Initial Public Offerings – The Criteria
WHAT IS AN IPO?
An Initial Public Offering or IPO refers to the process of offering shares of a ‘private corporation’ to the ‘public’ in a New Stock Issuance. The transition from the private to public company can be a crucial time for private investors to realize their gains from the investment which typically incudes share premiums for current private investors. For the time-being, it allows public investors to take full-participation in the offering. A company planning an Initial Public Offering will typically select underwriter.
QUALIFICATIONS FOR LISTING AN IPO
- Paid-up Capital: The paid-up capital of the applicant shall not be less than INR 10 crores (Purposely, the post issue paid-up equity capital for which listing is already sought must be taken into account.), and the capitalization of the applicant’s equity shall not be less than INR 25 crores (Purposely, capitalization will be the product of the issue-price and the post-issue number of equity shares. In respect of the requirement of market-capitalization and paid-up capital the issuers need to include everything in the disclaimer clause of the Exchange required to put-in the offer document.
- Conditions Precedent to Listing: The applicant must adhere to conditions precedent to listing as emerged from inter-alia from Securities Contracts Regulations Act 1956, Securities and Exchange Board of India Act 1992, Companies Act 1956, any rules or/and regulations framed under foregoing statutes, any clarifications, guidelines, any circular issued by the appropriate authority.
- At least Three Years Track Record of either:
- The applicant seeks listing,
- The promoting company/promoters, incorporated in or outside India,
- Partnership firm subsequently converted into a company & approaches the exchange for a listing. NOTE: The company will be considered for listing only after the fulfillment of conditions specified by SEBI.
- The applicant should satisfy the exchange for the listing on the following:
- No disciplinary action by other stock exchanges & regulatory authorities in the past 3 years.
- Redressal mechanism of investor grievance
- Distribution of Shareholding: The applicant promoting company or company’s shareholding pattern on 31st March of last three ‘calendar’ years separately showcasing promoters & other groups shareholding pattern must be as per regulatory requirements.
- Details of Litigation: The applicant, group companies, promoters or promoting company/companies, the nature of litigation, companies promoted by the promoters or promoting company/company’s litigation record, the status of litigation during the pre-ceding 3 years period must be clarified to the exchange.
- The Track Record of Director(s) of the Company: In respect of the track record of the directors, relevant disclosures may be insisted in the offer document stating the status of criminal cases filed or/and nature of the investigation being undertaken with regard to alleged commission of any offence by any of its director(s) and its effect on the business of the company, where all or any of the directors of issuer have/has been charge-sheeted with serious crimes like murder, forgery, rape, any economic offence etc.
Content Information as per nseindia.com