PART X: FAST TRACK FURTHER PUBLIC OFFER
Regulation 155. Eligibility conditions
There are certain relaxations from the requirements of Regulation 123 when an issuer makes a Further Public Offer (FPO) through the Fast Track Route.
Normally, the issuer must comply with sub-regulations (1), (2), (3), (4), (5) and (9) of Regulation 123.
However, if the issuer satisfies the specific conditions prescribed for a fast-track FPO, these particular requirements will not apply.
So , the issuer can proceed with the FPO without following those specified requirements, provided it fulfils the eligibility conditions laid down under this regulation.
(a).
The issuer must have had its equity shares listed on at least one recognised stock exchange for a minimum continuous period of three years immediately before the reference date.
The three-year period is calculated backwards from the reference date, which is the date used to assess the issuer's eligibility for the Fast Track FPO.
The issuer cannot qualify merely because it was incorporated three years ago.
Its equity shares must actually have been listed for the required period.
(b).
On the reference date, the entire shareholding of the issuer's promoter group must be held in dematerialised (Demat) form.
So, every share held by members of the promoter group must be converted into electronic form and maintained in their respective Demat accounts.
Even if a small portion of the promoter group's shareholding remains in physical certificate form, this condition will not be satisfied.
(c).
The issuer must have an average market capitalisation of its public shareholding of at least ₹1,000 crore to qualify for the Fast Track FPO route.
The calculation considers only the shares held by the public shareholders, not the shares held by promoters or the promoter group.
The requirement ensures that the issuer has a sufficiently large public shareholding base and market value.
The threshold must be satisfied in the case of a public issue.
Average Market Capitalisation of Public Shareholding
It refers to the average market value of the shares held by public shareholders, calculated over a period of one year.
The calculation is based on the daily market capitalisation of the issuer's public shareholding during that one-year period.
The one-year period ends on the last day of the quarter immediately preceding the month in which the proposed issue is approved by the shareholders or the Board of Directors, as applicable.
The sum of the daily market capitalisation for this entire period is divided by the total number of trading days during that period.
Example:
Assume the company’s proposed FPO is approved by its Board in October 2026.
The relevant one-year period will be calculated up to the end of the quarter immediately preceding October 2026, which is 30 September 2026.
Therefore, the company will consider the daily market capitalisation of its public shareholding from 1 October 2025 to 30 September 2026.
Assume there were 250 trading days during this period and the total of the daily market capitalisations was ₹2,50,000 crore.
Average market capitalisation = ₹2,50,000 crore ÷ 250 = ₹1,000 crore.
Since the average market capitalisation is ₹1,000 crore, the company satisfies this eligibility requirement.
Public shareholding shall have the same meaning as assigned to it under the Securities Contracts (Regulation) Rules, 1957.
(d).
The issuer's equity shares must have sufficient trading activity on the stock exchange.
The annualised trading turnover must be at least 2% of the weighted average number of equity shares listed during the relevant six-month period.
The relevant period is the six calendar months immediately preceding the month of the reference date.
Annualised trading turnover refers to the total number of equity shares traded during the six-month period, converted into an annual figure.
To calculate the annualised trading turnover, the total number of shares traded during the six-month period is multiplied by 2.
Weighted average number of equity shares listed refers to:
The average number of equity shares listed on the stock exchange during the relevant six months.
It also takes into account any changes in the number of listed shares during that period.
Example:
Assume the reference date is 15 October 2026.
The relevant six-month period will be from 1 April 2026 to 30 September 2026.
Total equity shares traded during this period: 6 lakh.
Annualised trading turnover: 6 lakh × 2 = 12 lakh shares.
Weighted average number of equity shares listed: 5 crore.
2% of 5 crore = 10 lakh shares.
Since the annualised trading turnover of 12 lakh shares exceeds the required 10 lakh shares, the issuer satisfies this requirement.
For issuers whose public shareholding is less than 15% of their issued equity capital, a different calculation is followed.
In such cases:
The annualised trading turnover must be at least 2% of the weighted average number of equity shares available as free float during the relevant six-month period.
The relevant period remains the six calendar months immediately preceding the month of the reference date.
Free float refers to the equity shares available for trading by the public in the stock market, excluding shares that are not considered freely tradable, such as promoter-held shares.
Therefore, instead of calculating 2% based on the weighted average of all listed equity shares, the calculation is based on the weighted average number of shares available as free float.
Example:
Assume the reference date is 15 October 2026.
Relevant six-month period: 1 April 2026 to 30 September 2026.
Total equity shares traded during this period: 3 lakh.
Annualised trading turnover: 3 lakh × 2 = 6 lakh shares.
Weighted average number of equity shares available as free float: 2 crore.
2% of 2 crore = 4 lakh shares.
Since the annualised trading turnover of 6 lakh shares exceeds the required 4 lakh shares, the issuer satisfies this requirement.
(e).
The issuer's equity shares must also satisfy a minimum delivery-based trading turnover requirement.
The annualised delivery-based trading turnover must be at least 10% of the annualised total trading turnover during the relevant six-month period.
The relevant period is the six calendar months immediately preceding the month of the reference date.
Delivery-based trading turnover refers to shares that are actually delivered from the seller's Demat account to the buyer's Demat account.
It excludes intraday trades where shares are bought and sold on the same day without delivery.
Annualised delivery-based trading turnover means the delivery-based shares traded during the six-month period, converted into an annual figure.
Similarly, annualised total trading turnover is the total number of equity shares traded during the same six-month period, converted into an annual figure.
Example:
Assume the reference date is 15 October 2026.
Relevant six-month period: 1 April 2026 to 30 September 2026.
Total equity shares traded during this period: 10 lakh.
Annualised total trading turnover: 10 lakh × 2 = 20 lakh shares.
Out of these, delivery-based shares traded during the six months: 2 lakh.
Annualised delivery-based trading turnover: 2 lakh × 2 = 4 lakh shares.
10% of annualised total trading turnover (20 lakh) = 2 lakh shares.
Since the annualised delivery-based trading turnover of 4 lakh shares exceeds the required 2 lakh shares, the issuer satisfies this requirement.
(f).
The issuer must have complied with the Equity Listing Agreement or the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), as applicable.
Such compliance must have been maintained for at least three years immediately preceding the reference date.
The issuer must have fulfilled the applicable listing-related requirements during this period.
These include timely submission of financial results, disclosure of material events, corporate governance requirements and other applicable stock exchange compliances.
The relevant three-year period is calculated backwards from the reference date.
If the issuer has been listed for less than three years, it would not satisfy this particular requirement.
Example:
Assume the reference date is 15 October 2026.
The relevant three-year period will be from 15 October 2023 to 14 October 2026.
During this period, the issuer must have complied with the applicable Equity Listing Agreement or LODR Regulations.
If the issuer has maintained the required compliance throughout this period, it satisfies this requirement.
Relaxation in Compliance with Board Composition Requirements
The issuer is generally required to comply with the Equity Listing Agreement or SEBI (LODR) Regulations, 2015, for at least three years immediately preceding the reference date.
However, a relaxation is provided in cases where the issuer has failed to comply with the requirements relating to the composition of the Board of Directors during any quarter within the last three years.
Such non-compliance will not automatically disqualify the issuer from satisfying the three-year compliance requirement.
For this relaxation to apply, the issuer must fulfil the following requirements:
The issuer must be compliant with the applicable Board composition requirements at the time of filing the Red Herring Prospectus (RHP) with the Registrar of Companies (ROC).
The RHP must contain adequate disclosures regarding the instances of non-compliance relating to Board composition during the preceding three years.
If both requirements are fulfilled, the issuer will be deemed to have complied with the three-year listing compliance requirement.
Example:
Assume the reference date is 15 October 2026.
The issuer failed to maintain the required Board composition during two quarters in 2024.
By the time it files the RHP with the ROC, it has corrected the Board composition and is fully compliant.
It also discloses the earlier instances of non-compliance in the RHP.
The issuer will be deemed to have satisfied the three-year compliance requirement.
Monetary Fines Imposed by Stock Exchanges
The issuer will not become ineligible to undertake an issuance under this regulation merely because stock exchanges have imposed monetary fines on it.
In other words, the imposition of only monetary fines by stock exchanges will not be treated as a ground for disqualifying the issuer from using the Fast Track FPO route.
Therefore, even if the issuer has been fined for certain listing-related non-compliances, it can still satisfy this eligibility requirement.
However, this relaxation is limited to cases involving monetary fines. It does not automatically protect the issuer from other forms of regulatory action or non-compliance.
Example:
Assume an issuer has been fined by the stock exchange for delayed submission of its quarterly financial results.
The issuer has paid the monetary fine imposed by the stock exchange.
Such imposition of a monetary fine alone will not make the issuer ineligible to undertake a Fast Track FPO.
(g).
Redressal of Investor Complaints
The issuer must have resolved at least 95% of the investor complaints received by it.
The calculation is based on the total number of investor complaints received up to the end of the quarter immediately preceding the month of the reference date.
The issuer must ensure that at least 95% of these complaints have been satisfactorily resolved.
The remaining 5% may still be pending, provided the issuer has achieved the minimum 95% redressal requirement.
The relevant cut-off date is the last day of the quarter preceding the month in which the reference date falls.
(h).
Absence of Pending Show-Cause Notices Issued by SEBI
There must be no pending show-cause notices issued by the SEBI Board against the issuer, its promoters or its Whole-Time Directors as on the reference date.
A show-cause notice is issued by SEBI when it seeks an explanation from an entity or individual regarding an alleged violation of securities laws.
The requirement applies to show-cause notices that have been issued but remain pending as on the reference date.
However, proceedings relating to the imposition of monetary penalties are excluded from this restriction.
Therefore, pending proceedings for imposition of penalty alone will not make the issuer ineligible under this requirement.
Disclosure of Pending Penalty and Prosecution Proceedings
Certain regulatory proceedings against the issuer, its promoters or Whole-Time Directors do not automatically make the issuer ineligible to undertake an issuance.
However, if any of the following proceedings exist, the issuer must make appropriate disclosures in the Offer Document.
(i). Show-Cause Notices for Imposition of Penalty
If the SEBI Board or the Adjudicating Officer has issued a show-cause notice against the issuer then:
Its promoters or Whole-Time Directors in proceedings relating to the imposition of a penalty, the details must be disclosed.
The issuer must disclose the nature of the alleged violation and the action initiated.
(ii). Prosecution Proceedings
If the SEBI Board has initiated prosecution proceedings against the issuer, its promoters or Whole-Time Directors, the details must also be disclosed in the Offer Document.
In both cases, the issuer must disclose the relevant regulatory action along with its potential adverse impact on the issuer.
This enables prospective investors to understand the regulatory risks associated with the issuer before making an investment decision.
(i).
Disclosure of Settlement of Securities Law Violations
If the issuer, its promoter, promoter group or any director has settled an alleged violation of securities laws through the SEBI settlement mechanism, during the three years immediately preceding the reference date, such settlement must be disclosed in the Offer Document.
The settlement mechanism allows entities or individuals to resolve alleged securities law violations by agreeing to settlement terms with SEBI, instead of continuing with the regular enforcement proceedings.
The disclosure requirement applies even if the alleged violation has been settled and the settlement order has been complied with.
The issuer must provide details of such settlement and disclose its compliance with the settlement order in the Offer Document.
The relevant period is the three years immediately preceding the reference date.
(j).
No Suspension of Trading as a Disciplinary Measure
The issuer's equity shares must not have been suspended from trading by the stock exchange as a disciplinary measure during the three years immediately preceding the reference date.
This requirement ensures that the issuer has maintained a satisfactory compliance record with the stock exchange.
A suspension imposed as a disciplinary action due to violations or non-compliance with listing requirements may affect the issuer's eligibility.
The relevant period is the three years immediately preceding the reference date.
(k).
Absence of Conflict of Interest Between Lead Manager and Issuer
There must be no conflict of interest between the Lead Manager(s) appointed for the issue and the issuer or its group companies.
The Lead Manager(s) must be able to perform their responsibilities independently and objectively.
Their relationship or financial interests with the issuer or its group companies must not compromise their ability to act in the interests of investors.
The assessment of conflict of interest must be made in accordance with the applicable SEBI regulations.
(l).
Disclosure and Adjustment of Audit Qualifications in Financial Statements
If the auditor has raised any qualifications in respect of the financial statements for the financial years disclosed in the Offer Document, the issuer must address those qualifications.
The issuer must provide restated financial statements after adjusting for the financial impact of the audit qualifications.
So , wherever the auditor has identified an error, omission or non-compliance that affects the financial statements, the issuer must make the necessary adjustments to reflect its impact.
However, there may be instances where the financial impact of an audit qualification cannot be accurately determined.
In such cases, the issuer must appropriately disclose the audit qualification and the inability to ascertain its financial impact in the Offer Document.
Regulation 156. Submission of offer document and due diligence certificate
156(1).
Filing of Offer Document and Payment of SEBI Fees
The issuer must file the Offer Document with both:
The SEBI Board.
The Stock Exchanges where the securities are proposed to be listed.
The filing must be carried out in accordance with Regulation 123(7) and Regulation 123(8) of the SEBI ICDR Regulations.
The issuer must also pay the applicable fees to SEBI.
The amount of fees payable must be calculated in accordance with Schedule III of the SEBI ICDR Regulations.
Therefore, filing the Offer Document with the required authorities and payment of the prescribed SEBI fees are necessary procedural requirements.
156(2).
Documents to be Submitted by the Lead Manager(s) to SEBI
Along with the Offer Document, the Lead Manager(s) must submit certain due diligence certificates to the SEBI Board.
The documents required are as follows:
(a). Due Diligence Certificate from the Lead Manager(s)
The Lead Manager(s) must submit a due diligence certificate in Form A of Schedule V.
This certificate must also include the additional confirmations specified in Form E of Schedule V.
Through this certificate:
The Lead Manager(s) confirm that they have carried out the necessary due diligence and that the relevant disclosures and information in the Offer Document have been examined.
(b). Due Diligence Certificate from the Debenture Trustee
In the case of a Fast Track Issue of Convertible Debt Instruments, an additional due diligence certificate must be submitted by the Debenture Trustee.
This certificate must be in Form B of Schedule V.
The requirement ensures that the Debenture Trustee has also carried out the necessary due diligence in relation to the convertible debt instruments.
Explanation:
For the purposes of this regulation, the reference date refers to the date on which the issuer files the relevant offer document with the Registrar of Companies (ROC).
The reference date differs depending on the type of issue:
Book-Built Issue: The date on which the Red Herring Prospectus (RHP) is filed with the ROC.
Fixed-Price Issue: The date on which the Prospectus is filed with the ROC.
Regulation 157. Post-listing exit opportunity for dissenting shareholders
Exit Offer to Dissenting Shareholders in Further Public Offers
In the case of a Further Public Offer (FPO), including an FPO undertaken through the Fast Track route, promoters or shareholders in control of the issuer must provide an exit offer to dissenting shareholders in certain circumstances.
This requirement arises when the issuer proposes:
A change in the objects for which the funds were raised, as disclosed in the Offer Document.
A variation in the terms of any contract relating to those objects, which was disclosed in the Offer Document.
If such a change or variation takes place, shareholders who do not agree with the proposed change are entitled to an exit opportunity.
The exit offer must be provided in accordance with the Companies Act, 2013.
The conditions and procedure for providing the exit offer must be followed as specified in Schedule XX of the SEBI ICDR Regulations.
The responsibility to provide the exit offer rests with the promoters or shareholders in control of the issuer.
Exemption from Providing an Exit Offer
The requirement to provide an exit offer to dissenting shareholders does not apply where the listed issuer has neither identifiable promoters nor shareholders in control.
In other words, if the issuer does not have any identifiable promoter or controlling shareholder, there is no person on whom the responsibility to provide the exit offer can be placed.
Therefore, such an issuer is exempt from the exit offer requirement in these circumstances.
Example:
Assume a listed company proposes to change the objects of its FPO.
The company has neither identifiable promoters nor any shareholders exercising control over it.
In such a situation, the requirement to provide an exit offer to dissenting shareholders will not apply.
