from the company at ₹ 125 will have to pay ₹ 20 (4 shares x ₹ 5) to an existing shareholder holding 4 shares and willing to renounce his right of buying one share in favour of that person.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(b) (Syllabus 2022).

Market price- offer price

(i)Fair Value of a right = Original holding + Rights

₹ 250 - ₹ 100

–Right issue price)]

= (1/3) x ( ₹ 250 - ₹ 100) = ₹ 50 per share

Number of right shares to be issued:

Equity capital of the company is ₹ 2 crore of ₹ 10 each fully paid (i.e. 20 lakh shares).

Since the ratio of rights issue is given (1:2), it means the number of shares to be issued on rights issue is fixed. Also, the offer price is fixed at ₹ 100.

Therefore, 10 lakh shares will be issued (of ₹ 10 each) at ₹ 100.

(ii)Fund raised from right issue = Number of right shares x offer price

=10,00,000 x ₹ 100= ₹ 10 crore

Since the company requires ₹ 10 crore for financing a new project, the amount raised will be sufficient.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The company should submit the letter of application along with the following documents / formalities:

1.Certified copy of the resolution passed by the Board of directors for issue of securities on Right Basis.

2.Shareholding pattern for pre and post issue as per the format prescribed under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for all types of securities issued on Rights basis.

3.A certified copy of Basis of Allotment as approved by Designated Stock Exchange should be filed.

4.Auditors/Practicing CA/CS certificate that allotment has been done as per basis of allotment approved by the designated stock exchange.

5.The total number of securities allotted in the physical category and in Demat (CDSL & NSDL Separately) with category wise distinctive numbers should be filed.

6.An undertaking from the Managing Director/Compliance Officer certifying that all the documents filed by the Company with the Exchange are same/similar/identical in all respect with the documents filed by the Company with Register of Companies/SEBI/RBI/FIPB in respect of the allotment/enlistment of the aforesaid rights share on the Exchange, and that the company has complied with all the legal and statutory formalities and no statutory authority has restrained the company from issuing and allotting the securities on rights basis.

7.Undertaking from the Compliance Officer of the issuer that the company or its promoters or whole-time directors are not in violation of the provisions of the SEBI Delisting Regulations, 2021 and its promoters, its directors are not in violation of the restrictions imposed by SEBI.

8.Undertaking from the Compliance Officer of the issuer that the issuer or any of its promoters or directors or are not wailful defaulter as defined under SEBI (ICDR) Regulations, 2018”;

9.Annual Listing fees.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(ii) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Application supported by Blocked Amount (ASBA)

ASBA stands for " Application supported by Blocked Amount" which is a mechanism whereby an application is made for subscribing to a public issue or rights issue, along with an authorization to self-certified syndicate bank to block the application money in a bank account. Under ASBA process instead of moving the application money from the bank account of applicant in an IPO to an escrow account, same is blocked in applicant's own bank account and if the shares are allotted to him in IPO, same is released to the issuer company.

The concept of ASBA was introduced by SEBI through the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (now SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018). The advantage is that until the money moves out of the investor’s account, the investor c ontinues to earn interest, which was not the case earlier since the money used to move out of the investor’s account to that of the issuer.

SEBI vide its circular dated January 22, 2020 made it mandatory that Application for a rights issue shall be made using ASBA facility.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 3(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

SEBI circular streamlining the process of Right issue

SEBI has streamlined the rights issue process and provided that the trading in Right Entitlements (REs) on the secondary market platform of stock exchanges commence along with the opening of the right issue and has to be closed at least three working days (earlier requirement of four days) prior to the closure of the rights issue. SEBI received representation from the market that in case there are trading holidays between the last date of REs trading date and issue closure, the provision of the minimum gap of four days may not always ensure that there are adequate days for settlement, as minimum 2 working days are required for the settlement of REs traded on last day of REs trading window. REs traded on the exchange platform have a T+2 rolling settlement.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 3(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Value of each share after rights issue = Total Holding value (including Right Shares) /Total Nunber of Holding (including Right Shares)

Value of Right = Market Value of Share – Value of share after rights issue

= ₹ 79.06

Value of Right : ₹ 79.06

Alternate Answer 5(a)

Value of Right = [Number of Rights Shares/ Total Shares (Old + New Holdings)] x [(Market Value – Right issue price)]

6/17 x ( ₹ 785 - ₹ 561)

6/17 x 224 = ₹ 79.06

Value of Right : ₹ 79.06

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The company should submit the letter of application along with the following documents/ formalities:

1)Listing Application for all types of securities issued on rights basis should be submitted.

2)Certified copy of the resolution passed by the Board of Directors for allotment of securities on Right Basis.

3)Shareholding pattern for pre and post issue as per the format prescribed under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 for all types of securities issued on Rights basis.

4)A certified copy of Basis of Allotment as approved by Designated Stock Exchange should be filed.

5)Auditors/Practicing CA/CS certificate that allotment has been done as per basis of allotment approved by the designated stock exchange.

6)The total number of securities allotted in the physical category and in Demat (CDSL & NSDL Separately) with category wise distinctive numbers should be filed.

7)An undertaking from the Managing Director/Compliance Officer certifying that all the documents filed by the Company with the Exchange are same/similar/ identical in all respect with the documents filed by the Company with Register of Companies/SEBI/RBI/FIPB in respect of the allotment/enlistment of the aforesaid rights share on the Exchange, and that the company has complied with all the legal and statutory formalities and no statutory authority has restrained the company from issuing and allotting the securities on rights basis.

8)Undertaking from the Compliance Officer of the issuer as per the following format:

•“The company or its promoters or whole time directors are not in violation of the provisions of Regulation 24 of the SEBI Delisting Regulations, 2009”.

•"We hereby confirm that the company, its promoters, its directors are not in violation of the restrictions imposed by SEBI”

9)Undertaking from the Compliance Officer of the issuer as per the following format:

“Neither the issuer nor any of its promoters or directors is a wilful defaulter as defined under the SEBI (Issue of Capital and Disclosure Requirements), 2018”;

"<Name of the issuer> (<name>, the promoter(s) of the issuer / <name> the director(s) of the issuer is a wilful defaulter as defined under the SEBI (ICDR) Regulations, 2018 and disclosures in this regard has been made at <place of disclosure> as per the format given in said regulation."

10)Annual Listing fees

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

MP - OP CR

Value of rights = N  N 0 1

100  50 = 2  1

= ₹ 16.67 be issued on rights issue is fixed. Also the subscription price is give which is Rs.50.

therefore total amount that will be raised is fixed which is number of shares to be issued multiplied with price at which it will be issued. Accordingly, the value of rights can be calculated as explained in above suggested solution and floating cost of 10% will not have any bearing on such calculation hence it was an additional information in the question which was not required for arriving at the answer.

Alternate Solution

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5(d) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The following are the post issue formalities to be completed by the Company Secretary for Rights Issue of equity shares for listing purpose.

The Company has to finalise the basis of allotment, and submit the documents as under, within 10 days from closure of the issue:

1.Bid data of Exchanges other than the designated stock exchange.

2.All rejections application along with Summary statement (1 set photocopy to be submitted).

3.Certified copies of all Bank final certificates (ASBA & NON ASBA).

4.Minutes of Basis of allotment duly signed by all the Lead Manager, Registrar and the Company.

5.Basis of allotment sheet for each category.

6.Round summary in case of over subscription, in hard as well as soft format.

7.Copy of post issue initial monitoring report filed with SEBI (3 day monitoring report).

8.Undertaking from Lead Manager, Company and the Registrar.

9.Pre Allotment shareholding and Post proposed Allotment Shareholding pattern as per Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

10.The calculation of ex right price by the Statutory Auditor/ Practicing company secretary/ Practicing Chartered Accountant, if not available in the offer document.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6A(i) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

(i)Issue Price of the shares as per Regulation 165 of SEBI (ICDR) Regulations, 2018

Regulation 165 of SEBI (ICDR) Regulations, 2018 provides that where the shares are not frequently traded, the price determined by the issuer shall take into account valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies.

Here, Book Value = ₹ 120

Trading Multiples valuation = ₹ 150

DCF Method = ₹ 135

In this case, the preferential issue price would be ₹ 150 (highest valuation considered) .

(ii)Adjustment under Regulation 166 of SEBI (ICDR) Regulations, 2018

Regulation 166 of SEBI (ICDR) Regulations, 2018 provides that the price determined for a preferential issue in accordance with Regulations 164, 164A, 164B or 165, shall be subject to appropriate adjustments, if the issuer, amongst others, divides its outstanding equity shares including by way of stock split. Further the effect on the price of the equity shares of the issuer due to material price movement and confirmation of reported event or information may be excluded as per the framework specified under sub-regulation (11) of regulation 30 of the SEBI (LODR) Regulations, 2015 for determination of the price for a preferential issue in accordance with Regulations 164, 164A, 164B or 165.

If Sunrise Textiles Ltd. undertakes a stock split after the preferential issue, the price determined must be adjusted proportionately to reflect the new number of shares. For example, if one share of ₹ 150 is split into two shares, the adjusted price would be ₹ 75 per share.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 3(b) (Syllabus 2022).

Documents to be submitted before T+5 days to S/E (i.e. within 5 working days from the closure of the issue)

(i)Certified true copy of the letter from Registrars and lead manager regarding dispatch of share/debenture/warrant certificates, allotment advice, refund orders, underwriting commission, uploading of electronic credit of Securities, uploading of ECS/NEFT/RTGS credits and brokerage warrants.

(ii)Confirmation from the depositories regarding the credit of beneficiary accounts of the security holders.

(iii)Certificate from the Registrar reconciling the total securities allotted with the total securities credited, and securities that have failed to be credited.

(iv)Basis of allotment advertisement.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

As per Regulation 13 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, an issuer shall be eligible to issue warrants in an initial public offer subject to the following:

•the tenure of such warrants shall not exceed 18 months from the date of their allotment in the initial public offer;

•a specified security may have one or more warrants attached to it;

•the price or formula for determination of exercise price of the warrants shall be determined upfront and disclosed in the offer document and at least 25 % of the consideration amount based on the exercise price shall also be received upfront;

However, in case the exercise price of warrants is based on a formula, 25% consideration amount based on the cap price of the price band determined for the linked equity shares or convertible securities shall be received upfront.

•in case the warrant holder does not exercise the option to take equity shares against any of the warrants held by the warrant holder, within 3 months from the date of payment of consideration, such consideration made in respect of such warrants shall be forfeited by the issuer.

Accordingly, Minto Ltd. can issue warrants after complying with the aforementioned conditions.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

(i)Every listed company is required to maintain public shareholding of at least twenty-five per cent as per the Securities Contracts (Regulation) Rules, 1957 and therefore, balance can be held by promoter / promoter group. In the given case the promoters can offer shares up to 3% of 1 crore shares i.e. 3 lakh shares of ₹ 10 each under QIP.

(ii)No resolution is required to be passed by the Shareholders in case the QIP is through an offer for sale by the promoters for compliance with minimum public shareholding requirements.

(iii)Since the shares offered are in offer for sale and hence, already listed, no further listing is required.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Define and discuss the conditions for preferential issue:

A listed issuer may make a preferential issue of specified securities, if:

•all equity shares allotted by way of preferential issue shall be made fully paid up at the time of the allotment;

•a special resolution has been passed by its shareholders;

•all the equity shares, if any, held by the proposed allottees in the issuer are in dematerialised form;

•the issuer is in compliance with the conditions for continuous listing of equity shares as specified in the listing agreement with the recognised stock exchange where the equity shares of the issuer are listed, SEBI Listing Regulations, 2015 as amended, and any circular or notifications issued by SEBI thereunder;

•the issuer has obtained the Permanent Account Number of the proposed allottees.

When an issuer becomes ineligible to make a such issue

1.Preferential issue of specified securities shall not be made to any person who has sold or transferred any equity shares of the issuer during the six months preceding the relevant date.

2.An issuer shall not be eligible to make a preferential issue if any of its promoters or directors is a fugitive economic offender.

3.Where any person belonging to promoter(s) or the promoter group has previously subscribed to warrants of an issuer but failed to exercise the warrants, the promoter(s) and promoter group shall be ineligible for issue of specified securities of such issuer on preferential basis for a period of one year from :

(a)the date of expiry of the tenure of the warrants due to non-exercise of the option to convert; or

(b)the date of cancellation of the warrants, as the case may be.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 1(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Following are the main difference between private placement and preferential allotment:

1.Private Placement can be described as an offer or invitation to offer made to specified investors by issuing securities, so as to raise funds. On the contrary, Preferential Allotment is the issue of shares or debentures to a particular group of persons is made by a listed company, to raise funds.

2.Private Placement is governed by section 42 of the Companies Act, 2013. Conversely, in the case of Preferential Allotment section 62 (l) of the Companies Act, 201 3 will apply.

3.In the case of private placement, 'Private placement offer letter' is sent to the investors for inviting them to subscribe for shares. As against, in the case of preferential allotment, no such offer document is issued to people.

4.In private placement, application money can be received through cheques, demand draft or any other banking modes but not cash. Unlike, preferential allotment in which the money is received in cash or kind.

5.In private placement, the application money is kept in the separate bank account of a scheduled commercial bank. On the contrary, no such account is required in case of preferential allotment.

6.The private placement must be authorized by the articles of association of the company. In contrast, no such authorization is required in case of preferential allotment.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 2A(ii) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Following are the Pre-Issue formalities for the Preferential Issue:

1.Certified copy of the resolution passed by the Board of Directors of the company for the proposed preferential issue 2 Printed copy of notice of AGM/EGM

3.Where allotment is:

(I)for consideration other than cash:

(a)Certified copy of valuation report

(b)Certified copy of Shareholders Agreements.

(c)Certified copy of approval letters from FIPB and RBI if applicable.

(II) pursuant to CDR Scheme/ Order of High Court/ BIFR:

(a)Certified copy of relevant scheme/ order

(III) pursuant to conversion of loan of financial institutions:

(a)Certified copy of the Loan Agreement executed by the company.

4.Brief' particulars of the proposed preferential issue.

5.In case if the prior holding of the allottee is under pledge with banks/ financial institution(s), company needs to provide an undertaking/ confirmations from the banks/ financial institutions, company and allottee(s).

6.Confirmation by the Managing Director/ Company Secretary.

7.Certificate from Statutory Auditors/ Practicing Chartered Accountant/ Practicing Company Secretary.

8.Pricing certificate by Statutory Auditor/ Practicing Chartered Accountant/ Practicing Company Secretary.

In case the securities of the company are infrequently traded pricing certificate as prescribed under the SEBI (CDR) Regulation, 2018.

9.Non-refundable processing fees.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6A(iii) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

NPO Analysis

(i)Minimum Subscription = 75% × ₹ 3 crore = ₹ 2.25 crore

Funds raised via Zero Coupon Zero Principal (ZCZP) = ₹ 2.4 crore

Condition satisfied and NPO issue is successful.

(ii)Administrative Overheads Check

Administrative expenses = ₹ 50 lakh

Funds raised via ZCZP = ₹ 2.4 crore

Administrative overhead in % = (50/240) × 100 = 20.83%

Permissible limit exceeds (normally capped around 5% considering CSR provisions – Although no such restrictions are there in Social Stock Exchange framework as it can be incurred based on the disclosure made in offer document)

Fund Utilisation

Transfer of Unutilized Funds

•Unutilized Funds transferred after 8 months to a separate account (Unutilized amount shall be transferred within 30 days from end of financial year to a separate bank account and then shall be spent over a period of 3 years. Further, if it remain Unutilized, it should be transferred within 6 months to Unspent CSR/SSE account, if not utilized for the purpose)

(iii)Non-compliance identified

Unutilized amount shall be transferred within 30 days from end of financial year to a separate bank account considering CSR provisions. Since there is no specific timeline for the Social Stock Exchange, it may require to be transferred to a separate Bank account immediately. However, the funds are transferred after 8 months which is a non-compliance. SSE framework ensures transparency, accountability, and genuine social impact, and non-compliance can lead to rejection, penalties, or delisting.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 4(b) (Syllabus 2022).

Social Stock Exchange means a separate segment of a recognized stock exchange having nationwide trading terminals permitted to register Not for Profit Organizations and / or list the securities issued by Not-for-Profit Organizations in accordance with Chapter X-A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

A Social Stock Exchange differs from other stock exchanges in its purpose and objective. The aim of Social Stock Exchange is to raise capital for Social Enterprise and measure their social impact.

SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2023- Notification dated December 21, 2023 has made the following changes, which has come into force. SEBI vide this amendment substituted the words “Social Auditor” and “Social Audit Firm” with the words “Social Impact Assessor” and “Social Impact Assessment Firm” respectively which are defined here under: [Regulation 292A(f) and 292(g)]

i)“Social Impact Assessor” means an individual registered with a self-regulatory organization under the Institute of Chartered Accountants of India or such other agency, as may be specified by the SEBI, who has qualified a certification program conducted by National Institute of Securities Market and holds a valid certificate;

ii)“Social Impact Assessment Firm” means any entity which has employed Social Impact Assessor(s) and has a track record of minimum three years for conducting social impact assessment;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Eligibility conditions for being identified as a Social Enterprise

Regulation 292E of SEBI (ICDR) Regulation, 2018 specifies the eligibility conditions for being identified as a Social Enterprise. As per above said regulations, a Not for Profit Organization or a for Profit Social Enterprise, to be identified as a Social Enterprise, shall establish primacy of its social intent.

In order to establish the primacy of its social intent, such Social Enterprise shall meet the following eligibility criteria:

a)the Social Enterprise shall be indulged in at least one of the following activities:

(i)eradicating hunger, poverty, malnutrition and inequality;

(ii)promoting health care including mental healthcare, sanitation and making available safe drinking water;

(iii)promoting education, employability and livelihoods;

(iv)promoting gender equality, empowerment of women and LGBTQIA+ communities;

(v)ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest and wildlife conservation;

(vi)protection of national heritage, art and culture;

(vii)training to promote rural sports, nationally recognised sports. Paralympic sports and Olympic sports;

(viii)supporting incubators of Social Enterprises;

(ix)supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building;

(x)promoting livelihoods for rural and urban poor including enhancing income of small and marginal farmers and workers in the non-farm sector;

(xi)slum area development, affordable housing and other interventions to build sustainable and resilient cities;

(xii)disaster management, including relief, rehabilitation and reconstruction activities

(xiii)promotion of financial inclusion;

(xiv)facilitating access to land and property assets for disadvantaged communities;

(xv)bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection;

(xvi)promoting welfare of migrants and displaced persons;

(xvii)any other area as identified by the Board or Government of India from time to time

b)the Social Enterprise shall target underserved or less privileged population segments or regions recording lower performance in the development priorities of central or state governments.

c)the Social Enterprise shall have at least 67% of its activities, qualifying as eligible activities to the target population, to be established through one or more of the following:

(i)at least 67% of the immediately preceding 3-year average of revenues comes from providing eligible activities to members of the target population.

(ii)at least 67% of the immediately preceding 3-year average of expenditure has been incurred for providing eligible activities to members of the target population.

(iii)members of the target population to whom the eligible activities have been provided constitute at least 67% of the immediately preceding 3-year average of the total customer base and/or total number of beneficiaries.

Corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, shall not be eligible to be identified as a Social Enterprise.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 2(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

(i)Dissenting Shareholder: As per SEBI (ICDR) Regulations, 2018, a dissenting shareholder is one who votes against the resolution for change in objects or variation in the terms of a contract referred to in the offer document of the issuer.

(ii)Conditions for Exit Offer : Promoters or shareholders in control must provide an exit opportunity to dissenting shareholders in case only if a public issue has opened after April 1, 2014; if

a.The proposal for change in objects or variation in contract terms is dissented by at least 10% of shareholders who voted in the general meeting.

b.the amount to be utilized for the objects for which the offer document was issued is less than 75% of the amount raised (including the amount earmarked for general corporate purposes as disclosed in the offer document).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(b) (Syllabus 2022).

Regulation 59 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 states that the promoters, or shareholders in control of an issuer, shall provide an exit offer to dissenting shareholders as provided for in the Companies Act, 2013, in case of change in objects or variation in the terms of contract related to objects referred to in the offer document as per conditions and manner is provided in Schedule XX. Further Schedule XX prescribes the procedure and computation of exit price as follows:

The promoters or shareholders in control shall make the exit offer, to the dissenting shareholders, in cases only if a public issue has opened after April 1, 2014; if:

•the proposal for change in objects or variation in terms of a contract, referred to in the offer document is dissented by at least 10 % of the shareholders who voted in the general meeting; and

•the amount to be utilized for the objects for which the offer document was issued is less than 75 % of the amount raised (including the amount earmarked for general corporate purposes as disclosed in the offer document).

The 'exit price payable to the dissenting shareholders shall be the highest of the following:

•the volume-weighted average price paid or payable for acquisitions, whether by the promoters or shareholders having control or by any person acting in concert with them, during the fifty-two weeks immediately preceding the relevant date;

•the highest price paid or payable for any acquisition, whether by the promoters or shareholders having control or by any person acting in concert with them, during the twenty-six weeks immediately preceding the relevant date;

•the volume-weighted average market price of such shares for a period of sixty trading days immediately preceding the relevant date as traded on the recognised stock exchange where the maximum volume of trading in the shares of the issuer are recorded during such period, provided such shares are frequently traded;

•where the shares are not frequently traded, the price determined by the promoters or shareholders having control and the merchant banker considering valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such issuers.

Therefore, Mono Auto Limited shall compute the exit price as stated above.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).