Short Title, Commencement & Definitions
Regulation 1. Short title and commencement
1(1).
The name of these regulations is the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
They may also be called SEBI (ICDR) Regulations, 2018. (Not present in the Act).
1(2).
These regulations do not apply immediately.
They come into force after 60 days.
The 60 days is counted from the date they are published in the Official Gazette.
Regulation 2. Definitions
2(a). Act
Act means the Securities and Exchange Board of India Act, 1992.
2(b). Advertisement
Advertisement includes different types of promotional materials
It covers: Notices , Brochures , Pamphlets , Show cards & Catalogues
It also includes: Hoardings , Placards & Posters.
Media-based forms are also included such as Newspaper insertions , Pictures & Films.
These Media Based forms cover both Print media and Electronic media.
It also includes Radio & Television programmes.
2(c). Anchor investor
An anchor investor means a qualified institutional buyer.
The anchor investor applies in a public issue on the main board.
The application is made through the book building process.
The minimum application amount is ten crore rupees for a public issue on the main board.
The minimum application amount is two crore rupees for an issue made under Chapter IX of these regulations.
The application is made in accordance with these regulations.
Explanation: (Not in Act)
An anchor investor is a qualified institutional buyer.
It is a large institutional investor and not a retail or small investor.
The anchor investor invests before the public issue opens to the general public.
The purpose of an anchor investor is to create confidence in the public issue.
The investment is made through the book building process.
Book-Building Process is defined in 2(g).
In a public issue on the main board, the minimum investment required is ten crore rupees.
In an issue made under Chapter IX, the minimum investment required is two crore rupees.
Chapter IX deals with Initial Public Offers aka the IPO’s.
The investment must be made in accordance with the SEBI ICDR Regulations.
The presence of anchor investors helps in attracting other investors to the issue.
What does Public Issue on the Main Board mean?
A public issue means a company is asking the general public to invest money in it by buying its shares or securities.
When people invest, they are basically giving money to the company and in return they get ownership which are these shares.
There are two types of public issues:
An initial public offer is when the company is coming to the public for the first time.
A further public offer is when an already listed company raises more money from the public again.
The main board is the main platform of big stock exchanges where large and well-established companies are listed.
These companies are usually bigger in size, have more financial history, and have to follow stricter rules and disclosures.
This is different from the SME platform, which is meant for smaller companies with relaxed requirements.
So when we say a public issue on the main board, it means:
The company is raising money from the general public, and
Its shares will be listed on the main stock exchange where big companies trade.
Main Stock Exchanges include Bombay Stock Exchange or National Stock Exchange.
2(d). Application supported by blocked amount (ASBA)
Application supported by blocked amount (ASBA) means an application for subscribing to a public issue or rights issue.
This is done along with an authorisation to self-certified syndicate bank to block the application money in a bank account.
An application supported by blocked amount (ASBA) is a type of application used to subscribe to a public issue or a rights issue.
It involves giving an application to apply for securities.
Along with the application, the applicant gives an authorisation to a self-certified syndicate bank.
The bank is authorised to block the application money in the applicant’s bank account.
The money remains in the bank account but cannot be used until the allotment process is completed.
The money is only debited if the securities are actually allotted to the applicant.
Explanation:
ASBA is a way of applying in an IPO or rights issue without actually paying the money immediately.
When you apply, your money is not taken out of your bank account.
Instead, your bank just blocks (freezes) that amount.
You cannot use that money, but it is still sitting in your account.
If you get shares, the money is then deducted.
If you do not get shares, the money is unblocked and becomes usable again.
Understanding Rights Issue
A rights issue is a way for a company to raise additional money from people who already own its shares.
The company does not go to new investors first, it approaches its existing shareholders.
The shares are offered in a fixed ratio based on current holdings.
The price of these shares is usually lower than the market price.
This is done to encourage shareholders to invest more money.
The company gives shareholders a “right” to buy these shares so , the shareholders get the first option before anyone else.
This right is not compulsory.
Shareholders can choose to buy the shares, ignore the offer, or sometimes even sell the right.
If shareholders do not exercise their right, their ownership in the company may get diluted.
Companies use rights issues when they need funds but want to avoid taking loans or bringing in new outside investors immediately.
2(e). Associate
An associate means a person or an entity.
The meaning of associate is not defined independently in these regulations.
It takes its meaning from Section 2(6) of the Companies Act , 2013 or the applicable accounting standards.
Therefore, if a person or entity qualifies as an associate under those laws or standards, it will be treated as an associate here as well.
Section 2(6) of the Companies Act defines an Associate Company as:
An associate company means a company in which another company has significant influence.
It is not a subsidiary company of that company.
It also includes a joint venture company.
Significant influence means:
Control of at least twenty per cent of the total voting power.
Control of or participation in business decisions through an agreement.
A joint venture means:
A joint arrangement between parties where the parties have joint control, and they have rights to the net assets of the arrangement.
2(f). Board
Board means the Securities and Exchange Board of India established under the Act.
2(g). Book Building
Book building is a process used in an issue of securities.
It is used to find out the demand for the securities from investors.
Investors indicate how many securities they want and at what price they are willing to buy.
Based on this demand, the price of the securities is determined.
It helps in deciding:
The price of the securities.
The value or quantum of securities.
The coupon (in case of debt instruments).
It applies to specified securities or Indian Depository Receipts, as the case may be.
The entire process is carried out in accordance with these regulations.
Alternatively,
Book building is a process undertaken to elicit demand for securities.
Elicit means to bring out or collect demand from investors.
It is used to assess the price of the securities.
The process helps in determining:
The quantum of securities which means the total number of securities to be issued.
The value of the securities which is the overall worth or size of the issue.
The coupon of the securities which is the interest rate paid on debt securities.
Book Building applies to Specified securities , or Indian Depository Receipts, as the case may be.
The entire process is carried out in accordance with these regulations.
2(h). Composite Issue
A composite issue means an issue of specified securities by a listed issuer.
The issue is made on a public-cum-rights basis.
Public-cum-rights means the issue includes both a public issue and a rights issue together.
In this type of issue, securities are offered to the general public, and to the existing shareholders.
The allotment in both the public issue and the rights issue is proposed to be made simultaneously.
Understanding Specified Securities
Specified securities means equity shares and convertible securities.
Equity shares are the normal shares of a company that give ownership and voting rights.
Convertible securities are instruments that can be converted into equity shares at a later date.
These include things like Convertible debentures and Convertible preference shares.
The conversion may happen at a future date, and with or without the option of the holder
2(i). Control
Control has the same meaning as given under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
In accordance with , SEBI (SAST) Regulations 2011.
Section 2(e) of the SEBI SAST Regulations , 2011 states that:
Control includes the right to appoint majority of the directors or the power to control management or policy decisions of a company
Such control may be exercised Individually or by persons acting in concert
Control can be exercised either directly or indirectly.
It may arise through:
Shareholding.
Management rights.
Shareholders’ agreements.
Voting agreements.
Any other manner.
A director or officer of a target company is not considered to be in control merely because of holding that position.
2(j). Convertible Debt Instrument
A convertible debt instrument means an instrument that creates or acknowledges indebtedness.
Indebtedness means a debt or money that the company has to repay.
It can be converted into equity shares of the issuer at a later date.
The conversion may happen with or without the option of the holder.
It may or may not create a charge on the assets of the issuer
Charge means a security or claim over the company’s assets to secure repayment of the debt.
2(k). Convertible Security
A convertible security means a security that can be converted into or exchangeable with equity shares of the issuer at a later date.
Convertible means it can be changed into equity shares in the future.
Exchangeable means it can be swapped for equity shares instead of being directly converted.
The conversion or exchange may happen with the option of the holder, or without the option of the holder.
It includes convertible debt instruments, and Convertible preference shares.
2(l). Designated Stock Exchange
A designated stock exchange means a recognised stock exchange having nationwide trading terminals.
It is chosen by the issuer.
It is the stock exchange on which the securities of the issuer are listed, or proposed to be listed.
The purpose of choosing a designated stock exchange is for a particular issue of specified securities under these regulations.
The issuer can choose a different recognised stock exchange as the designated stock.
Example:
A company plans to launch an IPO. It chooses National Stock Exchange as its designated stock exchange
So , all activities related to that issue (like application, bidding, allotment coordination) are primarily handled through NSE.
The company may also list on Bombay Stock Exchange, but for that issue, NSE is the designated stock exchange
For its next issue, the same company can choose BSE as the designated stock exchange instead of NSE
2(m). Draft Letter of Offer
Draft letter of offer means a preliminary document prepared by the issuer.
It is filed with the stock exchange(s).
The filing is done before the final letter of offer is issued.
It is specifically prepared in relation to a rights issue.
It contains relevant disclosures and details required under the regulations.
The idea is to enable review by stock exchanges and ensure compliance with regulatory requirements.
2(n). Draft Offer Document
Draft offer document means a preliminary offer document prepared by the issuer.
It is filed with the Board (i.e., SEBI).
The filing is done before the final offer document is issued.
It is prepared in relation to a public issue.
It contains necessary disclosures and information as required under the regulations.
2(o). Employee
Employee means a permanent employee of:
The issuer or the promoters or the subsidiary company of the issuer.
The employee may be working in India or outside India.
It also includes a director of the issuer whether whole-time or not.
However, employee does NOT include:
(i). Promoters.
(ii). A person belonging to the promoter group.
(iii). A director who:
Either individually, or
Through relatives, or
Through any body corporate,
Directly or indirectly holds more than 10% of the outstanding equity shares of the issuer.
Employee for Stock Option Schemes
For the purposes of stock option schemes:
The term “employee” will have the meaning given under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
Therefore, the meaning of “employee” is not independently defined under this provision.
The provision adopts the definition provided in the SEBI Share Based Employee Benefits and Sweat Equity Regulations, 2021.
2(oa). Financial Year
Financial year shall have the same meaning as assigned to it under Section 2(41) of the Companies Act, 2013.
In accordance with Section 2(41) of the Companies Act , 2013:
Financial year means the period ending on 31st March every year in relation to any company or body corporate.
If a company or body corporate is incorporated on or after 1st January of a year:
Its first financial year will end on 31st March of the following year.
So the first financial year can be longer than 12 months (to align with the March year-end).
The financial year is the period for which the financial statements of the company or body corporate are prepared.
2(p). Fugitive Economic Offender
Fugitive economic offender means an individual or a person:
Who is declared as a fugitive economic offender under section 12 of the Fugitive Economic Offenders Act, 2018.
Such declaration must be made under the provisions of that Act.
Only after this formal declaration does the individual qualify as a “fugitive economic offender.
2(q). Further Public Offer
Further public offer is an offer of specified securities by a listed issuer to the public for subscription.
It applies only when the issuer is already a listed company.
The offer is made to the public for subscribing to such specified securities.
It also includes an offer for sale of specified securities to the public by existing holders of such securities.
So, both fresh issue by the company and sale by existing shareholders are covered.
2(r). General Corporate Purposes
General corporate purposes include those identified purposes where:
No specific amount is allocated in the draft offer document, draft letter of offer, offer document, or letter of offer.
Any amount specifically mentioned under the head “general corporate purposes” (or by any similar name) in such documents.
These purposes are typically broad and not tied to a specific, itemised use of funds.
Issue-related expenses are not treated as general corporate purposes.
Issue-related expenses are the costs incurred by a company while issuing securities (like shares or debentures) to the public.
The following are examples of Issue-Relating Expenses:
Merchant banker fees (lead managers)
Legal fees (lawyers, compliance work)
Registrar fees (handling applications, allotment)
Underwriting commission
Advertising & marketing expenses (IPO ads, roadshows)
Printing & stationery (offer documents, forms)
Listing fees paid to stock exchanges
Stamp duty and regulatory filing fees
Auditor / due diligence fees
This is the case even if no specific amount is allocated for such expenses.
Therefore, simply not specifying an amount does not make issue-related expenses fall under general corporate purposes.
2(s). Green Shoe Option
Green shoe option means an option to allot equity shares in excess of the shares originally offered in a public issue.
Such additional allotment happens over and above the base issue size.
It is used as a post-listing price stabilizing mechanism.
Explanation:
It allows the company (through intermediaries) to issue extra shares if demand is high.
These extra shares are typically up to 15% of the issue size (as per practice).
After listing, if the share price falls below the issue price then the stabilizing agent buys shares from the market to support the price.
If the price rises then the extra shares already allotted help meet excess demand and reduce volatility.
So, it basically controls extreme price fluctuations after listing.
Example:
A company plans an IPO of 1,00,000 shares.
It includes a green shoe option of 15,000 shares.
Situation 1: High demand
Total demand exceeds supply.
Company/allotment includes extra 15,000 shares.
Situation 2: Price falls after listing
Stabilizing agent buys shares from market.
This increases demand and supports price
Situation 3: Price rises after listing
Extra shares already issued help prevent excessive price spike
2(t). Group Companies
Group companies include companies (other than the promoter(s) and subsidiary/subsidiaries) with which the issuer has had related party transactions.
Such related party transactions must have occurred during the period for which financial information is disclosed.
The transactions should be as covered under the applicable accounting standards.
It also includes other companies that are considered material by the board of the issuer.
2(u). Housing Finance Company
Housing finance company means a company that is registered with the National Housing Bank.
It must be a deposit-taking company.
The registration must be specifically for carrying on the business of housing finance.
Its primary business is providing finance for housing (e.g., home loans).
2(v). Infrastructure Sector
The infrastructure sector includes various facilities and services relating to transportation, including inter-modal transportation.
(i). Transportation
Transportation infrastructure includes the following:
(A). Roads and Road-related Infrastructure
This includes:
National Highways
State Highways
Major District Roads
Other District Roads
Village Roads
Toll Roads
Bridges
Highways
Road Transport Providers
Other road-related services
(B). Railways and Rail-related Infrastructure
This includes:
Rail Systems
Rail Transport Providers
Metro Rail Roads
Other railway-related services
(C). Ports, Waterways and Shipping
This includes:
Ports: Including minor ports & harbours
Inland Waterways
Coastal Shipping
Shipping Lines
Other port-related services
(D). Aviation and Airport Infrastructure
This includes:
Airports
Heliports
Airlines
Other airport-related services
(E) Logistics Services
This includes Logistics services forming part of the transportation infrastructure sector.
(ii). Agriculture
Agricultural infrastructure includes the following:
(A) . Storage Facilities
This includes:
Infrastructure related to storage facilities used for agricultural products.
This covers infrastructure required for the safe storage and preservation of agricultural produce.
(B). Agro-processing and Agricultural Inputs
This includes:
Construction of projects involving agro-processing.
Construction relating to projects involved in the supply of inputs to agriculture.
Examples of agricultural inputs can include things required for:
Agricultural production, such as seeds, fertilizers and other essential inputs.
(C). Preservation, Storage and Testing of Agro-products
This includes construction relating to:
Preservation of processed Agro-products.
Storage of processed Agro-products.
Preservation and storage of perishable goods, including:
Fruits.
Vegetables.
Flowers.
Testing facilities for quality of such agricultural and processed products.
(iii). Water Management
Water management infrastructure includes the following:
(A). Water Supply or Distribution
This includes:
Water supply systems
Water distribution systems
Infrastructure used for supplying and distributing water to users.
(B). Irrigation
This includes:
Irrigation infrastructure
Projects and facilities used for the supply and distribution of water for agricultural purposes.
C). Water Treatment
This includes:
Water treatment facilities
Infrastructure used for treating and processing water to make it suitable for its intended use.
D). Other Water Management Activities
The term etc. indicates that the infrastructure sector may also cover other facilities and services connected with water management, beyond the specifically listed activities.
iv). Telecommunication
Telecommunication infrastructure includes the following:
A). Basic or Cellular Services
This includes:
Basic telecommunication services.
Cellular/mobile telecommunication services.
Radio paging services.
These cover systems and services used for basic voice and mobile communication.
B) Domestic Satellite Services
This includes:
Domestic satellite services used for providing telecommunication services.
The satellite must be owned and operated by an Indian company.
The satellite is used specifically for providing telecommunication services.
C) Network and Internet Services
This includes:
Trunking networks
Broadband networks
Internet services
These cover infrastructure and services used for large-scale communication, data transmission and internet connectivity.
v). Industrial, Commercial and Social Development & Maintenance
This includes the following:
A). Real Estate Development
This covers:
Real estate development
Development of industrial parks
Development of Special Economic Zones (SEZs)
These projects involve the development of infrastructure for industrial and commercial activities.
B). Tourism Infrastructure
This includes:
Hotels
Convention centres
Entertainment centres
Other infrastructure related to tourism development
C). Public, Commercial, Cultural and Recreational Infrastructure
This includes:
Public markets
Public buildings
Trade fairs
Convention centres
Exhibition centres
Cultural centres
Sports infrastructure
Recreation infrastructure
Public gardens
Public parks
These facilities support commercial, cultural, social and recreational activities.
D) Educational and Healthcare Infrastructure
This includes construction of:
Educational institutions
Hospitals
This covers infrastructure supporting education and healthcare services.
E) Urban Development Infrastructure
This includes other forms of urban development, such as:
Solid waste management systems
Sanitation systems
Sewerage systems
Other related urban infrastructure and municipal services
vi). Power
Power infrastructure includes the following:
A) Generation of Power
This includes generation of electricity through:
Thermal power.
Hydro power.
Nuclear power.
Fossil fuel-based power.
Wind power.
Other renewable sources of energy.
Thus, the definition covers both conventional and renewable sources of power generation.
B) Transmission, Distribution and Trading of Power
This includes:
Transmission of power
Distribution of power
Trading of power
The infrastructure specifically includes the laying of new networks of transmission or distribution lines for carrying and supplying electricity.
vii). Petroleum and Natural Gas
This includes the following:
A). Exploration and Production
Exploration of petroleum and natural gas resources.
Production of petroleum and natural gas after extraction.
B) Import Terminals
Import terminals used for receiving petroleum and natural gas from outside the country.
These facilities form part of the infrastructure required to handle and receive imported energy resources.
C). Liquefaction and Re-gasification
Liquefaction facilities — facilities used to convert natural gas into a liquid form, generally for easier storage and transportation.
Re-gasification facilities — facilities used to convert liquefied natural gas back into its gaseous form for further use or distribution.
D). Storage Terminals
Storage terminals used for storing petroleum and natural gas.
These facilities provide infrastructure for safe storage before further transportation, distribution or use.
E). Transmission and Distribution Networks
This includes:
Transmission networks for transporting petroleum and natural gas over larger distances.
Distribution networks for supplying petroleum and natural gas to end users.
City gas infrastructure, which forms part of the distribution network for supplying gas within cities and urban areas.
viii). Housing
A). Urban and Rural Housing
This includes:
Urban housing
Rural housing
Public housing
Mass housing
Slum rehabilitation
Thus, the scope covers housing projects in both urban and rural areas, including large-scale and public housing initiatives.
B) Allied Housing Infrastructure
This includes infrastructure and facilities supporting housing projects, such as:
Drainage systems
Lighting infrastructure
Laying of roads
Sanitation facilities
Other allied activities connected with housing development.
(ix).
Services Provided by Recognised Stock Exchanges and Registered Depositories
Recognised stock exchanges provide services connected with the trading and listing of securities.
Registered depositories provide services relating to the holding, transfer and settlement of securities in dematerialised form.
These services facilitate the issuance, trading, settlement and maintenance of securities within the securities market.
(x). Other Miscellaneous Facilities or Services
(A). Mining and Related Activities
This includes:
Mining activities
Activities and infrastructure related to mining operations.
This brings certain mining-related infrastructure within the broader infrastructure sector.
(B). Technology-related Infrastructure
This includes:
Technology-related infrastructure.
Infrastructure required to support the use, operation and development of technology-based systems and services.
(C). Infrastructure Components, Materials & Utilities
This includes the manufacturing of components and materials required by the infrastructure sector.
It also covers manufacturing or provision of:
Components required for infrastructure projects.
Materials required by the infrastructure sector.
Other utilities or facilities required for infrastructure.
Energy-saving devices.
Metering devices.
Similar infrastructure-related equipment.
The focus is on products and facilities that are necessary for the infrastructure sector to function efficiently.
(D). Environment-related Infrastructure
This includes:
Environment-related infrastructure.
Facilities and services supporting environmental protection and management.
(E). Disaster Management Services
This includes:
Disaster management infrastructure and services.
Facilities and systems used for prevention, preparedness, response and management of disasters.
(F). Preservation of Monuments and Icons
This includes:
Infrastructure and services for the preservation of monuments.
Preservation of icons and other important heritage structures/objects.
(G). Emergency Services
This includes infrastructure and services required for emergency response, including:
Medical emergency services.
Police services.
Fire services.
Rescue services.
These services form part of infrastructure supporting public safety and emergency response.
(xi). Other Facilities or Services as determined by SEBI
The definition of infrastructure sector is not limited to the facilities and services specifically listed in the earlier categories.
The SEBI Board has the discretion to recognise any other facility or service as forming part of the infrastructure sector.
Such facility or service can be treated as infrastructure if, in the opinion of the Board, it constitutes infrastructure sector.
2(w). Initial Public Offer
Initial public offer means an offer of specified securities by an unlisted issuer to the public for subscription.
It applies where the issuer is not listed on any stock exchange prior to the offer.
The offer is made to the public for subscribing to such specified securities.
It also includes an offer for sale of specified securities to the public by existing holders of such securities in an unlisted issuer.
Explanation:
An IPO is the first time a private (unlisted) company goes to the public to raise money.
Through an IPO, the company becomes a listed company on stock exchanges.
There are two ways shares are offered in an IPO:
Fresh issue - Company issues new shares and receives funds
Offer for sale (OFS) - Existing shareholders sell their shares and receive funds
After the IPO:
Shares are listed and traded publicly.
The company becomes subject to SEBI and listing regulations.
2(x). Innovators Growth Platform
Innovators growth platform means a trading platform for listing and trading of specified securities.
It is meant for issuers that meet the eligibility criteria prescribed under Regulation 283.
Only those companies that satisfy such criteria can list their specified securities on this platform.
The platform facilitates both listing and trading of such securities.
2(y). Institutional Investor
Institutional investor means a specified category of investors recognized under the regulations.
It includes the following two categories:
(i). Qualified institutional buyers (QIBs).
(ii). Family trusts or intermediaries registered with SEBI, having a net worth of more than ₹500 crore as per their last audited financial statements.
The inclusion of family trusts and intermediaries is specifically for the purpose of listing and/or trading on the Innovators Growth Platform.
This is governed in accordance with the provisions of Chapter X of the regulations.
Explanation:
Institutional investors are large, financially strong and sophisticated investors.
Apart from regular QIBs, the definition is expanded for Innovators Growth Platform (IGP) to include:
Big family offices/trusts.
Large registered intermediaries.
The objective of the ₹500 crore net worth requirement is to make sure only serious and capable investors participate in such platforms.
2(z). Issue Size
Issue size includes the offer through offer document.
It also includes the promoters' contribution brought in as part of the issue.
Issue size refers to the total size of the public issue.
It is not limited to what the public subscribes to.
"Offer through offer document" is itself a defined term (see 2(ll).
It means net offer plus reservations. (The public portion plus any amounts set aside for categories like employees or existing shareholders.)
It also includes the amount invested by promoters as part of regulatory requirements.
So, issue size = Offer through offer document (net offer + reservations) + Promoters' contribution.
Example:
A company launches an IPO:
Net offer (open to the general public): ₹700 crore
Reservations (employees, shareholders, etc.): ₹100 crore
Offer through offer document = ₹700 crore + ₹100 crore = ₹800 crore
Promoters' contribution: ₹200 crore
Issue size = ₹800 crore + ₹200 crore = ₹1000 crore
