Issue Management – Important Terms

Issue Management – Important Terms (Part 1)

Initial Public Offer (IPO): An offer of specified securities by an unlisted issuer to the public for subscription, including an offer for sale of specified securities to the public by existing holders.
Further Public Offer (FPO): An offer of specified securities by a listed issuer to the public for subscription, including an offer for sale of specified securities to the public by existing holders.
Net Offer to Public: An offer of specified securities to the public, excluding reservations for certain investor categories and securities to be subscribed by the promoter group.
Rights Issue: An offer of specified securities by a listed issuer to its shareholders as on the record date fixed for the purpose.
Qualified Institutions Placement (QIP): An issue of equity shares or securities convertible into equity shares to Qualified Institutional Buyers, as per SEBI (ICDR) Regulations.
Preferential Issue: An issue of specified securities by a listed issuer to select persons or groups on a private placement basis, excluding public issues, rights issues, bonus issues, and QIPs.
Offer for Sale through Stock Exchange Mechanism: A mechanism allowing promoters to dilute their holding in listed companies through a separate window provided by the stock exchange.
Offer Document: A document containing relevant information about the company, promoters, projects, financial details, and objects of raising money, used for inviting subscription to the issue.
Book Building Process: A process to elicit demand and assess the price for determination of the quantum or value of specified securities, as per SEBI (ICDR) Regulations.
Fixed Price Issue: An issue where the prospectus contains the issue price per share, and demand is known only while the issue is open for subscription.
Differential Pricing: Offering shares to one category of investors at a price different from another category.
Fast Track Issue: A mechanism allowing well-established and compliant listed companies to access the Indian Primary Market in a time-effective manner, with certain entry norms and conditions.

Issue Management – Important Terms (Part 2)

Eligibility Criteria: The issuer should not have any pending show-cause notices or prosecution proceedings initiated by SEBI against them or their promoters/whole-time directors as on the reference date.
Disclosure Requirements: The issuer must disclose any actions taken by SEBI, such as show-cause notices or prosecution proceedings, and their potential impact on the issuer in the letter of offer.
Settlement of Violations: If the issuer or promoter has settled any alleged violations of securities laws through SEBI's settlement mechanism in the past three years, they must disclose this in the letter of offer.
Trading Suspension: The equity shares of the issuer should not have been suspended from trading as a disciplinary measure during the last three years preceding the reference date.
Conflict of Interest: There should be no conflict of interest between the lead manager(s) and the issuer or its group companies.
Promoter Subscription: Promoters and promoter groups must mandatorily subscribe to their rights entitlement and not renounce their rights, except in specific circumstances.

Key Concepts

Green Shoe Option: A price stabilizing mechanism that allows for the allotment of equity shares in excess of the issue size, up to a maximum of 15%.
Application Supported by Blocked Amount (ASBA): An application for subscribing to a public issue or rights issue, where the application money is blocked in a bank account until the allotment is finalized.
Unified Payment Interface (UPI): A payment mechanism introduced by SEBI for retail individual investors to apply in public issues through intermediaries.
Hard Underwriting: An underwriter agrees to buy their commitment at the earliest stage, guaranteeing a fixed amount to the issuer, and bearing a higher risk.
Soft Underwriting: An underwriter's liability arises at a later stage, based on investor response, and they have to take up their share of devolvement if the shares are not subscribed by investors.
Open Book Building: A system where the demand for securities and bids are displayed online, allowing investors to be guided by the movements of the bids during the issue period.
Closed Book Building: A system where the book is not made public, and bidders have to make a call on the price without having any information on the bids submitted by other bidders.

Investor Categories

Retail Individual Investor (RII): An investor who applies for securities worth not more than Rs. 2 lakh.
Qualified Institutional Buyer (QIB): A public financial institution, scheduled commercial bank, mutual fund, venture capital fund, or other entities registered with SEBI.
Non-Institutional Investor (NII): Investors who do not fall under the definition of RII or QIB.
Anchor Investor: A QIB who makes an application for a value of at least Rs. 10 crore in a public issue on the main board or Rs. 2 crore in a public issue on the SME exchange.

Issue Management – Important Terms (Part 3)

Anchor Investors: For allocations up to ₹250 crore, a minimum of 5 and a maximum of 15 anchor investors are permitted. For every additional ₹250 crore or part thereof, an additional 15 anchor investors may be allowed.
Allocation to Anchor Investors: Each anchor investor shall receive a minimum allotment of ₹5 crore. The allocation to anchor investors shall be completed on the day of the bidding by the anchor investors.
Lock-in Period: There shall be a lock-in of 30 days on the shares allotted to the anchor investors from the date of allotment. However, for 50% of the portion allocated, the lock-in of 30 days shall be applicable, and for the remaining portion, a lock-in of 90 days shall be applicable from the date of allotment.
Reservation for Domestic Mutual Funds, Life Insurance Companies, and Pension Funds: 40% of the anchor investor portion shall be reserved, with one-third (33%) for domestic mutual funds and 7% for Life Insurance Companies registered with IRDAI and Pension Funds registered with PFRDA.
Bidding for Anchor Investors: The bidding for anchor investors shall open one day before the issue opening date.
Payment by Anchor Investors: The anchor investors shall pay on application the same margin which is payable by other categories of investors, and the balance, if any, shall be paid within two days of the date of closure of the issue.
Price Adjustment: 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. However, if the price fixed as a result of book building is lower than the price at which the allocation is made to the anchor investors, the excess amount shall not be refunded to the anchor investors.
Disclosure: The number of shares allocated to the anchor investors and the price at which the allocation is made shall be made available to the stock exchange(s) by the lead manager(s) for dissemination on the website of the stock exchange(s) before opening of the issue.
Eligibility for Anchor Investors: Neither the lead manager(s) or any associate of the lead managers nor any person related to the promoter/promoter group shall apply under the Anchor Investors category.
Definition of Employee: Employee means a permanent employee, working in India or outside India, of the issuer or of the promoters or subsidiary company of the issuer, or a director of the issuer, whether whole-time or not.
Specified Securities: Specified securities mean equity shares and convertible securities.
Unified Payment Interface (UPI) Mechanism: UPI is an immediate real-time payment system that helps in instantly transferring funds between two bank accounts.
Alternate Capital Market for SME Start-ups: SMEs have been given an opportunity to list their securities on an alternative platform in the stock exchange, known as the SME Exchange.
Migration to SME Exchange: A listed issuer with share capital of less than 25 crore rupees may migrate to SME exchange if the shareholders approve by special resolution through postal ballot.
Migration to Main Board: An issuer, whose specified securities are listed on a SME Exchange and whose share capital is more than ten crore rupees and up to twenty-five crore rupees, may migrate its specified securities to Main Board (Main exchange) if its shareholders approve such migration by passing a special resolution through postal ballot and upon fulfilling the listing eligibility criteria.

Issue Management – Important Terms (Part 4)

Innovators Growth Platform (IGP): A market specified by SEBI ICDR Regulations for certain categories of issuers to list their securities without making a public offer, accessible only to Institutional Investors and Non-Institutional Investors.
Eligibility for IGP: An issuer must be intensive in the use of Technology, Information Technology, Intellectual Property, Data Analytics, Bio-Technology, or Nano-Technology, and have at least 25% of its pre-issue capital held by Qualified Institutional Buyers, Innovators Growth Platform Investors, or other specified entities for at least one year.
Innovators Growth Platform Investors: Include individuals with a total gross income of Rs. 50 lakhs annually and a minimum liquid net worth of Rs. 5 crore, or body corporates and family trusts with a net worth of Rs. 25 crore.
Listing on Main Board: Companies listed on the IGP can migrate to the main board of the stock exchange subject to fulfilling conditions specified in the SEBI ICDR Regulations 2018.
Key Conditions: The issuer must not have any Fugitive Economic Offender as a promoter or director, and must comply with other regulations specified by SEBI.