Disclosures
Regulation 83. Public communications, publicity materials, advertisements and research reports
All public communications relating to the rights issue must comply with the requirements of Schedule IX.
The same requirement applies to all publicity materials issued in connection with the issue.
All advertisements relating to the rights issue must also comply with Schedule IX.
Research reports relating to the issue are also covered by this requirement.
Therefore, the issuer and persons connected with the issue cannot publish promotional or informational material freely without following the prescribed requirements.
Schedule IX lays down the standards and restrictions governing how information about the issue can be communicated to the public.
Regulation 84. Issue-related advertisements
84(1).
The issuer shall publish an advertisement at least 2 days before the issue opens.
The advertisement must be published in:
At least 1 English national daily newspaper with wide circulation.
At least 1 Hindi national daily newspaper with wide circulation.
At least 1 regional language daily newspaper with wide circulation.
The regional language newspaper should have wide circulation at the place where the issuer’s registered office is situated.
The issuer shall also intimate the stock exchange(s) so that the advertisement can be disseminated on their websites.
The advertisement must disclose the following information:
(a).
Mention the date on which the Letter of Offer and application forms were completely dispatched.
This confirms that the documents have been sent to the intended eligible shareholders/applicants.
(b).
Centres for Obtaining Duplicate Application Forms
The issuer must specify the centres where shareholders can obtain duplicate copies of the application form.
These centres must be located at places other than the registered office of the issuer.
The facility is available to:
Existing shareholders; and
Other persons entitled to receive the rights entitlements.
The facility applies where the person has not received the application form within a reasonable time after the rights issue has opened.
(c).
Alternative Application Facility Where Application Form Is Not Received
If a shareholder entitled to receive Rights Entitlements has not received the original application form, they may still apply for the rights issue.
This facility also applies where the shareholder is unable to obtain a duplicate application form from the specified centres.
The shareholder may make the application through:
The application form available on the website of the Registrar or
The application form available on the stock exchange website or
A written application on plain paper.
The application must contain the necessary particulars required to identify the shareholder and calculate the entitlement.
Particulars to be Specified
The application should contain:
Name of the applicant.
Address of the applicant.
Rights issue ratio.
Issue price.
Number of equity shares held by the applicant.
Ledger folio number, where applicable.
Depository Participant ID (DP ID).
Client ID.
Number of equity shares entitled under the rights issue.
Number of equity shares actually applied for.
Number of additional equity shares applied for, if any.
Amount to be blocked with the Self-Certified Syndicate Bank (SCSB).
Example
A shareholder holds 1,000 shares.
Rights issue ratio is 1:2, meaning 1 rights share for every 2 shares held.
Therefore, the shareholder is entitled to 500 rights shares.
The shareholder has not received the application form and cannot obtain a duplicate.
The shareholder can use the form available on the Registrar/stock exchange website or apply on plain paper.
The application must mention the:
Shareholder's details, 1:2 ratio, issue price, 1,000 shares held, DP ID, Client ID, 500 shares entitled, number applied for, any additional shares, and the amount to be blocked with the SCSB.
(d). Omitted.
(e).
Application Through Both Form and Plain Paper
If a shareholder submits an application using the prescribed application form as well as a plain-paper application, both applications may be rejected.
The issuer has the option to reject both applications.
Therefore, a shareholder must choose only one method of application.
Submitting two applications through different modes does not give the shareholder two chances to apply.
Example:
A shareholder is entitled to 500 rights shares.
They submit one application using the official application form.
They also submit another application on plain paper.
The issuer may reject both applications.
(f).
Details of Specific Investors
The letter of offer must disclose details of the specific investor(s) in the following situations:
(i). Where promoter(s)/promoter group renounce their Rights Entitlements under Regulation 62(3) and Regulation 86(1)(b):
Name of the specific investor(s), i.e. the renouncees.
Name of the promoter(s)/promoter group, i.e. the renouncer.
Number of Rights Entitlements being renounced.
This identifies who is giving up the rights and who is receiving those rights.
(ii). Where the issuer intends to allot the under-subscribed portion of the rights issue under Regulation 90(2)(d):
Name of the specific investor(s) must be disclosed.
These are the investors to whom the issuer proposes to allot the unsubscribed portion.
Example:
Promoter A has 10,000 Rights Entitlements.
Promoter A renounces 4,000 Rights Entitlements in favour of Investor B.
The disclosure must mention:
Promoter A = renouncer
Investor B = renouncee/specific investor
Rights Entitlements renounced = 4,000
84(2).
No Advertisement Showing Investor Response During the Issue
While the rights issue is open for subscription, the issuer cannot release any advertisement about the subscription status of the issue.
The advertisement must not give the impression that the issue has been fully subscribed.
It must also not suggest that the issue has been oversubscribed.
The issuer cannot publish or indicate the level of investors’ response to the issue.
This prevents advertisements from influencing other investors by creating an impression of strong demand or a successful issue while subscription is still ongoing.
Example:
Rights issue opens with a target of ₹100 crore.
During the issue period, applications received are ₹120 crore.
The issuer cannot publish an advertisement saying “The issue is oversubscribed by 20%.”
Similarly, it cannot say “The issue is fully subscribed” even if ₹100 crore has already been received.
84(3).
Announcement of Closure of the Rights Issue
The issuer can make an announcement about closure of the rights issue only after certain conditions are satisfied.
The issuer must first be satisfied that at least 90% of the offer made through the letter of offer has been subscribed.
The 90% subscription must be based on the offer made under the letter of offer.
The issuer must also obtain a certificate from the Registrar to the Issue confirming that at least 90% of the offer has been subscribed.
Both conditions are required before the closure announcement:
At least 90% subscription and
Certificate from the Registrar confirming the same.
Timing of the Closure Announcement
The issuer generally cannot make the announcement regarding closure of the rights issue before the scheduled closing date.
The issue must remain open until the date specified for its closure.
Therefore, even if 90% or more of the issue has already been subscribed, the issuer cannot announce that the issue is closed before the scheduled closing date.
Exception: An issue-closing advertisement may be published before the closing date if it is made in the specific format prescribed under the SEBI ICDR Regulations.
Example:
Rights issue is scheduled to close on 20 September.
By 15 September, 95% of the issue has already been subscribed and the Registrar has certified it.
The issuer still cannot make a general closure announcement on 15 September.
However, it may make an issue-closing advertisement before 20 September if that advertisement follows the prescribed regulatory format.
Regultion 85. Opening of the issue
Time Period for Opening a Rights Issue
A rights issue may be opened only in compliance with the provisions of the Companies Act, 2013.
The opening of the rights issue must also follow the time period specified by SEBI.
SEBI may prescribe or change the permitted time period from time to time.
Therefore, the issuer cannot independently choose any opening period without considering both:
Companies Act, 2013 requirements and
SEBI-prescribed time period.
Regulation 86. Minimum subscription
86(1).
Minimum Subscription Requirement
The minimum subscription for a rights issue is generally 90% of the offer made through the offer document.
This means the issuer must receive applications for at least 90% of the total issue size.
If the issue does not receive the required minimum subscription, the issue cannot ordinarily proceed with allotment.
Exception to the 90% Minimum Subscription Requirement
The 90% minimum subscription requirement is not applicable when both conditions are satisfied:
(a). The object of the issue involves financing other than financing of capital expenditure for a project.
The money raised should not be intended to finance the capital expenditure of a specific project.
Capital expenditure means expenditure for creating, acquiring, or improving long-term assets such as plant, machinery, buildings, or infrastructure.
Therefore, this exception is relevant where the rights issue is being used for purposes other than project-related capital expenditure.
For example, the issue may be used for working capital, repayment of certain liabilities, or other permitted corporate purposes.
(b). The promoters and promoter group undertake to subscribe fully to their Rights Entitlements.
Promoters and promoter group must commit to subscribe to their entire entitlement.
They cannot simply subscribe to part of their entitlement and leave the remaining portion unsubscribed.
This undertaking provides assurance that the promoters will support the issue by taking up their full entitlement.
Promoters and promoter group must not renounce their Rights Entitlements to persons outside the permitted categories.
Renunciation is permitted only:
Within the promoter group or
To the specific investor(s) disclosed by the issuer under the SEBI ICDR Regulations.
Example:
Total rights issue = ₹100 crore.
Promoters are entitled to ₹30 crore.
The issue is for working capital and not for capital expenditure of a project.
Promoters undertake to subscribe to the entire ₹30 crore.
They may renounce their entitlement only within the promoter group or to specifically disclosed investor(s).
Since both conditions are satisfied, the normal 90% minimum subscription requirement does not apply.
86(2).
Refund When Minimum Subscription Is Not Received
If the rights issue does not receive the minimum subscription required under sub-regulation (1), the issue cannot proceed normally.
The issuer must refund all application money received from the applicants.
The refund must be made forthwith, meaning without unnecessary delay.
In any event, the refund must be completed within 4 days from the closure of the issue.
The 4-day period is counted from the date on which the rights issue officially closes.
The refund applies to all application monies received, not merely the amount relating to the unsubscribed portion.
Example:
Rights issue closes on 20 September.
Required minimum subscription is not achieved.
The issuer must refund all application money received.
The refund should be made immediately and, in any case, no later than 24 September.
Regulation 87. Period of subscription
Period for Keeping the Rights Issue Open
The rights issue must remain open for subscription for the period specified by SEBI from time to time.
The issuer cannot freely decide any subscription period; it must follow the period prescribed by the Board.
The purpose is to provide eligible shareholders a defined period to exercise their Rights Entitlements.
No Withdrawal After Issue Closing Date
An applicant may not withdraw their application after the issue closing date.
Once the issue closes, the application becomes final and cannot be cancelled or withdrawn by the applicant.
Therefore, investors must carefully consider their application before the closing date.
Example:
Rights issue is open from 1 September to 15 September.
An investor applies for 500 rights shares.
The investor may have withdrawal rights only as permitted before the closing date.
After 15 September, the investor cannot withdraw the application.
Regulation 88. Payment options
Payment Options for Rights Issue
The issuer must provide shareholders with one of the following payment options for each type of instrument offered in the rights issue.
This means the issuer must decide the applicable payment structure for each type of specified security/instrument.
The shareholder will make payment according to the option provided by the issuer.
(a). Part Payment on Application with Balance Payable in Calls
Under this option, the shareholder does not have to pay the entire issue price at the time of applying for the rights issue.
The issuer collects only a specified portion of the issue price along with the application.
The unpaid portion remains outstanding after the shares are allotted.
The issuer subsequently demands the remaining amount through calls.
A “call” is a formal demand made by the issuer requiring shareholders to pay the unpaid amount on their shares.
The issuer may make one call or multiple calls, depending on how the payment schedule is structured.
The shareholder must pay each call amount within the time specified by the issuer.
Therefore, the total issue price is ultimately paid in stages rather than entirely at the application stage.
(b). Full Payment on Application
Under this option, the shareholder must pay the entire issue price when making the application.
No portion of the issue price remains unpaid after the application payment.
The issuer therefore does not need to make subsequent calls for the same shares.
Once the shareholder makes the full payment and the shares are allotted, there is no further payment obligation towards the issue price.
Example:
Rights issue price = ₹100 per equity share.
Shareholder applies for 500 shares.
Entire amount payable = 500 × ₹100 = ₹50,000.
The shareholder pays ₹50,000 along with the application.
No further amount is payable through calls.
Minimum Part Payment on Application
If the issuer chooses the part-payment option, the amount payable at the time of application cannot be less than 25% of the issue price.
Therefore, 25% is the minimum amount that must be collected upfront.
The issuer may require more than 25% on application, but it cannot require less than 25%.
The remaining amount of the issue price can be collected later through calls.
Regulatory Approvals
The issuer must obtain all necessary regulatory approvals required to implement this part-payment structure.
These approvals must be obtained before the issuer proceeds with the payment arrangement.
Therefore, merely deciding to collect the issue price in instalments is not sufficient.
The issuer must ensure that the proposed payment structure is permitted by the relevant regulatory authorities.
Payment of Balance Amount Through Electronic Banking
This proviso applies where the issuer has chosen the part-payment option.
The shareholder pays a portion of the issue price along with the application.
The remaining balance is payable later through calls made by the issuer.
These calls for the balance amount are made outside the original issue period.
The shareholder is permitted to pay this balance amount through electronic banking modes.
Therefore, the shareholder does not necessarily have to make the subsequent call payment through physical instruments or by visiting a bank.
The electronic payment facility applies specifically to the balance amount payable through calls.
Regulation 89. Manner of Calls
Payment of Outstanding Subscription Money Through Calls
Under circumstances, the issuer chooses the part-payment option and intends to collect the remaining subscription money through calls then:
The issuer must ensure that the entire outstanding subscription amount is called within 12 months from the date of allotment.
The 12-month period is calculated from the date on which the equity shares are allotted, not from the issue opening or closing date.
The issuer must therefore make the necessary calls within this 12-month period.
Failure to Pay the Call Money
If an applicant fails to pay the call money within the prescribed 12-month period, the equity shares on which the call is outstanding shall be forfeited.
The subscription money that the applicant has already paid on those shares is also forfeited.
Therefore, the applicant loses both:
The equity shares and
The subscription money already paid on those shares.
Example:
Issue price = ₹100 per share.
Applicant pays ₹25 on application.
Remaining ₹75 is payable through calls.
Shares are allotted on 1 January 2027.
The issuer must call the outstanding ₹75 within 12 months from 1 January 2027.
If the applicant fails to pay the call money and the applicable 12-month period expires, the shares can be forfeited along with the ₹25 already paid.
Regulation 90. Allotment procedure and basis of allotment
90(1).
Restriction on Allotment Beyond the Offer
The issuer cannot allot more specified securities than the number of securities offered through the letter of offer.
The “specified securities” are the securities offered to investors under the rights issue.
Therefore, the maximum allotment is generally limited to the quantity mentioned in the letter of offer.
Even if applications received are higher than the number of securities offered, the issuer cannot simply allot securities beyond the offered quantity.
The only exception is where Regulation 74(1) and Regulation 74(2) specifically permit an allotment beyond the securities originally offered.
90(2).
Allotment shall be made in the following manner:
(a).
Full Allotment of Rights Entitlements
Eligible shareholders who apply for their Rights Entitlements must be given full allotment of the entitlement they have applied for.
This applies even when the shareholder applies for only part of their entitlement.
The same treatment is given to renouncee(s) who receive Rights Entitlements through renunciation.
A renouncee who applies for the specified securities renounced in their favour must also receive full allotment of the amount they have applied for.
Therefore, where the shareholder or renouncee has applied for securities within their available entitlement, that application should be allotted in full.
The allotment is subject to adjustment for fractional entitlements.
Example 1: Shareholder Applies for Full Entitlement
A shareholder is entitled to 1,000 rights shares.
The shareholder applies for all 1,000 shares.
The shareholder should receive the full 1,000 shares, subject to the applicable allotment conditions.
Example 2: Shareholder Applies for Part of Entitlement
A shareholder is entitled to 1,000 rights shares.
The shareholder applies for only 600 shares.
The shareholder should receive the full 600 shares applied for.
The remaining 400 shares are not allotted because the shareholder did not apply for them.
Example 3: Renouncee
Shareholder A renounces 500 Rights Entitlements in favour of Investor B.
Investor B applies for all 500 shares.
Investor B should receive the full 500 shares applied for.
If Investor B applies for only 300 shares, the 300 shares applied for should be allotted in full.
Adjustment for Fractional Entitlement
Rights Entitlements may sometimes result in fractions because of the rights issue ratio.
Such fractional entitlements are adjusted while determining the actual number of securities to be allotted.
(b).
Allotment of Additional Specified Securities
This provision deals with eligible shareholders who apply for more securities than their basic Rights Entitlement.
The shareholder must first apply for their entire Rights Entitlement.
After applying for the full entitlement, the shareholder may also apply for additional specified securities.
Additional shares can be allotted only if some portion of the rights issue remains undersubscribed after making the allotment mentioned in clause (a).
The remaining undersubscribed securities are then distributed, as far as possible, on an equitable basis.
While making this additional allotment, the issuer must give due regard to the number of specified securities held by each shareholder on the record date.
Therefore, a shareholder holding more shares on the record date may generally receive a larger proportion of the additional securities.
However, the provision says “as far as possible,” so the allotment need not always be exactly proportional.
Example
Rights issue offers 10,000 shares.
Shareholder A is entitled to 1,000 shares and applies for all 1,000 + 500 additional shares.
Shareholder B is entitled to 500 shares and applies for all 500 + 200 additional shares.
First, A receives 1,000 and B receives 500 under clause (a).
If 2,000 shares are still unsubscribed, these remaining shares may be allotted among applicants for additional shares.
In making this allotment, the issuer considers the number of shares A and B held on the record date.
(c).
Allotment of Additional Securities to Renouncees
This provision deals with renouncees who receive Rights Entitlements from an eligible shareholder through renunciation.
The renouncee must first apply for the specified securities that were renounced in their favour.
The renouncee may also apply for additional specified securities beyond the renounced entitlement.
Additional securities can be allotted to such renouncees only if some portion of the rights issue remains undersubscribed after:
Full allotment to eligible shareholders under clause (a); and
Allotment of additional securities to eligible shareholders under clause (b).
In other words, eligible shareholders get priority before additional securities are considered for renouncees.
If securities still remain after these allotments, the issuer may allot additional securities to renouncees.
The additional securities allotted to renouncees may be distributed on a proportionate basis.
Example
Rights issue = 10,000 shares.
Renouncee A receives 500 Rights Entitlements from a shareholder.
A applies for:
500 shares representing the renounced entitlement; and
300 additional shares.
First, the 500 shares are allotted under the renounced entitlement.
Additional shares are considered only after full allotment under clauses (a) and (b).
Suppose 100 shares remain undersubscribed after those allotments.
If several renouncees have applied for additional shares, the 100 shares may be distributed among them proportionately.
(d).
Allotment to Specific Investors
This provision deals with allotment of the remaining undersubscribed portion to specific investor(s) identified by the issuer.
The specific investor(s) must have been disclosed by the issuer before the rights issue opens.
The issuer cannot decide to introduce a new specific investor after the issue has opened for subscription.
Such allotment can be made only after completing the allotments under clauses (a), (b) and (c).
Therefore, priority is given in the following order:
(a) Eligible shareholders applying for their Rights Entitlements.
(b) Eligible shareholders applying for additional specified securities.
(c) Renouncees applying for additional specified securities.
(d) Specific investor(s) disclosed before the issue opens.
The specific investor(s) can receive securities only if a portion of the rights issue remains undersubscribed after the above allotments.
Example
Rights issue = 10,000 shares.
First, eligible shareholders receive their applied Rights Entitlements.
Remaining shares are then considered for additional applications from eligible shareholders.
After that, additional applications from renouncees are considered.
Suppose 500 shares are still undersubscribed.
If Investor X was disclosed by the issuer as a specific investor before the issue opened, those remaining 500 shares may be allotted to Investor X.
90(3).
Finalisation of Basis of Allotment
The basis of allotment must be finalised in a fair and proper manner.
The authorised employees of the designated stock exchange are responsible for ensuring that the allotment process is properly carried out.
The Registrars to the Issue also participate in ensuring that the basis of allotment is finalised correctly.
Therefore, the responsibility is shared between:
Authorised employees of the designated stock exchange; and
Registrars to the Issue.
The basis of allotment determines how the available securities are distributed among applicants, particularly where the issue is oversubscribed.
The allotment process must follow the manner prescribed by SEBI.
The issuer and its intermediaries cannot adopt an arbitrary method for deciding who receives the securities.
Example:
A rights issue has 10,000 shares available.
Eligible shareholders and other eligible applicants collectively apply for 15,000 shares.
Since applications exceed the available shares, the basis of allotment must determine how the 10,000 shares are distributed.
The designated stock exchange's authorised employees and the Registrar ensure that this basis is finalised fairly and according to SEBI's prescribed procedure.
Regulation 91. Allotment, refund and payment of interest
91(1).
Timeline for Allotment and Refund
The issuer must ensure that the specified securities are allotted within the period prescribed by SEBI.
Where an applicant is not entitled to receive the securities applied for, the relevant application money must be refunded within the prescribed period.
Where the application was made through ASBA, the blocked application money must be unblocked within the prescribed period, as applicable.
Therefore, the issuer has to complete the post-issue process within the timeline specified by the Board.
The requirement covers both:
Allotment of specified securities; and
Refund or unblocking of application money.
The issuer cannot keep the investor's money blocked or the allotment pending beyond the period prescribed by SEBI.
Example:
An investor applies for rights shares and the application money is blocked in the bank account through ASBA.
If the investor receives the full allotment, the amount corresponding to the allotment is used towards the issue.
If the investor receives only part of the shares, the excess blocked amount must be unblocked.
If the investor receives no allotment, the entire blocked amount must be unblocked.
All of this must be completed within the period specified by SEBI.
91(2).
Electronic Processing of Allotment and Application Money
The issuer must ensure that the entire post-issue process is carried out electronically.
The requirement covers the following activities, as applicable:
Allotment of specified securities.
Credit of securities in dematerialised form.
Refund of application money.
Unblocking of application money.
The allotment must therefore be processed electronically rather than through physical share certificates.
Once securities are allotted, they must be credited electronically to the investor’s demat account.
If an applicant is entitled to a refund, the refund must also be processed electronically.
Where application money was blocked through ASBA and is not required for allotment, the blocked amount must be electronically unblocked.
Example:
Investor applies for 1,000 rights shares through ASBA and ₹10,000 is blocked.
Investor is allotted 700 shares.
The amount relating to 700 shares is used towards the issue.
The excess amount relating to 300 shares is electronically unblocked.
The 700 allotted shares are electronically credited to the investor’s demat account.
91(3).
Interest for Delay in Allotment, Refund or Unblocking
If the issuer fails to complete the allotment within the period prescribed under sub-regulation (1), the issuer becomes responsible for paying interest to the shareholders.
The same applies if the issuer fails to refund the application money within the prescribed period.
It also applies where application money that should have been unblocked is not unblocked within the prescribed period.
The interest must be paid at the rate of 15% per annum.
The interest is a compensation for the delay in giving the shareholder the securities or releasing their money.
The issuer must pay this interest within the time period disclosed in both:
The draft letter of offer; and
The final letter of offer.
Therefore, the issuer must disclose in advance when and how the 15% interest will be paid if there is a delay.
Example:
An investor has ₹1,00,000 of application money that should have been refunded/unblocked.
The issuer delays the refund beyond the prescribed period.
Interest becomes payable at 15% per annum for the applicable period of delay.
If the applicable delay period is 30 days, the interest would be approximately ₹1,233:
₹1,00,000 × 15% × 30/365 = ₹1,233 approximately.
Regulation 92. Post-issue advertisements
92(1).
Post-Issue Advertisement
The issuer must publish an advertisement containing details of the important post-issue activities.
The advertisement must be released within 10 days from the date of completion of the various activities mentioned in the provision.
The advertisement must be published in:
At least one English national daily newspaper with wide circulation.
At least one Hindi national daily newspaper with wide circulation.
At least one regional-language daily newspaper with wide circulation at the place where the issuer’s registered office is situated.
Details to Be Disclosed
The advertisement must provide details regarding:
Subscription to the issue.
It should show how much of the issue was subscribed.
Basis of allotment.
It should disclose how the securities were allotted among applicants.
Number, value and percentage of all applications, including ASBA applications.
This covers the total applications received through all permitted modes, including ASBA.
Number, value and percentage of successful allottees, including ASBA applicants.
This shows how many applicants were successful and the value and percentage represented by them.
Date of completion of despatch of refund orders, wherever applicable.
If refund orders are required, the date on which their despatch was completed must be mentioned.
Date of instructions given by the Registrar to the Issue to the Self-Certified Syndicate Banks (SCSBs).
This relates to instructions for unblocking application money in ASBA accounts, where applicable.
Date of despatch of certificates, where applicable.
Date of credit of specified securities, where applicable.
This refers to the date on which the allotted securities were credited electronically to investors' demat accounts.
Date of filing of the listing application.
The advertisement must mention when the application for listing of the specified securities was filed with the stock exchange.
Any other relevant post-issue details required under the applicable provisions must also be included.
92(2).
Placement of Post-Issue Details on Stock Exchange Websites
The details required under 92(1) must also be placed on the websites of the stock exchanges where the securities are listed.
This means the information is not limited to newspaper advertisements.
The same post-issue details published through the required advertisement must also be made available online.
The relevant stock exchange websites provide investors with easy access to the information after the issue.
The requirement applies to the stock exchanges where the specified securities are listed.
Regulation 93. Post-issue responsibilities
93(1). Omitted.
93(2).
Monitoring of Investor Grievances
The designated stock exchange has the responsibility to regularly monitor the redressal of investor grievances arising from issue-related activities.
“Investor grievances” means complaints or problems faced by investors in connection with the issue.
These grievances may relate to matters such as:
Non-receipt of Rights Entitlements or application forms.
Non-allotment or incorrect allotment of securities.
Delay in refund or unblocking of application money.
Delay in credit of securities to the demat account.
Any other issue-related problem faced by an investor.
The designated stock exchange must regularly check whether these complaints are being properly addressed.
Therefore, its role is not limited to listing the securities; it also monitors the resolution of investor complaints arising from the issue.
93(3).
Issuer’s Responsibility for Post-Issue Activities
The issuer remains responsible for all post-issue activities until the required post-issue processes are fully completed.
The issuer’s responsibility continues until applicants receive the securities allotted to them.
Where the securities are allotted in dematerialised form, the issuer must ensure that the securities are credited to the applicants’ demat accounts.
Where securities are not allotted, the issuer must ensure that the application money is refunded to the applicants, as applicable.
The issuer must also ensure that the required listing or trading permission is obtained from the stock exchange.
Therefore, completion of the issue or finalisation of the basis of allotment does not by itself end the issuer’s post-issue responsibility.
Example
A rights issue closes and the basis of allotment is finalised.
The issuer still has to ensure:
Allotted securities are credited to the relevant demat accounts.
Unsuccessful or excess application money is refunded/unblocked, as applicable.
Listing or trading permission is obtained.
The issuer remains responsible until these required activities are completed.
93(4).
Coordination and Monitoring After Closure of the Issue
After the rights issue closes, the issuer remains responsible for coordinating the entire post-issue process.
The issuer must regularly coordinate with:
The Registrar to the Issue; and
Various intermediaries involved in the issue.
This coordination must continue at regular intervals after the issue closes.
Monitoring of Applications
The issuer must monitor the flow of applications received through Self-Certified Syndicate Banks (SCSBs).
It must also monitor the processing of those applications by the concerned intermediaries.
This includes monitoring the processing of ASBA application forms.
The issuer must ensure that applications are properly processed and that any issues are followed up with the relevant intermediary.
Process Until Basis of Allotment
The issuer's monitoring continues until the basis of allotment is finalised.
The issuer must coordinate with the Registrar and other intermediaries to ensure that the allotment process is completed properly.
Post-Allotment Activities
After the basis of allotment is finalised, the issuer must continue monitoring until the applicable activities are completed:
Credit of specified securities to the dematerialised accounts of successful allottees.
Unblocking of ASBA accounts for amounts that are not required towards allotment.
Despatch of refund orders, wherever applicable.
Listing of the specified securities on the stock exchange, wherever applicable.
Example
Rights issue closes on 30 September.
The issuer then coordinates with the Registrar and SCSBs to verify:
Applications received through ASBA.
Proper processing of those applications.
Finalisation of the basis of allotment.
Credit of allotted shares to demat accounts.
Unblocking of excess ASBA amounts or despatch of refunds.
Completion of listing formalities.
The issuer's coordination responsibility continues until these applicable activities are completed.
93(5).
Reporting Misconduct by Intermediaries
The designated stock exchange must monitor the activities of intermediaries involved in the issue.
If the designated stock exchange notices any act of omission or commission by an intermediary, it must report the matter to SEBI (the Board).
“Omission” means the intermediary fails to perform an act or responsibility that it was required to perform.
“Commission” means the intermediary performs an act that it was not supposed to perform or acts improperly.
The reporting obligation applies when such conduct is noticed during the issue or post-issue process.
93(6).
Notice of Devolvement on Underwriters
This provision applies when there is a devolvement on the underwriters.
“Devolvement” occurs when the issue is not fully subscribed by investors and the underwriters are required to subscribe to the portion of the issue that remains unsubscribed, according to their underwriting commitment.
In such a situation, the designated stock exchange must ensure that a formal notice of devolvement is issued to the underwriters.
The notice must clearly specify the obligation of each underwriter.
It should indicate the number or amount of securities that the respective underwriter is required to subscribe for.
The notice must be issued within 10 days from the date of closure of the issue.
Example:
Rights issue = ₹100 crore.
Public/investor applications = ₹80 crore.
Underwriters are responsible for the remaining ₹20 crore under their underwriting commitments.
This creates a devolvement of ₹20 crore on the underwriters.
The designated stock exchange must ensure that the notice specifying the underwriters' obligations is issued within 10 days from the issue closing date.
93(7).
Reporting Underwriters Who Fail to Meet Devolvement
This provision applies when a rights issue is undersubscribed and the issue has been underwritten.
“Undersubscribed” means that investors have subscribed for fewer specified securities than the number offered.
Because the issue is underwritten, the unsubscribed portion devolves upon the underwriters according to their underwriting obligations.
The underwriters are therefore required to subscribe to the portion devolved upon them.
If any underwriter fails to fulfil their underwriting devolvement, the designated stock exchange must report that failure to SEBI (the Board).
The designated stock exchange must provide the required information in the format prescribed in Schedule XVIII.
Therefore, the designated stock exchange has a reporting responsibility, while the underwriter has the responsibility to honour its devolvement.
Example
Rights issue = ₹100 crore.
Investors subscribe = ₹80 crore.
Unsubscribed portion = ₹20 crore.
This ₹20 crore devolves upon the underwriters according to their respective obligations.
Underwriter A is required to take ₹10 crore but fails to do so.
The designated stock exchange must furnish details of Underwriter A's failure to SEBI in the Schedule XVIII format.
Regulation 94. Release of subscription money
94(1).
Confirmation to Bankers Before Release of Funds
The issuer must give confirmation to the bankers to the issue that all formalities relating to the issue have been completed.
This confirmation must be supported by copies of the listing and trading approvals obtained from the stock exchange.
The listing and trading approvals serve as evidence that the securities have completed the required listing-related formalities.
Only after receiving this confirmation can the banker release the issue money to the issuer.
If the issue has failed, the banker is instead permitted to release the money for refund to the applicants.
Therefore, the money collected from investors is not released to the issuer until the required issue formalities are completed and confirmed.
Example:
Investors have deposited ₹50 crore towards a rights issue.
The issue process is completed and the issuer obtains the required listing and trading approvals.
The issuer sends copies of these approvals to the banker to the issue.
The banker can then release the ₹50 crore to the issuer.
If the issue fails and the required conditions are not met, the money is released for refund to the applicants instead.
94(2).
Refund When Listing or Trading Permission Is Not Obtained
This provision applies when the issuer fails to obtain listing or trading permission from the stock exchanges where the specified securities were proposed to be listed.
If the stock exchange rejects the issuer’s application for listing, the issuer becomes liable to refund the entire money received from applicants.
The issuer must refund the entire amount through verifiable means.
The refund must be completed within 4 days from the date on which the issuer receives intimation from the stock exchange rejecting the listing application.
Liability for Delay in Refund
If the issuer fails to repay the money within the prescribed 4 days, additional liability arises.
From the expiry of the fourth day, the issuer and every director who is an “officer in default” become jointly and severally liable to repay the money.
“Jointly and severally liable” means the applicants can recover the amount from the issuer and/or the responsible directors, subject to the applicable law.
Interest is payable on the amount at the rate of 15% per annum.
The interest liability starts from the expiry of the fourth day.
Example
The stock exchange rejects the listing application on 1 October.
The issuer receives the rejection intimation on 2 October.
The issuer must refund the entire application money within 4 days from 2 October.
If the issuer fails to repay within those 4 days, then from the expiry of the fourth day:
The issuer becomes liable for the money; and
Every director who is an officer in default also becomes jointly and severally liable.
Interest at 15% per annum becomes payable on the delayed amount.
94(3).
Refund When Listing or Trading Permission Is Not Obtained
This provision applies when the issuer fails to obtain listing or trading permission from the stock exchanges where the specified securities were proposed to be listed.
If the stock exchange rejects the issuer’s application for listing, the issuer becomes liable to refund the entire money received from applicants.
The issuer must refund the entire amount through verifiable means.
The refund must be completed within 4 days from the date on which the issuer receives intimation from the stock exchange rejecting the listing application.
Liability for Delay in Refund
If the issuer fails to repay the money within the prescribed 4 days, additional liability arises.
From the expiry of the fourth day, the issuer and every director who is an “officer in default” become jointly and severally liable to repay the money.
“Jointly and severally liable” means the applicants can recover the amount from the issuer and/or the responsible directors, subject to the applicable law.
Interest is payable on the amount at the rate of 15% per annum.
The interest liability starts from the expiry of the fourth day.
Example
The stock exchange rejects the listing application on 1 October.
The issuer receives the rejection intimation on 2 October.
The issuer must refund the entire application money within 4 days from 2 October.
If the issuer fails to repay within those 4 days, then from the expiry of the fourth day:
The issuer becomes liable for the money; and
Every director who is an officer in default also becomes jointly and severally liable.
Interest at 15% per annum becomes payable on the delayed amount.
Regulation 95. Reporting of transactions of the promoters and promoter group and other pre-issue transactions
95(1).
Reporting Transactions by Promoters and Promoter Group
The issuer must monitor all transactions in securities carried out by its promoters and promoter group during the specified period.
The reporting period begins from the date of filing of:
The draft letter of offer; or
The letter of offer, as applicable.
The reporting period continues until the date on which the rights issue closes.
Any transaction in securities by the promoters or promoter group during this period must be reported to the stock exchange(s).
The requirement covers all transactions in securities, so the issuer cannot limit the reporting only to transactions involving the rights issue.
The transaction must be reported within 24 hours from the time the transaction takes place.
Example
Draft letter of offer is filed on 1 September.
Rights issue closes on 20 September.
A promoter sells 10,000 equity shares on 10 September.
The issuer must report this transaction to the stock exchange(s) within 24 hours of the transaction.
If another promoter buys shares on 15 September, that transaction must also be reported within 24 hours.
95(2).
Reporting of Pre-Issue Placement
The issuer must report any pre-issue placement that was proposed and disclosed in the draft letter of offer.
“Pre-issue placement” means a placement of securities made before the rights issue.
The reporting requirement applies only when the proposed pre-issue placement has been disclosed in the draft letter of offer.
The issuer must report the transaction to the stock exchange(s) within 24 hours of the pre-issue transaction taking place.
The requirement applies whether the pre-issue placement is completed:
In part; or
In its entirety.
Therefore, the issuer cannot wait until the entire proposed placement is completed before making the disclosure.
Example
The draft letter of offer discloses a proposed pre-issue placement of ₹20 crore.
The issuer completes ₹8 crore of the placement on 10 September.
The issuer must report this transaction to the stock exchange(s) within 24 hours.
If the remaining ₹12 crore is subsequently placed, that transaction must also be reported within 24 hours of the relevant transaction.
Regulation 96. Post-Issue Reports
Submission of Post-Issue Reports
The issuer has to submit two different post-issue reports after the rights issue:
Initial post-issue report
Final post-issue report
(a) Initial Post-Issue Report
The issuer must submit the initial post-issue report in the format specified in Part B of Schedule XVII.
This report must be submitted within 3 working days from the closure of the issue.
Therefore, the deadline is calculated from the date on which the rights issue closes.
(b) Final Post-Issue Report
The issuer must submit the final post-issue report in the format specified in Part C of Schedule XVII.
The normal deadline is within 15 days from the date on which the basis of allotment is finalised.
If the issue fails and the application money is refunded, the final post-issue report must instead be submitted within 15 days from the date of refund of the money.
Therefore, there are two possible starting points:
Successful issue: 15 days from finalisation of basis of allotment.
Failed issue: 15 days from refund of application money.
