These guidelines shall be called “Securities and Exchange Board of India (Delisting of Securities) Guidelines 2003”.

These guidelines are being issued under section 11(1) of SEBI Act, 1992, read with sub-section (2) of Section 11A of SEBI Act, with the objective to protect the interest of investors in the securities market.

3.1 In these Guidelines, unless the context otherwise requires:-
(a) Act’ means the Securities and Exchange Board of India Act, 1992;
(b) Authority’ means the Central Listing Authority established under the Securities and Exchange Board of India (Central Listing Authority)Regulations, 2003.
(c) ‘Board’ means the Securities and Exchange Board of India established under section 3 of the Act;
(d) ‘compulsory delisting’ means delisting of the securities of a company by an exchange.
(e) ‘delisting exchange’ means the exchange from which the securities of the company are proposed to be delisted in accordance with these Guidelines;
(f) ‘exchange’ means any stock exchange which has been granted recognition under section 4 of the Securities Contracts (Regulation) Act, 1956;
(g) ‘promoter’ means a promoter as defined in clause (h) of sub-regulation (1) of Regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulation, 1997 and includes a person who is desirous of getting the securities of the company delisted under these Guidelines;
(h) ‘public shareholding’ means the shareholding in a company held by persons other than the promoter, the acquirer or the persons acting in concert with him as defined in regulation 2(1)(j) of the Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulation, 1997 and the term ‘public holders of securities’ shall be construed accordingly;
(i) ‘schedule’ means a schedule appended to these Guidelines.
(j) ‘voluntary delisting’ means delisting of securities of a body corporate voluntarily by a promoter or an acquirer or any other person other than the stock exchange(s).
3.2 Words and expressions not defined in these Guidelines shall have the same meaning as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, or any statutory modification or re-enactment thereof, as the case may be.

4.1 These guidelines shall be applicable to delisting of securities of companies and specifically shall apply to:
a. Voluntary delisting being sought by the promoters of a company
b. any acquisition of shares of the company (either by a promoter or by any other person) or scheme or arrangement, by whatever name referred to, consequent to which the public shareholding falls below the minimum limit specified in the listing conditions or listing agreement that may result in delisting of securities;
c. Promoters of the companies who voluntarily seek to delist their securities from all or some of the stock exchanges;.
d. Cases where a person in control of the management is seeking to consolidate his holdings in a company, in a manner which would result in the public shareholding in the company falling below the limit specified in the listing conditions or in the listing agreement that may have the effect of company being delisted;
e. companies which may be compulsorily delisted by the stock exchanges;

4.2 Provided that company shall not be permitted to use the buy-back provision to delist its securities.

5.1 A company may delist from stock exchange where its securities are listed.

Provided that the securities of the company have been listed for a minimum period of 3 years on any stock exchange.

Provided further that an exit opportunity has been given to the investors for the purpose of which an exit price shall be determined in accordance with the “book
building process” described in clauses 7-10 and 13 and 14 of these guidelines

5.2  An exit opportunity need not be given in cases where securities continue to be listed in a stock exchange having nation wide trading terminals.
Explanation: For the purposes of these guidelines, stock exchange having nationwide trading terminals means the Stock Exchange, Mumbai, the National
Stock Exchange and any other stock exchange, which may be specified by the Board.
 

6.1 Any promoter or acquirer desirous of delisting securities of the company under the provisions of these guidelines shall : -

(a) obtain the prior approval of shareholders of the company by a special resolution passed at its general meeting;
(b) make a public announcement in the manner provided in these Guidelines.
(c) make an application to the delisting exchange in the form specified by the exchange, annexing therewith a copy of the special resolution passed
under sub-clause (a); and;
(d) comply with such other additional conditions as may be specified by the concerned stock exchanges from where securities are to be delisted.

7.1 Before making application for delisting, the promoters or the acquirers of the  company shall make a public announcement.

7.2 The public announcement shall contain inter-alia information specified in Schedule I.

7.3  Before making the public announcement, the promoter shall appoint a merchant banker registered with the Board, who is not an associate of the promoter.

8.1 Any promoter of a company which desires to delist from the stock exchange shall determine an exit price for delisting of securities in accordance with the book
building process described in Schedule II of these guidelines.

8.2 The offer price shall have a floor price, which will be the average of 26 weeks traded price quoted on the stock exchange where the shares of the company are
most frequently traded preceding 26 week from the date of the public announcement and without any ceiling of maximum price.

8.3 In the case of infrequently traded securities the offer price shall be as per regulation 20(5) of the SEBI (Substantial Acquisition and Takeover) Regulations,
and the infrequently traded securities shall be determined in the manner explained under regulation 20(5) of the SEBI (Substantial Acquisition and Takeover)
Regulations.
8.4 The stock exchange(s) shall provide the infrastructure facility for display of the price at the terminals of the trading members to enable the investors to access the price on the screen to bring transparency to the delisting process.
8.5 In the event of securities being delisted, the acquirer shall allow a further period of 6 months for any of the remaining shareholders to tender securities at the same price;

8.6 The stock exchanges shall monitor the possibility of price manipulation and keep under special watch the securities for which announcement for delisting has been made.

8.7 To ascertain the genuineness of physical securities if tendered and to avoid the bad delivery, Registrar and Transfer Agent shall co-operate with the Clearing
House / Clearing Corporation to determine the quality of the papers upfront.

8.8  If the quantity eligible for acquiring securities at the final price offered does not result in public shareholding falling below required level of public holding for
continuous listing, the company shall remain listed.

8.9 The paid up share capital shall not be extinguished as in the case of buyback of securities;

8.10  In case of partly paid-up securities, the price determined by the book building process shall be applicable to the extent the call has been made and paid.

8.11 The amount of consideration for the tendered and acceped securities shall be settled in cash;

9.1  The promoter may not accept the securities at the offer price determined by the book building process.
9.2 Where the promoter decides not to accept the offer price so determined:
(a) he shall not make an application to the exchange for delisting of the securities; and
(b) the promoter shall ensure that the public shareholding is brought up to the minimum limits specified under the listing conditions within a period of 6
months from the date of such decision, by any of the modes specified in sub-clause 9.3.
9.3 For the purposes of sub-clause 9.2(b), the public shareholding may be increased by any of the following means:
(a) by issue of new shares by the company in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000;
(b) by the promoter making an offer for sale of his holdings in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000;
(c ) by the promoter making sale of his holdings through the secondary market in a transparent manner;
9.4 In the event of the promoter not being able to raise the public shareholding in accordance with sub-clause 9.3 within six months, he shall offer for sale to the
public such portion of his holdings as would bring up the public shareholding to the minimum limits specified in the listing agreement or the listing conditions at
the price determined by the Central Listing Authority.

10.1 On determination of the final price pursuant to the book building, the promoter or the acquirer shall within a period of two working days from such determination:
(a) make a public announcement in the newspapers of the final price as discovered by the book building process and whether or not the promoter or the acquirer has accepted the price; and,
(b) communicate to, exchange or exchanges from which delisting is sought to be made, the final price discovered and whether the promoter has accepted the price.

11.1 When a company which is listed on any stock exchange or stock exchanges other than the stock exchanges having nationwide trading terminals, seeks delisting, an
exit offer shall be made to the shareholders in accordance with these guidelines.

11.2 There shall not be any compulsion for the existing company to remain listed on any stock exchange merely because it is a regional stock exchange.

12.1 Where the offer for delisting results in acceptance of a fewer number of shares than the total shares outstanding and as a consequence the public shareholding
does not fall below the minimum limit specified by the listing conditions or the listing agreement, the offer shall be considered to have failed and no securities  shall be acquired pursuant to such offer.

13.1 The payment of consideration for delisting of securities shall be paid in cash by the promoter or acquirer.

14.1 A company may delist one or all of its class of securities subject to the provisions of this clause.

14.2  If the equity shares of a company are delisted, the fixed income securities may continue to remain listed on the stock exchange

14.3 A company which has a convertible instrument outstanding, it shall not be permitted to delist its equity shares till the exercise of the conversion options.

15.1 The Stock Exchanges may delist companies which have been suspended for a minimum period of six months for non-compliance with the Listing Agreement.
15.2 The Stock Exchanges may also delist companies as per the norms provided in

Schedule III.

15.3 The Stock Exchange shall give adequate and wide public notice through news papers ( including one English national daily of wide circulation) and through display of the notice on the notice board/ website/ trading systems of the Exchange.

15.4 The stock exchange shall give a show cause notice to a company or adopt procedure provided under Part B of Schedule III for delisting under sub-clause 15.1 and 15.2.

15.5 The exchange shall provide a time period of 15 days within which representation may be made to the exchange by any person who may be aggrieved by the proposed delisting.

15.6 The stock exchange may, after consideration of the representations received from aggrieved persons, delist the securities of such companies.
15.6 A Where the stock exchange delists the securities of a company, it shall ensure that adequate and wide public notice of the fact of delisting is given through newspapers and on the notice boards/trading systems of the stock exchange and shall ensure disclosure in all such notices of the fair value of such securities determined in accordance with the Explanation to clause 16.1

15.7 The stock exchange shall display the name of such company on its website.

16.1 Where the securities of the company are delisted by an exchange, the promoter of the company shall be liable to compensate the security-holders of the company bypaying them the fair value of the securities held by them and acquiring their securities, subject to their option to remain security-holders with the company.

Explanation: For the purposes of this sub-clause, fair value of securities shall be determined by persons appointed by the stock exchange out of a panel of experts, which shall also be selected by the stock exchange, having regard to the factors mentioned in regulation 20 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

16.2 – deleted

17.1 In case of rights issue, allotment to the promoters or the persons in control of the management shall be allowed even if they subscribe to unsubscribed portion which may result in public shareholding falling below the permissible minimum level.

Provided that the adequate disclosures have been made in the offer document to that effect.
Provided further that they agree to buy out the remaining holders at the price of rights issue or make an offer for sale to bring the public shareholding at the level specified in the listing conditions or listing agreement to remain listed.

17.2 In case the rights issue is not fully subscribed, which may result in the public shareholding falling below the permissible minimum level as specified in the listing condition or listing agreement, the promoter(s) of the company shall be required to delist by providing an exit opportunity in the manner specified in clause 17.1 of these guidelines or may be required to make offer for sale of their holdings so that the public shareholding is raised to the minimum level specified in the listing agreement or in the listing conditions within a period of 3 months.

Reinstatement of delisted securities should be permitted by the stock exchanges with a cooling period of 2 years. In other words, relisting of securities should be allowed only after 2 years of delisting of the securities. It would be based on the respective norms/criteria for listing at the time of making the application for listing and the application will be initially scrutinized by the Central Listing Authority.

[See Guideline 7.2]
CONTENTS OF THE PUBLIC ANNOUNCEMENT
1. The floor price and how it was reached
2. The dates of opening and closing of the bidding
3. The name of the exchange or exchanges from which the securities are sought to be delisted.
4. The names and addresses of the trading members as well as the bidding terminals and centres through which bids can be placed.
5. Description of the methodology to be adopted for determination of acceptable price
6. Period for which the offer shall be valid
7. The necessity and the object of the delisting
8. A full and complete disclosure of all material facts.
9. The proposed time table from opening of the offer till the settlement of the transfers.
10. Details of the escrow account and the amount deposited therein.
11. Listing details and stock market data:
(a) high, low and average market prices of the securities of the company during the preceding three years;
(b) monthly high and low prices for the six months preceding the date of the public announcement; and,
(c) the volume of securities traded in each month during the six months preceding the date of public announcement.
12. Present capital structure and shareholding pattern.
13. The likely post-delisting capital structure.
14. The aggregate shareholding of the promoter group and of the directors of the promoters, where the promoter is a company and of persons who are in control of the company.
15. Name of compliance officer of the company.
16. It should be signed and dated by the promoter.

[See Guideline 8.1]
THE BOOK BUILDING PROCESS
1. The book building process shall be made through an electronically linked transparent facility.
2. The number of bidding centres shall not be less than thirty, including all stock exchange centres and there shall be at least one electronically linked computer
terminal at all bidding centres.
3. The promoter shall deposit in an escrow account, 100 per cent of the estimated amount of consideration calculated on the basis of the floor price indicated and the number of securities required to be acquired. The provisions of clause 10 of the Securities and Exchange Board of India (Buyback of Securities) Regulations,1998 shall be applicable mutatis mutandis to such escrow account.
4. The offer to buy shall remain open to the security holders for a minimum period of three days. The security holders shall have a right to revise their bids before the closing of the bidding.
5. The promoter or acquirer shall appoint ‘trading members’ for placing bids on the online electronic system.
6. Investors may approach trading members for placing offers on the on-line electronic system. The format of the offer form and the details that it must contain shall be specified.
7. The security holders desirous of availing the exit opportunity shall deposit the shares offered with the trading members prior to placement of orders. Alternately they may mark a pledge for the same to the trading member. The trading members in turn may place these securities as margin with the exchanges/clearing corporations.
8. The offers placed in the system shall have an audit trail in the form of confirmations which gives broker ID details with time stamp and unique order number
9. The final offer price shall be determined as the price at which the maximum number of shares has been offered. The acquirer shall have the choice to accept the price. If the price is accepted then the acquirer shall be required to accept all offers upto and including the final price but may not have to accept higher priced offers, subject to clause 15. An illustration is given below:

10 If final price is accepted the acquirer shall have to accept offers up to and including the final price i.e. 240 shares at the final price of Rs. 130/-.

11 At the end of the book build period the merchant banker to the book building exercise shall announce in the press and to the concerned exchanges the final price and the acceptance (or not) of the price by the acquirer.

12 The acquirer shall make the requisite funds available with the exchange/clearing corporation on the final settlement day (which shall be three days from the end of the book build period). The trading members shall correspondingly make the shares available. On the settlement day the funds and securities shall be paid out in a process akin to secondary market settlements.

13 The entire exercise shall only be available for demat shares. For holders of physical certificates the acquirer shall keep the offer open for a period of 15 days from the final settlement day for the shareholders to lodge the certificates with custodian(s) specified by the merchant banker.

(GUIDELINE 17.1]
NORMS AND PROCEDURE FOR DELISTING OF SECURITIES BY THE STOCK EXCHANGES
A NORMS
1. The percentage of equity capital (floating stock) in the hands of public investors.
This may be seen with reference to ---
• Existing paid-up equity capital
• Market lot
• Share price – very high, medium, low
• Market Capitalisation
• SEBIs Takeover Regulations-Regulation 21(3)
• Clause 40A of the Listing Agreement
2. The minimum trading level of shares of a company on the exchanges. There should be some liquidity in every trading cycle. There should be some volume of trading for price discovery on the market. The Company should appoint market makers. Criteria of no-trading may be considered.
3. Financial aspect/Business aspects
    a) The company should generate reasonable revenue/income/profits. It should be operational/working. It must demonstrate earning power through its financial
         results, profits, reserves, dividend payout for last 2/3 years.
     b) If there is hardly any public interest in the securities the company then it is for consideration whether its “listed company” label needs to be retained any more.
    c) The company should have some tangible asset. It is for consideration as to what value of assets the company should own in order to be listed continuously               listed.
4. Track records of compliance of the Listing Agreement requirements for the past three years.

•  Submission of audited/unaudited results, annual report, other documents required to be furnished to the Exchange,
•   Book closure Record date with due notice
•   Payment of listing fee
•   Service to investors especially with regard to timely return of shares duly transferred, timely payment of dividend, communication of price sensitive                    information, etc.
•   Failure to observe good accounting practises in reporting earnings and financial position
•   Publishing half yearly unaudited/audited results
•    Frequent changes in – Accounting year, Share transfer agent, Registered office, Name.

5. Promoters’ Directors’ track record especially with regard to insider trading, manipulation of share prices, unfair market practises (e.g. returning of share transfer
documents under objection on frivolous grounds with a view to creating scarcity of floating stock, in the market causing unjust aberrations in the share prices, auctions, close-out, etc. (Depending upon the trading position of directors or the firms).

6. If whereabouts of the company, its promoters directors are not available and even the letters sent by the Exchange return undelivered and the company fails top remain in touch with the Exchange.

7. The company has become sick and unable to meet current debt obligations or to adequately finance operations, or has not paid interest on debentures for the          last 2- 3 years, or has become defunct,or there are no employees, or liquidator appointed, etc.

8. On the basis of the above norms and other relevant information available about the company, its promoters/directors, project, litigations, etc., a profile of the                company should be prepared and then a decision on delisting should be taken by an Exchange.

B PROCEDURE
1. The decision on delisting should be taken by a panel to be constituted by the Exchange comprising the following :
    a. Two directors/officers of the Exchange (one director to be a public representative)
    b. One representative of the investors
    c. One representative from the Central Government (Department of Company Affairs)/ Regional Director / Registrar of Companies
    d. Executive Director / Secretary of the Exchange

2. Due notice of delisting and intimation to the company as well as other Stock Exchanges where the company’s securities are listed to be given.

3. Notice of termination of the Listing Agreement to be given.

4. An appeal against the order of compulsory delisting may be made to the SEBI.

1.1 These Guidelines have been issued by Securities and Exchange Board of India under Section 11 of the Securities and Exchange Board of India Act, 1992.

1.2 These Guidelines may be called the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999.

2.1 In these Guidelines, unless otherwise defined;-

(1) "employee" means

(a) a permanent employee of the company working in India or out of India; or
(b) a director of the company, whether a whole time director or not; or
(c) an employee as defined in sub-clauses (a) or (b) of a subsidiary, in India or out of India, or of a holding company of the company.

(2) "employee compensation" means the total cost incurred by the company towards employee compensation including basic salary, dearness allowance, other allowances, bonus and commissions including the value of all perquisites provided, but does not include:
(a) the fair value of the option granted under an Employee Stock Option Scheme; and
(b) the discount at which shares are issued under an Employee Stock Purchase Scheme.

(2A)“employee stock option” means the option given to the whole-time Directors, Officers or employees of a company which gives such Directors, Officers or employees, the benefit or right to purchase or subscribe at a future date, the securities offered by the company at a predetermined price.

(3) “employee stock option scheme (ESOS)” means a scheme under which a company grants employee stock option.

(4) "employee stock purchase scheme (ESPS)" means a scheme under which the company offers shares to employees as part of a public issue or otherwise.

(4a) “ESOS shares” means shares arising out of exercise of options granted under ESOS.

(4b) “ESPS shares” means shares arising out of grant of shares under ESPS.

(5) "exercise" means making of an application by the employee to the company for issue of shares against option vested in him in pursuance of the ESOS.

(6) "exercise period" means the time period after vesting within which the employee should exercise his right to apply for shares against the option vested in him in pursuance of the ESOS.
(7) "exercise price" means the price payable by the employee for exercising the option granted to him in pursuance of ESOS.

(7a) “fair value” of an option means the fair value calculated in accordance with Schedule III.

(8) "grant" means issue of option to employees under ESOS.

(9) "independent director" means a director of the company, not being a whole time director and who is neither a promoter nor belongs to the promoter group.

(9a) ”intrinsic value” means the excess of the market price of the share  under ESOS over the exercise price of the option (including up-front payment, if any).

(10) “market price" means the latest available closing price, prior to the date of the meeting of the Board of Directors in which options are granted/ shares are issued, on the stock exchange on which the shares of the company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.”

(11) "option grantee “means an employee having right but not an obligation to exercise in pursuance of the ESOS.

(12) "promoter" means;
(a) the person or persons who are in over-all control of the company;
(b) the person or persons who are instrumental in the formation of the company or programme pursuant to which the shares were offered to the public;
(c) the persons or persons named in the offer document as promoter(s). Provided that a director or officer of the company if they are acting as such only in their professional capacity will not be deemed to be a promoter.
Explanation: Where a promoter of a company is a body corporate, the promoters of that body corporate shall also be deemed to be promoters of the company.

(13) "promoter group" means
(a) an immediate relative of the promoter (i.e. spouse of that person, or any parent, brother, sister or child of the person or of the spouse);
(b) persons whose shareholding is aggregated for the purpose of disclosing in the offer document "shareholding of the promoter group".

(14) "share" means equity shares and securities convertible into equity shares and shall include American Depository Receipts (ADRs), Global Depository Receipts (GDRs) or other depository receipts representing underlying equity shares or securities convertible into equity shares.

(15) "vesting" means the process by which the employee is given the right to apply for shares of the company against the option granted to him in pursuance of ESOS.

(16) "vesting period" means the period during which the vesting of the option granted to the employee in pursuance of ESOS takes place.

2.1 All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Securities and Exchange Board of India Act, 1992 or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, SEBI (Disclosure and Investor Protection) Guidelines, or any statutory modification or re-enactment thereof, as the case may be.

3.1 These Guidelines shall apply to any company whose shares are listed on any recognised stock exchange in India.

4.1  An employee shall be eligible to participate in ESOS of the company.
Explanation: Where such employee is a director nominated by an institution as its representative on the Board of Directors of the company –

(i) the contract/ agreement entered into between the institution nominating its employee as the director of a company and the director so appointed shall, inter-alia, specify the following:
      (a) whether options granted by the company under its ESOS can be accepted by the said employee in his capacity as director of the company;
      (b) that options, if granted to the director, shall not be renounced in favour of the nominating institution; and
      (c) the conditions subject to which fees, commissions, ESOSs, other incentives, etc. can be accepted by the director from the company.
(ii) the institution nominating its employee as a director of a company shall file a copy of the contract/ agreement with the said company, which shall, in turn, file the copy with all the stock exchanges on which its shares are listed.
(iiii) the director so appointed shall furnish a copy of the contract/ agreement at the first Board meeting of the company attended by him after his nomination.

4.2  An employee who is a promoter or belongs to the promoter group shall not be eligible to participate in the ESOS.

4.3 A director who either by himself or through his relative or through any body corporate, directly or indirectly holds more than 10% of the outstanding equity shares of the company shall not be eligible to participate in the ESOS.

5.1  No ESOS shall be offered unless the disclosures, as specified in Schedule IV, are made by the company to the prospective option grantees and the company constitutes a Compensation Committee for administration and superintendence of the ESOS.

5.2  The Compensation Committee shall be a Committee of the Board of directors consisting of a majority of independent directors.

5.3  The Compensation Committee shall, inter alia, formulate the detailed terms and conditions of the ESOS including;
   (a) the quantum of option to be granted under an ESOS per employee and in aggregate.
   (b) the conditions under which option vested in employees may lapse in case of termination of employment for misconduct;
   (c) the exercise period within which the employee should exercise the option and that option would lapse on failure to exercise the option within the exercise  period;
    (d) the specified time period within which the employee shall exercise the vested options in the event of termination or resignation of an employee.

    (e) the right of an employee to exercise all the options vested in him at one time or at various points of time within the exercise period;

     (f) the procedure for making a fair and reasonable adjustment to the number of options and to the exercise price in case of corporate actions such as rights  issues, bonus issues ,merger, sale of division and others. In this regard following shall be taken into consideration by the compensation committee:

         (i) the number and the price of ESOS shall be adjusted in a manner such that total value of the ESOS remains the same after the corporate action
        (ii) for this purpose global best practices in this area including the procedures followed by the derivative markets in India and abroad shall be considered.
        (iii) the vesting period and the life of the options shall be left unaltered as far as possible to protect the rights of the option holders.

(g) the grant, vest and exercise of option in case of employees who are on long leave; and

(h) the procedure for cashless exercise of options.

 5.4 The Compensation Committee shall frame suitable policies and systems to ensure that there is no violation of;
     (a) Securities and Exchange Board of India (Insider Trading) Regulations, 1992; and
    (b) Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995, by any               employee.

6.1 No ESOS can be offered to employees of a company unless the shareholders of the company approve ESOS by passing a special resolution in the general meeting.

6.2  The explanatory statement to the notice and the resolution proposed to be passed in general meeting for ESOS shall, inter alia, contain the following information:

    (a) the total number of options to be granted;

    (b) identification of classes of employees entitled to participate in the ESOS;

    (c) requirements of vesting and period of vesting;

    (d) maximum period (subject to clause 9.1) within which the options shall be vested;

     (e) exercise price or pricing formula;

      (f) exercise period and process of exercise;

     (g) the appraisal process for determining the eligibility of employees to the ESOS;

     (h) maximum number of options to be issued per employee and in aggregate;

      (i) a statement to the effect that the company shall conform to the accounting policies specified in clause 13.1;

     (j) the method which the company shall use to value its options whether fair value or intrinsic value;

     (k) the following statement:

‘In case the company calculates the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed in the Directors report and also the impact of this difference on profits and on EPS of the company shall also be disclosed in the Directors’ report.’

6.3  Approval of shareholders by way of separate resolution in the general meeting shall be obtained by the company in case of;

(a) grant of option to employees of subsidiary or holding company and,

(b) grant of option to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of option.
 

7.1 The company shall not vary the terms of the ESOS in any manner, which may be detrimental to the interests of the employees.

7.2 The company may by special resolution in a general meeting vary the terms of ESOS offered pursuant to an earlier resolution of a general body but not yetexercised by the employee provided such variation is not prejudicial to the interests of the option holders.

7.3 The provisions of clause 6.3 shall apply to such variation of terms as they do to the original grant of option.

7.4 The notice for passing special resolution for variation of terms of ESOS shall disclose full details of the variation, the rationale therefor, and the details of the employees who are beneficiary of such variation.

7.5 A company may reprice if ESOSs were rendered unattractive due to fall in the price of the shares in the market.

Provided that the company ensures that such repricing shall not be detrimental to the interest of employees and approval of shareholders in General Meeting has been obtained for such repricing.

8.1 The companies granting option to its employees pursuant to ESOS will have the freedom to determine the exercise price subject to conforming to the accounting policies specified in clause 13.1.

Provided that in case the company calculates the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed in the Directors report and also the impact of this difference on profits and on Earning Per Share of the company shall also be disclosed in the Directors’ report.

9.1 There shall be a minimum period of one year between the grant of options and vesting of option.

Provided that in a case where options are granted by a company under an ESOS in lieu of options held by the same person under an ESOS in another company which has merged or amalgamated with the first mentioned company, the period during which the options granted by the transferor company were held by him shall be adjusted against the minimum vesting period required under this clause.

9.2 The company shall have the freedom to specify the lock-in period for the shares issued pursuant to exercise of option.

9.3 The employee shall not have right to receive any dividend or to vote or in any manner enjoy the benefits of a shareholder in respect of option granted to him, till shares are issued on exercise of option.

10.1 The amount payable by the employee, if any, at the time of grant of option;-
(a) may be forfeited by the company if the option is not exercised by the employee within the exercise period; or
(b) the amount may be refunded to the employee if the option are not vested due to non-fulfillment of condition relating to vesting of option as per the ESOS.

11.1 Option granted to an employee shall not be transferable to any person.
11.2 (a) No person other than the employee to whom the option is granted shall be entitled to exercise the option.

(b) Under the cashless system of exercise, the company may itself fund or permit the empanelled stock brokers to fund the payment of exercise price which shall be adjusted against the sale proceeds of some or all the shares, subject to the provision of the Companies Act.

11.3 The option granted to the employee shall not be pledged, hypothecated, mortgaged or otherwise alienated in any other manner.

11.4  In the event of the death of employee while in employment, all the option granted to him till such date shall vest in the legal heirs or nominees of the deceased employee.

11.5 In case the employee suffers a permanent incapacity while in employment, all the option granted to him as on the date of permanent incapacitation, shall vest in him on that day.

11.6  In the event of resignation or termination of the employee, all options not vested as on that day shall expire. However, the employee shall, subject to the provision of clause 5.3 (b) shall be entitled to retain all the vested options.

11.7 The options granted to a director, who is an employee of an institution and has been nominated by the said institution, shall not be renounced in favour of the institution nominating him.

12.1 The Board of Directors, shall, inter alia, disclose either in the Directors’ Report or in the annexure to the Directors’ Report, the following details of the ESOS:
(a) options granted;

(b) the pricing formula;

(c) options vested;

(d) options exercised;

(e) the total number of shares arising as a result of exercise of option;

(f) options lapsed;

(g) variation of terms of options;

(h) money realised by exercise of options;

(i) total number of options in force;

(j) employee wise details of options granted to;-

   (i) senior managerial personnel;
   (ii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year.
   (iii) identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and                 conversions) of the company at the time of grant;

(k) diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’.

(l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed.

(m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock .

(n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:
(i) risk-free interest rate,
(ii) expected life,
(iii) expected volatility,
(iv) expected dividends, and
(v) the price of the underlying share in market at the time of option grant.

12.2  Until all options granted in the three years prior to the IPO have been exercised or have lapsed, disclosures shall be made either in the Directors’ Report or in an Annexure thereto of the information specified in clause 12.1 in respect of such options also.

12.3 Until all options granted in the three years prior to the IPO have been exercised or have lapsed, disclosure shall be made either in the Directors’ Report or in an Annexure thereto of the impact on the profits and on the EPS of the company if the company had followed the accounting policies specified in clause 13 in respect of such options.

13.1 Every company that has passed a resolution for an ESOS under clause 6.1 of these guidelines shall comply with the accounting policies specified in Schedule I.
13.2 [Deleted]

14.1 In the case of every company that has passed a resolution for an ESOS under clause 6.1 of these guidelines, the Board of Directors shall at each annual general meeting place before the shareholders a certificate from the auditors of the company that the scheme has been implemented in accordance with these guidelines and in accordance with the resolution of the company in the general meeting.

Omitted clause 15 vide circular no. SEBI/CFD/DIL/ESOP/5/2009/03/09 dated September 3, 2009

15.1 The provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines prohibiting initial public offering by companies having outstanding warrants and financial instruments shall not be applicable in case of outstanding option granted to employees in pursuance of ESOS.”

15.2 If any option is outstanding at the time of an initial public offering by a company, the promoters' contribution shall be calculated with reference to the enlarged capital which would arise on exercise of all vested options.

15.3 If any options granted to employees in pursuance of pre-IPO ESOS are outstanding at the time of IPO, the IPO document of the company shall disclose all the information specified in clause 12.1 and also the following information:
(a) The impact on the profits and on the EPS of the last three years if the company had followed the accounting policies specified in clause 13 in respect of options granted in the last three years.
(b) The intention of the holders of shares allotted on exercise of option granted under ESOS or allotted under ESPS, to sell their shares within three (3) months after the date of listing of shares in such IPO (aggregate number of shares intended to be sold by option holders), if any, has to be disclosed. In case of ESOS the same shall be disclosed regardless of whether the shares arise out of options exercised before or after the IPO.
(c) Specific disclosures about the intention to sell shares arising out of ESOS or allotted under ESPS within three (3) months after the date of listing, by directors, senior managerial personnel and employees having ESOS or ESPS shares amounting to more than 1% of the issued capital (excluding outstanding warrants and conversions), which inter-alia shall include 

16.1 An employee shall be eligible to participate in the ESPS.
16.2 An employee who is a promoter or belongs to the promoter group shall not be eligible to participate in the ESPS.
16.3 A director who either by himself or through his relatives or through any body corporate, directly or indirectly holds more than 10% of the outstanding equity shares           of the company shall not be eligible to participate in the ESPS.

17.1 No ESPS shall be offered to employees of the company unless the shareholders of the company approve ESPS by passing special resolution in the meeting           of the general body of the shareholders.

17.2 The explanatory statement to the notice shall specify:
    (a) the price of the shares and also the number of shares to be offered to each employee.
    (b) the appraisal process for determining the eligibility of employee for ESPS.
    (c) Total number of shares to be issued.

17.3 The number of shares offered may be different for different categories of employees.

17.4 The special resolution shall state that the company shall conform to the accounting policies specified in clause 19.2.

17.5 Approval of shareholders by way of separate resolution in the general meeting shall be obtained by the company in case of;
      (a) allotment of shares to employees of subsidiary or holding company and,
      (b) allotment of shares to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and                        conversions) of the company at the time of allotment of shares.
 

18.1 The company shall have the freedom to determine price of shares to be issued under an ESPS, provided they conform to the provisions of clause 19.2.

18.2 Shares issued under an ESPS shall be locked in for a minimum period of one year from the date of allotment.

Provided that in a case where shares are allotted by a company under a ESPS in lieu of shares acquired by the same person under an ESPS in another company which has merged or amalgamated with the first mentioned company, the lock in period already undergone in respect of shares of the transferor company shall be adjusted against the lock-in required under this clause.

18.3 If the ESPS is part of a public issue and the shares are issued to employees at the same price as in the public issue, the shares issued to employee pursuant to ESPS shall not be subject to any lock-in.

19.1 The Directors’ Report or Annexure thereto shall contain, inter alia, the following disclosures:
(a) the details of the number of shares issued in ESPS;
(b) the price at which such shares are issued;
(c) employee-wise details of the shares issued to;
(i) senior managerial personnel;
(ii) any other employee who is issued shares in any one year amounting to 5% or more shares issued during that year;
(iii) identified employees who were issued shares during any one year equal to or exceeding 1% of the issued capital of the company at the time of issuance;
(d) diluted Earning Per Share (EPS) pursuant to issuance of shares under ESPS; and
(e) consideration received against the issuance of shares.
19.2 Every company that has passed a resolution for an ESPS under clause 17.1 of these guidelines shall comply with the accounting policies specified in Schedule II.

20.1 Nothing in these guidelines shall apply to shares issued to employees in compliance with the Securities and Exchange Board of India Guidelines on preferential Allotment.

Omitted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003

21.1 Part D of the Clarification XIV dated March 1, 1996, of the SEBI (Disclosure and Investor Protection) Guidelines shall not be applicable in case of ESOS and ESPS.”

22.1 The shares arising pursuant to an ESOS and shares issued under an ESPS shall be listed immediately upon exercise in any recognized stock exchange where the securities of the company are listed subject to compliance of the following:
(a) The ESOS/ESPS is in accordance with these Guidelines.
(b) In case of an ESOS the company has also filed with the concerned stock exchanges, before the exercise of option, a statement as per Schedule V and has                 obtained in-principle approval from such Stock Exchanges.
(c) As and when ESOS/ ESPS are exercised the company has notified the concerned Stock Exchanges as per the statement as per Schedule VI.

22.2 The shares arising after the IPO, out of options granted under any ESOS framed prior to its IPO shall be listed immediately upon exercise in all therecognised stock exchanges where the equity shares of the company are listed subject to compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009and, where applicable, clause 22.2A.

22.2A (1) No listed company shall make any fresh grant of options under any ESOS framed prior to its IPO and prior to the listing of its equity shares (hereinafter in this clause referred to as ‘pre-IPO scheme’) unless:
(i) such pre-IPO scheme is in conformity with these guidelines; and,
(ii) such pre-IPO scheme is ratified by its shareholders in general meeting subsequent to the IPO.
Provided that the ratification under item (ii) may be done any time prior to grant of new options under such pre-IPO scheme.
(2) No change shall be made in the terms of options issued under such pre-IPO schemes, whether by repricing, change in vesting period or maturity or otherwise, unless prior approval of the shareholders is taken for such change.
Provided that nothing in this sub-clause shall apply to any adjustments for corporate actions made in accordance with these guidelines.

22.3 For listing of shares issued pursuant to ESOS or ESPS the company shall [Deleted] obtain the in-principle approval from Stock Exchanges where it proposes to list the said shares.
22.4 [Deleted]
22.5 [Deleted]
22.6 The listed companies shall file the ESOS or ESPS Schemes through EDIFAR filing.

22.7 When holding company issues ESOS/ESPS to the employee of its subsidiary, the cost incurred by the holding company for issuing such options/shares shall be disclosed in the 'notes to accounts' of the financial statements of the subsidiary company.

22.7A In a case falling under clause 22.7, if the subsidiary reimburses the cost incurred by the holding company in granting options to the employees of the subsidiary, both the subsidiary as well as the holding company shall disclose the payment or receipt, as the case may be, in the ‘notes to accounts’ to their financial statements.]
22.8 The Company shall appoint a registered Merchant Banker for the implementation of ESOS and ESPS as per these guidelines till the stage of framing the ESOS/ESPS and obtaining in-principal approval from the stock exchanges in accordance with clause 22.1 (b).
22A. ESOS / ESPS through Trust Route:
   22A.1 In case of ESOS/ESPS administered through a Trust, the accounts of the company shall be prepared as if the company itself is administering the                               ESOS/ESPS.

23.1 These guidelines shall come into force with effect from 19th June, 1999 and will be applicable to the options/ shares granted/allotted on or after 19th June, 99 unless otherwise specified in the Guidelines.
 

                                                                    SCHEDULE I
                                                                     (Clause 13.1)

Accounting Policies for ESOS:
(a) In respect of options granted during any accounting period, the accounting value of the options shall be treated as another form of employee compensation in the financial statements of the company.
(b) The accounting value of options shall be equal to the aggregate, over all employee stock options granted during the accounting period, of the intrinsic value of the option or, if the company so chooses, the fair value of the option.
(c) Where the accounting value is accounted for as employee compensation in accordance with clause (b), the amount shall be amortised as under :
(i) Where the scheme does not provide for graded vesting, the amount shall be amortised on a straight-line basis over the vesting period.
(ii) Where the scheme provides for graded vesting -
(1) the vesting period shall be determined separately for each separate vesting portion of the option, as if the option was, in substance, multiple option and the amount of employee compensation cost shall be accounted for and amortised accordingly on a straight-line basis over the vesting period;
or
(2) the amount of employee compensation cost shall be accounted for and amortised on a straight-line basis over the aggregate vesting period of the entire option (that is, over the vesting period of the last separately vesting portion of the option):

Provided that the amount of employee compensation cost recognized at any date at least equals the fair value or the intrinsic value, as the case may be, of the vested portion of the option at that date.”
(d) When an unvested option lapses by virtue of the employee not conforming to the vesting conditions after the accounting value of the option has already been accounted for as employee compensation, this accounting treatment shall be reversed by a credit to employee compensation expense equal to the amortized portion of the accounting value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortized portion.
(e) When a vested option lapses on expiry of the exercise period, after the fair value of the option has already been accounted for as employee compensation, this accounting treatment shall be reversed by a credit to employee compensation expense.

                                                                            SCHEDULE II
                                                                             (Clause 19.2)

Accounting Policies for ESPS:

(a) In respect of shares issued under an ESPS during any accounting period, the accounting value of the shares so issued shall be treated as another form of employee compensation in the financial statements of the company.
(b) The accounting value of shares issued under ESPS shall be equal to the aggregate of price discount over all shares issued under ESPS during any accounting period;

Explanation: For the purposes of this clause, ‘price discount’ means the excess of the market price of the shares over the price at which they are issued under the ESPS.

                                                                       Schedule III
                                                                       (Clause 2.1)

(i) The fair value of a stock option is the price that shall be calculated for that option in an arm’s length transaction between a willing buyer and a willing seller.
(ii) The fair value shall be estimated using an option-pricing model (for example, the Black-Scholes or a binomial model) that takes into account as of the grant date the exercise price and expected life of the option, the current price in the market of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option.
(iii) The fair value of an option estimated at the grant date shall not be subsequently adjusted for changes in the price of the underlying stock or its volatility, the life of the option, dividends on the stock, or the risk-free interest rate.
(iv) Where the exercise price is fixed in Indian Rupees, the risk-free interest rate used shall be the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.
(v) The expected life of an award of stock options shall take into account the following factors:
(a) The expected life must at least include the vesting period.
(b) The average lengths of time similar grants have remained outstanding in the past. If the company does not have a sufficiently long history of stock option grants, the experience of an appropriately comparable peer group may be taken into consideration.
(c) The expected life of ESOSs should not be less than half of the exercise period of the ESOSs issued until and unless the same is supported by historical evidences with respect to ESOSs issued by the company earlier.
(vi) If the company does not have a sufficiently long history of traded stock prices to estimate the expected volatility of its stock, it may use an estimate based on the estimated volatility of stocks of an appropriately comparable peer group.
(vii) The estimated dividends of the company over the estimated life of the option may be estimated taking into account the company’s past dividend policy as well as the mean dividend yield of an appropriately comparable peer group.
(viii) Justification shall be given for significant assumptions. If at the time of further issue of ESOS/ESPS there are any changes in the assumptions, reasons for the same shall be given.

                                                                                   Schedule IV
                                                                          Disclosure Document
                                                                                  (Clause 5.1)

Part A: Statement of Risks
All investments in shares or options on shares are subject to risk as the value of shares may go down or go up. In addition, employee stock options are subject to the following additional risks:
1. Concentration: The risk arising out of any fall in value of shares is aggravated if the employee’s holding is concentrated in the shares of a single company.
2. Leverage: Any change in the value of the share can lead to a significantly larger change in the value of the option as an option amounts to a levered position in the share.
3. Illiquidity: The options cannot be transferred to anybody, and therefore the employees cannot mitigate their risks by selling the whole or part of their options before they are exercised.
4. Vesting: The options will lapse if the employment is terminated prior to vesting. Even after the options are vested, the unexercised options may be forfeited if the employee is terminated for gross misconduct.

Part B: Information about the company
1. Business of the company: A description of the business of the company on the lines of item V (a) of Part I of Schedule II of the Companies Act.
2. Abridged financial information: Abridged financial information for the last five years for which audited financial information is available in a format similar to that required under item B(1) of Part II of Schedule II of the Companies Act. The last audited accounts of the company should also be provided unless this has already been provided to the employee in connection with a previous option grant or otherwise.
3. Risk Factors: Management perception of the risk factors of the company in accordance with item VIII of Part I of Schedule II of the Companies Act.
4. Continuing disclosure requirement: The option grantee should receive copies of all documents that are sent to the members of the company. This shall include the annual accounts of the company as well as notices of meetings and the accompanying explanatory statements

Part C: Salient Features of the Employee Stock Option Scheme
This Part shall contain the salient features of the employee stock option scheme of the company including the conditions regarding vesting, exercise, adjustment for corporate actions, and forfeiture of vested options. It shall not be necessary to include this Part if it has already been provided to the employee in connection with a previous option grant, and no changes have taken place in the scheme since then. If the option administrator (whether the company itself or an outside securities firm appointed for this purpose) provides advisory services to the option grantees in connection with the exercise of options or sale of resulting shares, such advice must be accompanied by an appropriate disclosure of concentration and other risks. The option administrator should conform to the code of conduct appropriate for such fiduciary relationships.

                                                                     SCHEDULE V
                                                                      (Clause 22.1)

INFORMATION REQUIRED IN THE STATEMENT TO BE FILED WITH STOCK EXCHANGE
Description of Stock Option Scheme
1. Authorized Share Capital of the Company.
2. Issued Share Capital of the Company as on date of Institutional of the Scheme/ amending of the Scheme.
3. Date of Institution of the Scheme/ amending of the Scheme.
4. Validity period of the Scheme.
5. Date of notice of AGM/EGM for approving the Scheme/for amending the Scheme/for approving grants under Clause 6.3 (a) or (b) of the SEBI (ESOS & ESPS) Guidelines.
6. Date of AGM/EGM approving the Scheme/amending the Scheme/approving grants under Clause 6.3 (a) or (b) of the SEBI   (ESOS & ESPS) Guidelines.
7. Kind of security granted as Options under the Scheme.
8. Identity of classes of persons eligible under the scheme:
􀂃 Permanent employees
􀂃 Permanent employees outside India
􀂃 Permanent employees of subsidiary
􀂃 Permanent employees of holding company
ô€‚ƒ Whole –time directors
􀂃 Independent directors
9. Total number of securities reserved under the scheme.
10. Number of securities entitled under each option.
11. Total number of options to be granted.
12. Maximum number of Options to be granted per employee in each grant and in aggregate.
13. Exercise price or pricing formula.
14. Whether any amount payable at the time of grant of the Options? If so, quantum of such amount.
15. Lock-in period under the Scheme:
 Lock-in period between grant and vesting

Lock-in period after exercise.

16. Vesting Period under the Scheme.
17. Maximum period within which the options shall be vested.
18. Exercise Period under the plan.
19. Whether employee can exercise all the Options Vested at one time? Yes/No
20. Whether employee can exercise vested Options at various points of time within the exercise period? Yes/No
21. Whether scheme provides for the procedure for making a fair and reasonable adjustment to the number of options and to the exercise price in case of rights issues, bonus issues and other corporate actions? Clause in Scheme describing such adjustment.
22. Description of the appraisal process for determining the eligibility of employees under the scheme.
23. The specified time period within which vested options are to be exercised in the event of termination or resignation of an employee.
24. The specified time period within which options are to be exercised in the event of death of the employee.
25. Whether Plan provides for conditions under which option vested in employees may lapse in case of termination of employment for misconduct? Clause in Scheme describing such adjustment.
26. Whether Plan provides for conditions for the grant, vesting and exercise of option in case of employees who are on long leave? Clause in Scheme describing such adjustment.
27. Whether amount paid/payable by the employee at the time of the grant of the Option will be forfeited if the employee does not exercise the option within the exercise period? Clause in Scheme describing such adjustment.
28. Details of approval of shareholders pursuant to Clause 6.3 of the SEBI (ESOS & ESPS) Guidelines with respect to:
􀂃 Grant of options to employees of subsidiary or holding company.
􀂃 Grant of options to identified employees, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of the option.
 

                                                                SCHEDULE VI
                                                                  (Clause 22.1)

Format Of Notification For Issue Of Shares Under The Stock Option Plans
1. Company Name and Address of Registered Office :
2. Name of the Exchanges on which the company’s shares are listed :
3. Filing date of the Statement referred in clause 22.1.b of guidelines with stock Exchange :
4. Filing Number, if any :
5. Title of the Stock Option Scheme pursuant to which shares are issued, if any :
6. Kind of Security to be listed :
7. Par value of the shares :
8. Date of issue of shares :
9. Number of shares issued :
10. Share Certificate no, if applicable :
11. Distinctive number of the share, if applicable :
12. ISIN Number of the shares if issued in Demat :
13. Exercise Price per share :
14. Premium per share :
15. Total Issued Shares after this issue :
16. Total Issued Share capital after this issue :
17. Details of any lock-in on the shares :
18. Date of expiry of lock-in :
19. Whether shares identical in all respects to existing shares If not, when will they become identical? :
20. Details of Listing fees, if payable

(1.1) Short title, commencement, etc.

(a) These Guidelines have been issued by the Securities and Exchange Board of India under Section 11 of the Securities and Exchange Board of India Act, 1992.

(b) These Guidelines may be called the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.

(c) These Guidelines shall come into force from the date specified by the Board.

1.2 Definitions

1.2.1 In these Guidelines, unless the context otherwise requires;

(ia) “Abridged Letter of Offer” in relation to a rights issue means the abridged form of a letter of offer which satisfies the minimum requirements laid down in Section IV of Chapter VI of the Guidelines);

(ib) “Abridged Prospectus” means the memorandum as prescribed in Form 2A under Sub-section (3) of Section 56 of the Companies Act, 1956;

ii) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);

iii) “Advertisement” includes notices, brochures, pamphlets, circulars, show cards, catalogues, hoardings, placards, posters, insertions in newspaper, pictures, films, cover pages of offer documents or any other print medium, radio, television programmes through any electronic medium;

(iii-a) “Application Supported by Blocked Amount (ASBA)” means an application for subscribing to an issue containing an authorisation to block the application money in a bank account.)

(iii-b) “ASBA Investor” means an Investor who intends to apply through ASBA process and

a. is a “Resident Retail Individual Investor”;

b. is bidding at cut-off, with single option as to the number of shares bid for;

c. is applying through blocking of funds in a bank account with the SCSB;

d. has agreed not to revise his/her bid;

e. is not bidding under any of the reserved categories.)

iv) “Board” means the Securities and Exchange Board of India established under provisions of Section 3 of the Act;

v) “Book Building” means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document;

vi) “Collection Centre” means a place where the application for subscribing to the public or rights issue is collected by the Banker to an Issue on behalf of the issuer company;

vii) “Company” means the Company defined in Section 3 of the Companies Act, 1956;

viii) “Composite Issues” means an issue of securities by a listed company on a public cum rights basis offered through a single offer document wherein the allotment for both public and rights components of the issue is proposed to be made simultaneously;

(viii-a) “Convertible Debt Instrument” means an instrument or security which creates or acknowledges indebtedness and is convertible into equity shares at a later date, at or without the option of the holder of the instrument or the security of a body corporate, whether constituting a charge on the assets of the body corporate or not);

ix) “Credit Rating Agency” means a body corporate registered under Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999;

x) “Designated Financial Institution” means the public financial institution included in or notified under Section 4A of the Companies Act, Industrial Development Corporation established by State Governments and financial institutions approved under Section 36(1)(viii) of Income Tax Act, 1961;

xi) 7(Deleted)

xii) “Depository” means a body corporate registered under Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996;

(xii-a) “Designated Stock Exchange” means a stock exchange in which securities of the company are listed or proposed to be listed and which is chosen by the company for purposes of a particular issue under these guidelines.

Provided that where any of such stock exchanges have nationwide trading terminals, the company shall choose one of them as the designated stock exchange.

Provided further that the company may choose a different exchange as a designated stock exchange for any subsequent issue, subject to the above clause.)

(xiib) “Employee” means

a) a permanent employee of the company working in India or out of India;
or
b) a director of the company, whether a whole time director, part time director or otherwise;

c) an employee as defined in sub-clauses (a) or (b) of a subsidiary, in India or out of India, or of a holding company of the company.)

(xiic) “Fast Track Issue” means a public issue or rights issue made by a listed company which satisfies all the requirements of clause 2.1.2A.)

xiii) “Firm Allotment” means allotment on a firm basis in public issues by an issuing company made to Indian and Multilateral Development Financial Institutions, Indian Mutual Funds, Foreign Institutional Investors including non-resident Indians and overseas corporate bodies and permanent/ regular employees of the issuer company.

(xiii-a) “Green Shoe Option” means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing
price stabilizing mechanism in accordance with the provisions of Chapter VIII-A of these Guidelines, which is granted to a company to be exercised through a Stabilising Agent.)

xiv) “Guidelines” means Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 1999 and includes instructions issued by the Board.

xv) “Infrastructure Company” means, a company wholly engaged in the business of developing, maintaining and operating infrastructure facility.

xvi) “Infrastructure Facility” means the “infrastructure facility” within the meaning of Section 10(23G)(c) of Income Tax Act, 1961.

xvii) “Issuer Company” means a company which has filed offer documents with the Board for making issue of securities in terms of these guidelines.

xviii) “Listed Company” means a company which has any of its securities offered through an offer document listed on a recognised stock exchange and also includes Public Sector Undertakings whose securities are listed on a recognised stock exchange.

xix) “Merchant Banker” means an entity registered under Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992;

(xix a) “Mutual fund” means a mutual fund registered with the Board under the SEBI (Mutual Funds) Regulations, 1996.)

(xix b) “Networth” means aggregate of value of the paid up equity capital and free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulated losses and deferred expenditure not written off (including miscellaneous expenses not written off) as per the audited balance sheet.)

xx) “Offer Document” means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue.

xxi) “Offer for Sale” means offer of securities by existing shareholder(s) of a company to the public for subscription, through an offer document.

xxii) “Preferential Allotment” means an issue of capital made by a body corporate in pursuance of a resolution passed under Sub-section (1A) of Section 81 of the Companies Act, 1956.

xxiii) “Public Issue” means an invitation by a company to public to subscribe to the securities offered through a prospectus;

xxiv) “Public Financial Institutions” means institutions included in or notified for the purposes of Section 4A of the Companies Act, 1956.

(xxiv a) “Qualified Institutional Buyer” means

a) a public financial institution as defined in section 4A of the Companies Act, 1956;
b) a scheduled commercial bank;
c) a mutual fund registered with the Board;
d) a foreign institutional investor and sub-account registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual;
e) a multilateral and bilateral development financial institution;
f) a venture capital fund registered with SEBI;
g) a foreign venture capital investor registered with SEBI;
h) a state industrial development corporation;
i) an insurance company registered with the Insurance Regulatory and Development Authority (IRDA);
j) a provident fund with minimum corpus of Rs. 25 crores;
k) a pension fund with minimum corpus of Rs. 25 crores);
l) National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of Government of India published in the Gazette of India.

(xxiv b))) “Resident retail individual investor” means a Retail Individual Investor who is a person resident in India as defined in Foreign Exchange Management Act, 1999.

(xxiv c))) “Retail Individual Investor” means an investor who applies or bids for securities of or for a value of not more than 21(Rs.1,00,000/-).)

(xxiv d)) “Retail Individual Shareholder” means a shareholder of a listed company, who –

a) as on the record date (i.e., the date fixed for the purpose of determining eligible shareholders), is holding shares which, on the basis of the closing price of the shares as on the previous day, are worth up to Rs.1,00,000/-;
and
b) applies or bids for securities of or for a value of not more than Rs.1,00,000/-)

xxv) “Rights Issue” means an issue of capital under Sub-section (1) of Section 81 of the Companies Act, 1956, to be offered to the existing shareholders of the company through a Letter of Offer.

xxvi) “Schedule” means schedule annexed to these Guidelines.

((xxvi-a) “Self Certified Syndicate Bank (SCSB)” is a Banker to an Issue registered under SEBI (Bankers to an Issue) Regulations, 1994 which offers the service of making an Applications Supported by Blocked Amount and recognized as such by the Board)

(xxvi-aa) “Shelf Prospectus” means a shelf prospectus within the meaning of clause (b) of the Explanation to Section 60A of the Companies Act, 1956.))

xxvii) “Stock Exchange” means a stock exchange which is for the time being recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956.

xxviii) “Underwriting” means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public do not subscribe to the securities offered to them.

xxix) “Unlisted Company” means a company which is not a listed company.

(1.3) All other words and expressions used but not defined in these Guidelines, but defined in the Act or in the Companies Act, 1956 or in Securities Contracts (Regulation) Act, 1956 and/ or the Rules and the Regulations made thereunder, shall have the meanings respectively assigned to them in such Acts or the Rules or the Regulations made thereunder or any statutory modification or re-enactment thereto, as the case may be.

1.4 Applicability of the Guidelines
i) These Guidelines shall be applicable to all public issues by listed and unlisted companies, all offers for sale and rights issues by listed companies whose equity share capital is listed, except in case of rights issues where the aggregate value of securities offered does not exceed Rs.50 lacs.

(Provided that in case of the rights issue where the aggregate value of the securities offered is less than Rs.50 Lakhs, the company shall prepare the letter of offer in accordance with the disclosure requirements specified in these guidelines and file the same with the Board for its information and for being put on the SEBI website.)

ii) Unless otherwise stated, all provisions in these guidelines applicable to public issues by unlisted companies shall also apply to offers for sale to the public by unlisted companies.
 

2.0 Conditions for issue of securities

(The companies issuing securities offered through an offer document shall satisfy the following at the time of filing the draft offer document with SEBI(, unless specified otherwise in the Chapter) and also at the time of filing the final offer document with the Registrar of Companies/ Designated Stock Exchange:)

2.1 Filing of offer document

2.1.1 (No issuer company shall make any public issue of securities, unless a draft Prospectus has been filed with the Board through a Merchant Banker, at least 30 days prior to the filing of the Prospectus with the Registrar of Companies (ROC):

Provided that if the Board specifies changes or issues observations on the draft Prospectus (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Prospectus or comply with the observations issued by the Board before filing the Prospectus with ROC.

Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 30 days from the date of receipt of the draft Prospectus by the Board.

Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.

Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Prospectus after receipt of comments or reply from such regulator or other agencies.

Provided further that the Board may specify changes or issue observations, if any, on the draft Prospectus only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Prospectus.)

2.1.2 (No listed issuer company shall make any rights issue of securities,(where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs,) unless a draft letter of offer has been filed with the Board, through a Merchant Banker, at least 30 days prior to the filing of the letter of offer with the Designated Stock Exchange (DSE).

Provided that if the Board specifies changes or issues observations on the draft Letter of Offer (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Letter of Offer or comply with the observations issued by the Board before filing the Letter of Offer with DSE.

Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 30 days from the date of receipt of the draft Letter of Offer by the Board.

Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.

Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Letter of Offer after receipt of comments or reply from such regulator or other agencies .

Provided further that the Board may specify changes or issue observations, if any, on the draft Letter of Offer only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Letter of Offer.)

2.1.2A Fast Track Issues

2.1.2A.1 Nothing contained in clauses 2.1.1 and 2.1.2 shall apply to a public issue of securities by a listed issuer company or a rights issue of securities by a listed issuer company, where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs, if the following conditions are satisfied:

(a) The shares of the company have been listed on any stock exchange having nationwide terminals for a period of at least three years immediately preceding the reference date;

(b) The “average market capitalisation of public shareholding” of the company is at least Rs. 10,000 crores for a period of one year up to the end of the quarter preceding the month in which the proposed issue is approved by the Board of Directors / shareholders of the issuer;

(c) The annualized trading turnover of the shares of the company during six calendar months immediately preceding the month of the reference date has been at least two percent of the weighted average number of shares listed during the said six months period;

(d) The company has redressed at least 95% of the total shareholder / investor grievances or complaints received till the end of the quarter immediately preceding the month of the reference date;

(e) The company has complied with the listing agreement for a period of at least three years immediately preceding the reference date;

(f) The impact of auditors’ qualifications, if any, on the audited accounts of the company in respect of the financial years for which such accountsare disclosed in the offer document does not exceed 5% of the net profit/ loss after tax of the company for the respective years.

(g) No prosecution proceedings or show cause notices issued by the Board are pending against the company or its promoters or whole time directors as on the reference date; and

(h) The entire shareholding of the promoter group is held in dematerialized form as on the reference date.

Explanation: For the purposes of this clause:

(a) “Reference date” shall mean:

(i) in case of a public issue of securities by a listed company satisfying all the requirements specified in this clause, the date of filing of red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC; and

(ii) in case of a rights issue of securities by a listed company satisfying all the requirements specified in this clause, where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs, the date of filing of letter of offer with Designated Stock Exchange.

(b) “Average market capitalisation of public shareholding” shall mean the sum of daily market capitalization of “public shareholding” for a period of one year up to the end of the quarter preceding the month in which the proposed issue was approved by the Board/ shareholders, as the case may be, divided by the number of trading days. For this purpose, “public shareholding” shall have the same meaning as assigned to it in clause 40A of the Listing Agreement.

2.1.2A.2 A listed issuer company satisfying all the requirements specified in this clause and filing a red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC or letter of offer with Designated Stock Exchange, as the case may be, shall simultaneously with such filing or as soon thereafter as reasonably practicable, but in any case not later than the opening of the issue, file a copy thereof with the Board.”)

2.1.3 Companies barred not to issue security

No company shall make an issue of securities if the company has been prohibited from accessing the capital market under any order or direction passed by the Board.

2.1.4 Application for listing

No company shall make any public issue of securities unless it has made an application for listing of those securities in the stock exchange(s).

2.1.5 Issue of securities in dematerialised form

2.1.5.1 No company shall make public or rights issue or an offer for sale of securities, unless:

(a) the company enters into an agreement with a depository for dematerialisation of securities already issued or proposed to be issued to the public or existing shareholders; and

(b) the company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialized form with a depository.

Explanation:

A “depository” shall mean a depository registered with the Board under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.

2.2 (Initial Public Offerings by Unlisted Companies)

2.2.1 (An unlisted company may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets all the following conditions:

(a) The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets:

Provided that if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/project;

(b) The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three (3) out ofimmediately preceding five (5) years;

Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of Companies Act, 1956;

(c) The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years (of 12 months each);

(d) In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned bythe company from the activity suggested by the new name; and

(e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), does not exceed five (5) times its pre-issue networth as per the audited balance sheet of the last financial year.)

2.2.2 (An unlisted company not complying with any of the conditions specified in Clause

2.2.1 may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets both the conditions (a) and (b) given below:

(a) (i) The issue is made through the book-building process, with at least (50% of net offer to public) being allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.

OR

1. (ii) The “project” has at least 15% participation by Financial Institutions/ Scheduled Commercial Banks, of which at least 10% comes from the appraiser(s). In addition to this, at least 10% of the issue size shall be allotted to QIBs, failing which the full subscription monies shall be refunded.

AND

(b) (i) The minimum post-issue face value capital of the company shall be Rs. 10 crores.

OR

(b) (ii) There shall be a compulsory market-making for at least 2 years fromthe date of listing of the shares, subject to the following:

(a) Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares;

(b) Market makers undertake to ensure that the bid-ask spread (difference between quotations for sale and purchase) for their quotes shall not at any time exceed 10%:

(c) The inventory of the market makers on each of such stock exchanges, as on the date of allotment of securities, shall be at least 5% of the proposed issue of the company.)

(2.2.2A An unlisted public company shall not make an allotment pursuant to a public issue or offer for sale of equity shares or any security convertible into equity shares unless, in addition to satisfying the conditions mentioned in Clause 2.2.1 or 2.2.2 as the case may be, the prospective allottees are not less than one thousand (1000) in number.)

(2.2.2B For the purposes of clauses 2.2.1 and 2.2.2 above:

(i) ”Net Tangible Assets” shall mean the sum of all net assets of the company, excluding ‘intangible assets’, as defined in Accounting Standard 26 (AS 26) issued by the Institute of Chartered Accountants of India.

(ii) “Project” means the object for which the monies proposed to be raised to cover the objects of the issue.

(iii) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered only if the financial statements of the partnership business for the said years conform to and are revised in the format prescribed for companies under the Companies Act, 1956 and also comply with the following:

a. adequate disclosures are made in the financial statements as required to be made by the companies as per Schedule VI of the Companies Act, 1956;

b. the financial statements shall be duly certified by a Chartered Accountant stating that:

I. the accounts as revised or otherwise and the disclosures made are in accordance with the provisions of Schedule VI of the Companies Act, 1956; and

II. the accounting standards of the Institute of Chartered

Accountants of India (ICAI) have been followed and that the financial statements present a true and fair picture of the firm’s accounts.

(iv) In case of an unlisted company formed out of a division of an existing company, the track record of distributable profits of the division spun off shall be considered only if the requirements regarding financial statements as specified for partnership firms in (sub-clause (iii) above are complied with.

(v) (Deleted)

2.2.3 Offer for sale

2.2.3.1 (An offer for sale shall not be made of equity shares of a company or any other security which may be converted into or exchanged with equity shares of the company at a later date, unless the conditions laid down in clause 2.2.1 or 2.2.2, as the case may be and in clause 2.2.2A, are satisfied.)

2.2.4 Offer for sale can also be made if provisions of clause 2.2.2 are complied at the time of submission of offer document with Board.

2.3 Public Issue by Listed Companies

2.3.1 (A listed company shall be eligible to make a public issue of equity shares or any other security which may be converted into or exchanged with equity shares at a later date:

Provided that the aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), issue size does not exceed 5 times its pre-issue networth as per the audited balance sheet of the last financial year.

Provided (further) that in case there is a change in the name of the issuer company within the last 1 year (reckoned from the date of filing of the offer document), the revenue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the preceding 1 full-year period.)

2.3.2 (A listed company which does not fulfill the conditions given in the provisos to Clause

2.3.1 above shall be eligible to make a public issue, subject to complying with the conditions specified in clause 2.2.2.)

2.3.3 (Deleted)

2.4 Exemption from Eligibility Norms

2.4.1 The provisions of clauses (2.2 and 2.3) shall not be applicable in case of:

i) a banking company including a Local Area Bank (hereinafter referred to as Private Sector Banks) set up under sub-section (c) of Section 5 of the Banking Regulation Act, 1949 and which has received license from the Reserve Bank of India; or

ii) a corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, State Bank of India Act 1955 and State Bank of India (Subsidiary Banks) Act, 1959 (hereinafter referred to as “public sector banks”);

iii) an infrastructure company:

a)(whose project has been appraised by a Public Financial Institution (PFI) or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financing Services Ltd. (IL&FS) or a bank which was earlier a PFI; and)

b) not less than 5% of the project cost is financed by any of the institutions referred to in sub-clause (a), jointly or severally, irrespective of whether they appraise the project or not, by way of loan or subscription to equity or a combination of both;

iv) rights issue by a listed company.

Explanation: (Deleted)

2.5 Credit Rating for Debt Instruments

(2.5.1A No issuer company shall make a public issue or rights issue of (convertible debt instruments), unless the following conditions are also satisfied, as on date of filing of draft offer document with SEBI and also on the date of filing a final offer document with ROC/Designated Stock Exchange:

(i) (credit rating is obtained from at least one credit rating agency registered with the Board and disclosed in the offer document;)

(ii) The company is not in the list of willful defaulters of RBI;

(iii) The company is not in default of payment of interest or repayment of principal in respect of debentures issued to the public, if any, for a period of more than 6 months.

2.5.1B (Deleted)

2.5.2 (Where credit ratings are obtained from more than one credit rating agencies, all the ratings, including the unaccepted ratings, shall be disclosed in the offer document.)

2.5.3 (Deleted.)

2.5.4 All the credit ratings obtained during the three (3) years preceding the pubic or rights issue of debt instrument (including convertible instruments) for any listed security of the issuer company shall be disclosed in the offer document.

2.5A IPO Grading

 2.5A.1 No unlisted company shall make an IPO of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, unless the following conditions are satisfied as on the date of filing of Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue) with ROC:

(i) the unlisted company has obtained grading for the IPO from at least one credit rating agency;

(ii) disclosures of all the grades obtained, along with the rationale/ description furnished by the credit rating agency(ies) for each of the grades obtained, have been made in the Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue); and

(iii) the expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.)

2.6 Outstanding Warrants or Financial Instruments

2.6.1 No unlisted company shall make a public issue of equity share or any security convertible at later date into equity share, if there are any outstanding financial instruments or any other right which would entitle the existing promoters or shareholders any option to receive equity share capital after the initial public offering.

2.7 Partly Paid-up Shares

2.7.1 No company shall make a public or rights issue of equity share or any security convertible at later date into equity share, unless all the existing partly paid-up shares have been fully paid or forfeited in a manner specified in clause 8.6.2.

2.8 Means of Finance

No company shall make a public or rights issue of securities unless firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount to be raised through proposed Public/ Rights issue, have been made.)

2.0 Conditions for issue of securities

(The companies issuing securities offered through an offer document shall satisfy the following at the time of filing the draft offer document with SEBI(, unless specified otherwise in the Chapter) and also at the time of filing the final offer document with the Registrar of Companies/ Designated Stock Exchange:)

2.1 Filing of offer document

2.1.1 (No issuer company shall make any public issue of securities, unless a draft Prospectus has been filed with the Board through a Merchant Banker, at least 30 days prior to the filing of the Prospectus with the Registrar of Companies (ROC):

Provided that if the Board specifies changes or issues observations on the draft Prospectus (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Prospectus or comply with the observations issued by the Board before filing the Prospectus with ROC.

Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 30 days from the date of receipt of the draft Prospectus by the Board.

Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.

Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Prospectus after receipt of comments or reply from such regulator or other agencies.

Provided further that the Board may specify changes or issue observations, if any, on the draft Prospectus only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Prospectus.)

2.1.2 (No listed issuer company shall make any rights issue of securities,(where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs,) unless a draft letter of offer has been filed with the Board, through a Merchant Banker, at least 30 days prior to the filing of the letter of offer with the Designated Stock Exchange (DSE).

Provided that if the Board specifies changes or issues observations on the draft Letter of Offer (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Letter of Offer or comply with the observations issued by the Board before filing the Letter of Offer with DSE.

Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 30 days from the date of receipt of the draft Letter of Offer by the Board.

Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.

Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Letter of Offer after receipt of comments or reply from such regulator or other agencies .

Provided further that the Board may specify changes or issue observations, if any, on the draft Letter of Offer only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Letter of Offer.)

2.1.2A Fast Track Issues

2.1.2A.1 Nothing contained in clauses 2.1.1 and 2.1.2 shall apply to a public issue of securities by a listed issuer company or a rights issue of securities by a listed issuer company, where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs, if the following conditions are satisfied:

(a) The shares of the company have been listed on any stock exchange having nationwide terminals for a period of at least three years immediately preceding the reference date;

(b) The “average market capitalisation of public shareholding” of the company is at least Rs. 10,000 crores for a period of one year up to the end of the quarter preceding the month in which the proposed issue is approved by the Board of Directors / shareholders of the issuer;

(c) The annualized trading turnover of the shares of the company during six calendar months immediately preceding the month of the reference date has been at least two percent of the weighted average number of shares listed during the said six months period;

(d) The company has redressed at least 95% of the total shareholder / investor grievances or complaints received till the end of the quarter immediately preceding the month of the reference date;

(e) The company has complied with the listing agreement for a period of at least three years immediately preceding the reference date;

(f) The impact of auditors’ qualifications, if any, on the audited accounts of the company in respect of the financial years for which such accountsare disclosed in the offer document does not exceed 5% of the net profit/ loss after tax of the company for the respective years.

(g) No prosecution proceedings or show cause notices issued by the Board are pending against the company or its promoters or whole time directors as on the reference date; and

(h) The entire shareholding of the promoter group is held in dematerialized form as on the reference date.

Explanation: For the purposes of this clause:

(a) “Reference date” shall mean:

(i) in case of a public issue of securities by a listed company satisfying all the requirements specified in this clause, the date of filing of red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC; and

(ii) in case of a rights issue of securities by a listed company satisfying all the requirements specified in this clause, where the aggregate value of such securities, including premium, if any, exceeds Rs. 50 lacs, the date of filing of letter of offer with Designated Stock Exchange.

(b) “Average market capitalisation of public shareholding” shall mean the sum of daily market capitalization of “public shareholding” for a period of one year up to the end of the quarter preceding the month in which the proposed issue was approved by the Board/ shareholders, as the case may be, divided by the number of trading days. For this purpose, “public shareholding” shall have the same meaning as assigned to it in clause 40A of the Listing Agreement.

2.1.2A.2 A listed issuer company satisfying all the requirements specified in this clause and filing a red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC or letter of offer with Designated Stock Exchange, as the case may be, shall simultaneously with such filing or as soon thereafter as reasonably practicable, but in any case not later than the opening of the issue, file a copy thereof with the Board.”)

2.1.3 Companies barred not to issue security

No company shall make an issue of securities if the company has been prohibited from accessing the capital market under any order or direction passed by the Board.

2.1.4 Application for listing

No company shall make any public issue of securities unless it has made an application for listing of those securities in the stock exchange(s).

2.1.5 Issue of securities in dematerialised form

2.1.5.1 No company shall make public or rights issue or an offer for sale of securities, unless:

(a) the company enters into an agreement with a depository for dematerialisation of securities already issued or proposed to be issued to the public or existing shareholders; and

(b) the company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialized form with a depository.

Explanation:

A “depository” shall mean a depository registered with the Board under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.

2.2 (Initial Public Offerings by Unlisted Companies)

2.2.1 (An unlisted company may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets all the following conditions:

(a) The company has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets:

Provided that if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/project;

(b) The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three (3) out ofimmediately preceding five (5) years;

Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of Companies Act, 1956;

(c) The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years (of 12 months each);

(d) In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned bythe company from the activity suggested by the new name; and

(e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), does not exceed five (5) times its pre-issue networth as per the audited balance sheet of the last financial year.)

2.2.2 (An unlisted company not complying with any of the conditions specified in Clause

2.2.1 may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets both the conditions (a) and (b) given below:

(a) (i) The issue is made through the book-building process, with at least (50% of net offer to public) being allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded.

OR

1. (ii) The “project” has at least 15% participation by Financial Institutions/ Scheduled Commercial Banks, of which at least 10% comes from the appraiser(s). In addition to this, at least 10% of the issue size shall be allotted to QIBs, failing which the full subscription monies shall be refunded.

AND

(b) (i) The minimum post-issue face value capital of the company shall be Rs. 10 crores.

OR

(b) (ii) There shall be a compulsory market-making for at least 2 years fromthe date of listing of the shares, subject to the following:

(a) Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares;

(b) Market makers undertake to ensure that the bid-ask spread (difference between quotations for sale and purchase) for their quotes shall not at any time exceed 10%:

(c) The inventory of the market makers on each of such stock exchanges, as on the date of allotment of securities, shall be at least 5% of the proposed issue of the company.)

(2.2.2A An unlisted public company shall not make an allotment pursuant to a public issue or offer for sale of equity shares or any security convertible into equity shares unless, in addition to satisfying the conditions mentioned in Clause 2.2.1 or 2.2.2 as the case may be, the prospective allottees are not less than one thousand (1000) in number.)

(2.2.2B For the purposes of clauses 2.2.1 and 2.2.2 above:

(i) ”Net Tangible Assets” shall mean the sum of all net assets of the company, excluding ‘intangible assets’, as defined in Accounting Standard 26 (AS 26) issued by the Institute of Chartered Accountants of India.

(ii) “Project” means the object for which the monies proposed to be raised to cover the objects of the issue.

(iii) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered only if the financial statements of the partnership business for the said years conform to and are revised in the format prescribed for companies under the Companies Act, 1956 and also comply with

the following:

a. adequate disclosures are made in the financial statements as required to be made by the companies as per Schedule VI of the Companies Act, 1956;

b. the financial statements shall be duly certified by a Chartered Accountant stating that:

I. the accounts as revised or otherwise and the disclosures made are in accordance with the provisions of Schedule VI of the Companies Act, 1956; and

II. the accounting standards of the Institute of Chartered

Accountants of India (ICAI) have been followed and that the financial statements present a true and fair picture of the firm’s accounts.

(iv) In case of an unlisted company formed out of a division of an existing company, the track record of distributable profits of the division spun off shall be considered only if the requirements regarding financial statements as specified for partnership firms in (sub-clause (iii) above are complied with.

(v) (Deleted)

2.2.3 Offer for sale

2.2.3.1 (An offer for sale shall not be made of equity shares of a company or any other security which may be converted into or exchanged with equity shares of the company at a later date, unless the conditions laid down in clause 2.2.1 or 2.2.2, as the case may be and in clause 2.2.2A, are satisfied.)

2.2.4 Offer for sale can also be made if provisions of clause 2.2.2 are complied at the time of submission of offer document with Board.

2.3 Public Issue by Listed Companies

2.3.1 (A listed company shall be eligible to make a public issue of equity shares or any other security which may be converted into or exchanged with equity shares at a later date:

Provided that the aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), issue size does not exceed 5 times its pre-issue networth as per the audited balance sheet of the last financial year.

Provided (further) that in case there is a change in the name of the issuer company within the last 1 year (reckoned from the date of filing of the offer document), the revenue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the preceding 1 full-year period.)

2.3.2 (A listed company which does not fulfill the conditions given in the provisos to Clause

2.3.1 above shall be eligible to make a public issue, subject to complying with the conditions specified in clause 2.2.2.)

2.3.3 (Deleted)

2.4 Exemption from Eligibility Norms

2.4.1 The provisions of clauses (2.2 and 2.3) shall not be applicable in case of:

i) a banking company including a Local Area Bank (hereinafter referred to as Private Sector Banks) set up under sub-section (c) of Section 5 of the Banking Regulation Act, 1949 and which has received license from the Reserve Bank of India; or

ii) a corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, State Bank of India Act 1955 and State Bank of India (Subsidiary Banks) Act, 1959 (hereinafter referred to as “public sector banks”);

iii) an infrastructure company:

a)(whose project has been appraised by a Public Financial Institution (PFI) or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financing Services Ltd. (IL&FS) or a bank which was earlier a PFI; and)

b) not less than 5% of the project cost is financed by any of the institutions referred to in sub-clause (a), jointly or severally, irrespective of whether they appraise the project or not, by way of loan or subscription to equity or a combination of both;

iv) rights issue by a listed company.

Explanation: (Deleted)

2.5 Credit Rating for Debt Instruments

(2.5.1A No issuer company shall make a public issue or rights issue of (convertible debt instruments), unless the following conditions are also satisfied, as on date of filing of draft offer document with SEBI and also on the date of filing a final offer document with ROC/ Designated Stock Exchange:

(i) (credit rating is obtained from at least one credit rating agency registered with the Board and disclosed in the offer document;)

(ii) The company is not in the list of willful defaulters of RBI;

(iii) The company is not in default of payment of interest or repayment of principal in respect of debentures issued to the public, if any, for a period of more than 6 months.

2.5.1B (Deleted)

2.5.2 (Where credit ratings are obtained from more than one credit rating agencies, all the ratings, including the unaccepted ratings, shall be disclosed in the offer document.)

2.5.3 (Deleted.)

2.5.4 All the credit ratings obtained during the three (3) years preceding the pubic or rights issue of debt instrument (including convertible instruments) for any listed security of the issuer company shall be disclosed in the offer document.

2.5A IPO Grading

 2.5A.1 No unlisted company shall make an IPO of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, unless the following conditions are satisfied as on the date of filing of Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue) with ROC:

(i) the unlisted company has obtained grading for the IPO from at least one credit rating agency;

(ii) disclosures of all the grades obtained, along with the rationale/ description furnished by the credit rating agency(ies) for each of the grades obtained, have been made in the Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue); and

(iii) the expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.)

2.6 Outstanding Warrants or Financial Instruments

2.6.1 No unlisted company shall make a public issue of equity share or any security convertible at later date into equity share, if there are any outstanding financial instruments or any other right which would entitle the existing promoters or shareholders any option to receive equity share capital after the initial public offering.

2.7 Partly Paid-up Shares

2.7.1 No company shall make a public or rights issue of equity share or any security convertible at later date into equity share, unless all the existing partly paid-up shares have been fully paid or forfeited in a manner specified in clause 8.6.2.

2.8 Means of Finance

No company shall make a public or rights issue of securities unless firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount to be raised through proposed Public/ Rights issue, have been made.)

3.0 The companies eligible to make public issue can freely price their equity shares or any security convertible at later date into equity shares in the following cases:

3.1 Public/ Rights Issue by Listed Companies

3.1.1 A listed company whose equity shares are listed on a stock exchange, may freely price its equity shares and any security convertible into equity at a later date, offered through a public or rights issue.

3.2 Public Issue by Unlisted Companies

3.2.1 An unlisted company eligible to make a public issue and desirous of getting its securities listed on a recognised stock exchange pursuant to a public issue, may freely price its equity shares or any securities convertible at a later date into equity shares.

(3.2A) Infrastructure company

(3.2A.1) An eligible infrastructure company shall be free to price its equity shares, subject to the compliance with the disclosure norms as specified by SEBI from time to time.

3.3 Initial public Issue by Banks

3.3.1 The banks (whether public sector or private sector) may freely price their issue of equity shares or any securities convertible at a later date into equity share, subject to approval by the Reserve Bank of India.

3.4 Differential Pricing

3.4.1 Any unlisted company or a listed company making a public issue of equity shares or securities convertible at a later date into equity shares, may issue such securities to applicants in the firm allotment category at a price different from the price at which the net offer to the public is made,

provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public.

Explanation:

The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters’ contributions.

3.4.1A An unlisted company or a listed company making a public issue of equity shares or securities convertible at a later date into equity shares may issue such securities to retail individual investors and/or retail individual shareholders at a price lower than the price at which net offer is made to other categories of public.

Provided that the difference between the price at which the securities are issued to retail individual investors and/or retail individual shareholders and the price at which the net offer is made to other categories of public, is not more than 10% of the price at which securities

are offered to other categories of public.)

3.4.2 A listed company making a composite issue of capital may issue securities at differential prices in its public and rights issue.

3.4.3 In the public issue which is a part of a composite issue, differential pricing as per(sub-clauses 3.4.1 and 3.4.1A) above is also permissible.

3.4.4 Justification for the price difference shall be given in the offer document for sub-clauses 3.4.1, 3.4.1A and 3.4.2.

3.5 Price Band

3.5.1 Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the offer documents filed with the Board and actual price can be determined at a later date before filing of the offer document with ROCs.

3.5.2 If the Board of Directors has been authorised to determine the offer price within a specified price band such price shall be determined by a Resolution to be passed by the Board of Directors.

3.5.3 The Lead Merchant Bankers shall ensure that in case of the listed companies, a 48 hours notice of the meeting of the Board of Directors for passing resolution for determination of price is given to the Designated Stock Exchange.

3.5.4 In case of public issue by listed issuer company, issue price or price band may not be disclosed in the draft prospectus filed with the Board.)

3.5.5 In case of a rights issue, issue price or price band may not be disclosed in the draft letter of offer filed with the Board. The issue price may be determined anytime before fixation of the record date, in consultation with the Designated Stock Exchange.)

3.5.6 The final offer document shall contain only one price and one set of financial projections, if applicable.

3.6 Payment of Discounts/ Commissions, etc.

3.6.1 No payment, direct or indirect in the nature of a discount, commission, allowance or otherwise shall be made either by the issuer company or the promoters in any public issue, to the persons who have received firm allotment in such public issue.

3.7 Freedom to determine the denomination of shares for public / rights issues and to change the standard denomination

3.7.1 An eligible company shall be free to make public or rights issue of equity shares in any denomination determined by it in accordance with Sub-section (4) of Section 13 of the Companies Act, 1956 and in compliance with the following and other norms as may be specified by SEBI from time to time:

i. In case of initial public offer by an unlisted company,

a. if the issue price is Rs. 500/- or more, the issuer company shall have a discretion to fix the face value below Rs. 10/- per share subject to the condition that the face value shall in no case be less than Rs. 1 per share;

b. if issue price is less than Rs. 500 per share, the face value shall be Rs. 10/- per share;

Provided that nothing contained in sub-clause (i) shall apply to initial public offer made by any government company, statutory authority or corporation or any special purpose vehicle set up by any of them, which is engaged in infrastructure sector.

Explanation:

For the purposes of this proviso, the term “Infrastructure sector” shall include the following facilities/services:

(i) Transportation (including inter modal transportation), including the following:

(a) Roads, national highways, state highways, major district roads, other district roads and village roads, including toll roads, bridges, highways, road transport providers and other

road-related services;

(b) Rail system, rail transport providers, metro rail roads and other railway related services;

(c) Ports (including minor ports and harbours), inland waterways, coastal shipping including shipping lines and other port related services;

(d) Aviation, including airports, heliports, airlines and other airport related services;

(e) Logistics services;

(ii) Agriculture, including the following:

(a) Infrastructure related to storage facilities;

(b) Construction relating to projects involving agro-processing and supply of inputs to agriculture;

(d) Construction for preservation and storage of processed agro-products, perishable goods such as fruits, vegetables and flowers including testing facilities for quality;

(iii) Water management, including the following:

(a) Water supply or distribution;

(b) Irrigation;

(c) Water treatment, etc.

(iv) Telecommunication, including the following:

1. Basic or cellular, including radio paging;

(b) Domestic satellite service (i.e., satellite owned and operated by an Indian company for providing telecommunication service);

(c) Network of trunking, broadband network and internet services;

(v) Industrial, Commercial and Social development and maintenance, including the following:

(a) Real estate development, including an industrial park or special economic zone;

(b) Tourism, including hotels, convention centres and entertainment centres;

(c) Public markets and buildings, trade fair, convention, exhibition, cultural centres, sports and recreation infrastructure, public gardens and parks;

(d) Construction of educational institutions and hospitals;

(e) Other urban development, including solid waste management systems, sanitation and sewerage systems, etc.;

(vi) Power, including the following:

(a) Generation of power through thermal, hydro, nuclear, fossil fuel, wind and other renewable sources;

(b) Transmission ,distribution or trading of power by laying a network of new transmission or distribution lines;

(vii) Petroleum and natural gas, including the following:

(a) Exploration and production;

(b) Import terminals;

(c) Liquefaction and re-gasification;

(d) Storage terminals;

(e) Transmission networks and distribution networks including city gas infrastructure;

(viii) Housing, including the following:

(a) Urban and rural housing including public / mass housing, slum rehabilitation etc;

(b) Other allied activities such as drainage, lighting, laying of roads, sanitation facilities etc.;

(ix) Other miscellaneous facilities/services, including the following:

(a) Mining and related activities;

(b) Technology related infrastructure;

(c) Manufacturing of components and materials or any other utilities or facilities required by the infrastructure sector like energy saving devices and metering devices, etc;

(d) Environment related infrastructure;

(e) Disaster management services;

(f) Preservation of monuments and icons;

(g) Emergency services (including medical, police, fire, and rescue);

(x) Such other facility/service which, in the opinion of the Board, constitutes infrastructure sector.)

ii. The disclosure about the face value of shares (including the statement about the issue price being “X” times of the face value) shall be made in the advertisement, offer documents and in application forms in identical font size as that of issue price or price band.)

3.7.2 The companies which have already issued shares in the denomination of Rs.10/- or Rs.100/- may change the standard denomination of the shares by splitting or consolidating the existing shares.

3.7.3 The companies proposing to issue shares in any denomination or changing the standard denomination in terms of clause 3.7.1 or 3.7.2 above shall comply with the following:

(a) the shares shall not be issued in the denomination of decimal of a rupee;

(b) the denomination of the existing shares shall not be altered to a denomination of decimal of a rupee;

(c) at any given time there shall be only one denomination for the shares of the company;

(d) the companies seeking to change the standard denomination may do so after amending the Memorandum and Articles of Association, if required;

(e) the company shall adhere to the disclosure and accounting norms specified by SEBI from time to time.