PART VIII: ISSUANCE CONDITIONS AND PROCEDURE
Regulation 129. Allocation in the net offer
129(1).
Allocation in Net Offer Category
In an issue made through the book building process under Regulation 103(1):
The allocation of specified securities in the net offer category shall be made in the manner prescribed under the following provisions.
Category-wise Allocation in Net Offer
In a book-built issue under Regulation 103(1), the net offer is divided among three broad investor categories.
(a). Retail Individual Investors: Not less than 35% of the net offer must be allocated to retail individual investors.
This is a minimum allocation.
The issuer cannot ordinarily allocate less than 35% of the net offer to this category.
For example, if the net offer is 1,00,000 shares, at least 35,000 shares are meant for retail individual investors.
(b). Non-Institutional Investors: Not less than 15% of the net offer must be allocated to non-institutional investors.
This is also a minimum allocation.
For a net offer of 1,00,000 shares, at least 15,000 shares would be allocated to NIIs.
(c). Qualified Institutional Buyers: Not more than 50% of the net offer may be allocated to QIBs.
This is a maximum limit.
Therefore, QIB allocation cannot exceed 50% of the net offer under this provision.
For a net offer of 1,00,000 shares, the QIB allocation cannot exceed 50,000 shares.
Within the QIB portion, 5% shall be allocated to mutual funds.
This 5% is calculated with reference to the QIB allocation.
For example, if the QIB portion is 50,000 shares, 5% of that portion = 2,500 shares for mutual funds.
Reallocation of Unsubscribed Portion
If the portion reserved for Retail Individual Investors under clause (a) is not fully subscribed then:
the unsubscribed portion may be allocated to applicants in another category.
Similarly, if the portion reserved for Non-Institutional Investors under clause (b) is not fully subscribed then:
The unsubscribed portion may be allocated to applicants in another category.
Therefore, the minimum allocation meant for retail investors or NIIs does not have to remain unused if there are insufficient applications in that category.
The issuer can use the unsubscribed portion to satisfy demand from another category.
Example:
Retail portion = 35,000 shares.
Retail investors apply for only 30,000 shares.
The remaining 5,000 shares may be allocated to applicants from another eligible category.
Additional Allocation to Mutual Funds
Mutual funds are entitled to a 5% allocation within the QIB portion under clause (c).
In addition to this 5% allocation, mutual funds can also apply for and receive securities from the remaining portion available for QIBs.
Therefore, the 5% allocation is not a maximum limit on the participation of mutual funds.
Mutual funds can receive their specific 5% allocation plus any additional allocation from the balance QIB portion.
Example:
QIB portion = 50,000 shares.
5% specifically available to mutual funds = 2,500 shares.
The remaining 47,500 shares are available to QIBs, including mutual funds.
Therefore, mutual funds can receive more than 2,500 shares if they are allotted shares from the remaining QIB portion.
129(2).
Category-wise Allocation under Regulation 103(2)
In a book-built issue under Regulation 103(2), the net offer is allocated among Retail Individual Investors, Non-Institutional Investors and Qualified Institutional Buyers.
(a). Retail Individual Investors: Not more than 10% of the net offer shall be allocated to this category.
This is a maximum limit.
Retail allocation cannot exceed 10% of the net offer.
(b). Non-Institutional Investors: Not more than 15% of thee net offer shall be allocated to this category.
This is also a maximum limit
NII allocation cannot exceed 15% of the net offer.
(c). Qualified Institutional Buyers: Not less than 75% of the net offer shall be allocated to QIBs.
This is a minimum allocation.
At least 75% of the net offer must be available to QIBs.
Out of the QIB portion, 5% shall be allocated to mutual funds.
Example
If the net offer is 1,00,000 shares:
Retail Individual Investors: maximum 10,000 shares. (Not more than 10%)
Non-Institutional Investors: maximum 15,000 shares. (Not more than 15%)
QIBs: minimum 75,000 shares. (Not less than 75%)
Mutual funds: 5% of the QIB portion = 3,750 shares.
Reallocation Between Retail and NII Categories
If the portion reserved for Retail Individual Investors under clause (a) is not fully subscribed, the unsubscribed portion may be allocated to Non-Institutional Investors.
Similarly, if the portion available to Non-Institutional Investors under clause (b) is not fully subscribed, the unsubscribed portion may be allocated to Retail Individual Investors.
This reallocation is permitted only between the two categories specified in clauses (a) and (b).
The provision therefore allows the unused portion of one category to meet excess demand in the other category.
Example:
Retail allocation limit = 10,000 shares.
Retail investors apply for only 7,000 shares.
Unsubscribed portion = 3,000 shares.
These 3,000 shares may be allocated to Non-Institutional Investors.
Additional Allocation to Mutual Funds
Mutual funds have a specific 5% allocation within the QIB portion under clause (c).
In addition to this 5% allocation, mutual funds are also eligible to receive securities from the balance portion available for QIBs.
Therefore, the 5% allocation is not the maximum that mutual funds can receive.
Mutual funds can participate in the remaining QIB allocation along with other QIBs.
Example:
QIB allocation = 75,000 shares.
5% specifically allocated to mutual funds = 3,750 shares.
The remaining 71,250 shares are available to QIBs.
Mutual funds can also receive shares from this remaining 71,250-share portion.
129(3).
Allocation to Anchor Investors
In a book-built issue, the issuer may allocate up to 60% of the portion available for allocation to Qualified Institutional Buyers to anchor investors.
This 60% limit is calculated from the QIB portion, not from the entire net offer.
The allocation to anchor investors must comply with the conditions specified in Schedule XIII.
Therefore, anchor investors can receive a substantial part of the QIB allocation, subject to the 60% ceiling.
Example:
Total net offer = 1,00,000 shares.
QIB portion = 75,000 shares.
Maximum allocation to anchor investors = 60% of 75,000 = 45,000 shares.
129(3A).
Allocation within the Non-Institutional Investor Category
In a book-built issue, the portion available to Non-Institutional Investors (NIIs) is further divided into two sub-categories based on application size.
(a). One-third of the portion available to NIIs shall be reserved for applicants with an application size:
More than ₹2 lakh, and Up to ₹10 lakh.
(b). Two-thirds of the portion available to NIIs shall be reserved for applicants with an application size:
More than ₹10 lakh.
Example
If the NII portion is 15,000 shares:
One-third = 5,000 shares for applications above ₹2 lakh and up to ₹10 lakh.
Two-thirds = 10,000 shares for applications above ₹10 lakh.
Reallocation Between NII Sub-categories
If the portion reserved for either NII sub-category is not fully subscribed, the unsubscribed portion may be allocated to applicants in the other NII sub-category.
This reallocation is permitted only between the two NII sub-categories:
Applications above ₹2 lakh and up to ₹10 lakh.
Applications above ₹10 lakh.
Example:
Suppose the NII portion is 15,000 shares.
₹2 lakh to ₹10 lakh category = 5,000 shares.
Above ₹10 lakh category = 10,000 shares.
If the first category receives applications for only 3,000 shares, the remaining 2,000 shares may be allocated to applicants in the above ₹10 lakh category.
129(4).
Allocation in Issues Other Than Book Building
Where the issue is made other than through the book building process, the net offer category is allocated in the following manner:
(a). Retail Individual Investors:
At least 50% of the net offer shall be allocated to Retail Individual Investors.
This is a minimum allocation.
(b). Remaining portion:
The portion remaining after the retail allocation shall be available for:
(i). Individual applicants other than Retail Individual Investors.
(ii). Other investors, including corporate bodies or institutions.
The allocation to these applicants is irrespective of the number of specified securities applied for.
If the portion allocated to Retail Individual Investors is not fully subscribed, the unsubscribed portion may be allocated to applicants in the other category.
Similarly, if the remaining portion is not fully subscribed, it may be allocated to Retail Individual Investors.
Example:
Suppose the net offer is 1,00,000 shares:
Retail Individual Investors: minimum 50,000 shares.
Remaining 50,000 shares: available to:
Individual applicants other than retail investors.
Corporate bodies and institutions.
If retail investors subscribe to only 40,000 shares, the remaining 10,000 shares may be allocated to applicants in the other category.
Explanation:
Higher Allocation to Retail Individual Investors
Under 129(4), Retail Individual Investors are ordinarily entitled to a minimum of 50% of the net offer in a non-book-built issue.
However, if the proportionate entitlement of Retail Individual Investors is more than 50% of the issue size, they shall receive that higher percentage.
Therefore, 50% is not an absolute ceiling for the retail category. It is the minimum allocation under 129(4).
Example:
Suppose the proportionate entitlement of Retail Individual Investors works out to 55% of the issue size.
Since 55% is higher than 50%, retail investors shall be allocated 55%
Regulation 130. Reservation on a competitive basis
130(1).
Reservation on a Competitive Basis
The issuer may make reservations on a competitive basis out of the issue size.
Promoters’ contribution is excluded while calculating the portion available for such reservations.
Reservations may be made in favour of:
(a). Employees.
(b). Shareholders, other than promoters and promoter group, of:
Listed subsidiaries.
Listed promoter companies.
Competitive basis means applicants within the reserved category compete for the reserved portion through the prescribed application and allotment process.
Prohibition on Certain Reservations
The issuer shall not make any reservation for the following persons or entities:
Lead manager(s).
Registrar to the issue.
Syndicate member(s).
Promoters, directors and employees of the above intermediaries.
Group or associate companies of the lead manager(s), registrar and syndicate member(s).
Promoters, directors and employees of such group or associate companies.
Therefore, these persons and entities cannot receive a reserved portion of the issue under the reservation facility.
130(2).
Reservation for Existing Retail Individual Shareholders
In a Further Public Offer (FPO), the issuer may make a reservation on a competitive basis for existing Retail Individual Shareholders.
This provision applies only where the FPO is not part of a composite issue.
The reservation is made out of the issue size after excluding promoters’ contribution.
The reservation is available specifically to existing retail individual shareholders of the issuer.
Since it is on a competitive basis, eligible shareholders compete for allotment within the reserved portion.
130(3).
The reservations on competitive basis shall be subject to following conditions:
(a). Limits on Employee Reservation
The aggregate reservation for employees shall not exceed 5% of the issuer’s post-issue capital.
Aggregate means the total reservation made for all eligible employees collectively.
The value of allotment to any individual employee shall not exceed ₹2 lakh.
Therefore, two separate limits apply:
Overall employee reservation: maximum 5% of post-issue capital.
Individual employee allotment: maximum ₹2 lakh.
Example:
Post-issue capital = 10,00,000 shares.
Maximum employee reservation = 5% = 50,000 shares.
Even within this 50,000-share employee reservation, no individual employee can receive an allotment exceeding ₹2 lakh in value.
Under-subscription in Employee Reservation
If the employee reservation portion is under-subscribed, the unsubscribed portion may be allotted to employees on a proportionate basis.
In such a case, an individual employee may receive an allotment having a value exceeding ₹2 lakh.
However, the total value of securities allotted to any one employee cannot exceed ₹5 lakh.
Therefore, the ₹2 lakh limit can be exceeded only because of the unsubscribed portion.
The overall ceiling of ₹5 lakh per employee continues to apply.
Example:
Normal maximum allotment per employee = ₹2 lakh.
Employee reservation is under-subscribed.
An employee may consequently receive securities worth ₹3 lakh or ₹4 lakh.
But the employee cannot receive securities worth more than ₹5 lakh in total.
(b). Limit on Shareholder Reservation
The reservation made for shareholders shall not exceed 10% of the issue size.
This is the maximum overall limit for the shareholder reservation category.
Therefore, the issuer cannot reserve more than 10% of the issue size for eligible shareholders.
Example:
Issue size = ₹100 crore.
Maximum shareholder reservation = 10% = ₹10 crore.
(c). Restriction on Additional Application
A person who receives a reservation on a competitive basis cannot make any further application for subscription in the net offer.
This restriction applies to persons for whom such reservation has been made.
However, the restriction does not apply to:
Employees.
Retail Individual Shareholders of the listed issuer.
Retail Individual Shareholders of listed subsidiaries of listed promoter companies.
Therefore, except for these specified categories, a person cannot apply both under the reserved portion and separately under the general net offer.
Example:
An investor receives an allotment under a reserved shareholder category.
That investor cannot additionally apply for shares in the general net offer.
But an eligible retail individual shareholder covered by the exception can apply in both capacities.
(d). Adjustment of Unsubscribed Reserved Portions
If any reserved category is under-subscribed, the unsubscribed portion may first be transferred to another reserved category or categories.
This transfer between reserved categories is called an inter-se adjustment.
After making all necessary inter-se adjustments, any portion that still remains unsubscribed shall be added to the net offer category.
Therefore, the sequence is:
Unsubscribed portion in one reserved category.
Adjustment among other reserved categories.
Any portion still remaining unsubscribed is added to the net offer category.
Example:
Employee reservation = 10,000 shares, with 3,000 shares unsubscribed.
The 3,000 shares may first be shifted to another reserved category.
If 1,000 shares still remain unsubscribed after the adjustment, those 1,000 shares are added to the net offer category.
(e). Spill-over from Reserved Category to Net Offer
If the net offer category is under-subscribed, the shortfall in the net offer may be met from the reserved category.
The transfer is permitted only to the extent of the under-subscription.
This transfer of shares from the reserved category to the net public offer is called spill-over.
Therefore, the reserved category can be used to meet the unmet demand in the net offer category.
Example:
Net offer = 50,000 shares.
Applications received in net offer = 45,000 shares.
Under-subscription = 5,000 shares.
Up to 5,000 shares may spill over from the reserved category to the net public offer.
130(4).
Application Limit in Reserved Categories
An applicant in a reserved category may apply for any number of specified securities.
However, the applicant cannot apply for more securities than the total number reserved for that particular category.
Therefore, the reserved portion acts as the maximum application limit for that category.
Example:
Employee reservation = 10,000 shares.
An eligible employee may apply for 2,000, 5,000 or 10,000 shares.
The employee cannot apply for more than 10,000 shares under that reserved category.
Regulation 131. Abridged prospectus
131(1).
Contents of Abridged Prospectus
The abridged prospectus shall contain the disclosures specified in Part E of Schedule VI.
It must contain the prescribed information necessary to provide a concise version of the offer document.
The abridged prospectus shall not contain any matter that is extraneous to the contents of the offer document.
131(2).
QR Code and Links in Application Forms
Every application form distributed by the issuer or any other person in relation to the issue shall include:
A QR code.
A link to access the red-herring prospectus.
A link to access the abridged prospectus.
A link to access the price band advertisement.
Regulation 132. ASBA
Mandatory ASBA Facility
The issuer shall accept bids only through the ASBA (Application Supported by Blocked Amount) facility.
The ASBA process must be carried out in the manner specified by the Board.
Therefore, applicants cannot use other bidding or payment mechanisms where this requirement applies.
Regulation 133. Availability of issue material
Availability of Offer Documents and Issue Material
The lead manager(s) shall ensure that the offer document and other issue material are available before the opening of the issue.
The issue material includes application forms.
These documents and materials must be made available to:
Stock exchanges.
Syndicate members.
Registrar to the issue.
Registrar and share transfer agents.
Depository participants.
Stock brokers.
Underwriters.
Bankers to the issue.
Investors’ associations.
Self-certified syndicate banks (SCSBs).
Regulation 134. Prohibition on payment of incentives
Prohibition on Incentives for IPO Applications
Any person connected with the issue shall not offer any incentive to any person for making an application in the Initial Public Offer (IPO).
The prohibition applies to incentives offered:
Directly or indirectly.
In cash.
In kind.
Through services.
In any other manner.
The only exception is fees or commission paid for services actually rendered in relation to the issue.
Example:
Offering ₹500 cash to someone for applying in the IPO = not permitted.
Offering a free service specifically to induce someone to apply = not permitted.
Paying a commission to an intermediary for legitimate services rendered in connection with the issue = permitted.
Regulation 135. Omitted.
Regulation 136. Underwriting
136(1).
Underwriting of Further Public Offer
If an issuer making a Further Public Offer (FPO) other than through the book building process wants to cover possible under-subscription, it may get the issue underwritten.
Before filing the prospectus, the issuer must enter into an underwriting agreement.
The underwriting agreement must be entered into with:
Merchant bankers registered with the Board, or
Stock brokers registered with the Board, acting as underwriters.
The agreement must specify the maximum number of specified securities that the underwriters will subscribe to:
By themselves, or By procuring subscription from others.
The underwriters agree to subscribe at a predetermined price.
The predetermined price shall not be less than the issue price.
The fact that the issue has been underwritten must be disclosed in the prospectus.
Example:
Issue size = 10 lakh shares.
Only 8 lakh shares are subscribed.
Underwriting obligation = up to 2 lakh shares.
The underwriters must subscribe to or procure subscription for the shortfall, at the predetermined price, which cannot be below the issue price.
136(2).
Underwriting for Rejected Applications
The issuer making a Further Public Offer (FPO), other than through the book building process, shall enter into an underwriting agreement before filing the prospectus.
The underwriting agreement shall be entered into with:
Merchant bankers registered with the Board, or
Stock brokers registered with the Board, acting as underwriters.
The agreement shall specify the number of specified securities that the underwriters shall subscribe to on account of rejection of applications.
The underwriters may subscribe to these securities:
By themselves, or
By procuring subscription from others.
The subscription shall be made at a predetermined price.
The predetermined price shall not be less than the issue price.
The fact of entering into such an underwriting agreement shall be disclosed in the prospectus.
Example:
Issue price = ₹100 per share.
Applications for 1,00,000 shares are rejected, creating an underwriting obligation of 1,00,000 shares.
If the predetermined underwriting price is ₹100, the underwriters must subscribe to or procure subscription for those shares.
They cannot agree to subscribe at ₹95 because the predetermined price cannot be lower than the issue price.
136(3).
If the issuer makes a public issue through the book building process:
(a). Underwriting by Lead Manager(s) and Syndicate Member(s)
The issue shall be underwritten by:
Lead manager(s).
Syndicate member(s).
The underwriting requirement ensures that the specified underwriters undertake responsibility for subscription to the issue as applicable.
However, there is an important exception for the QIB portion.
At least 75% of the net offer is proposed to be compulsorily allotted to Qualified Institutional Buyers (QIBs) under Regulation 103(2) to satisfy the eligibility conditions.
This 75% QIB portion shall not be underwritten.
Therefore, the compulsory QIB portion is excluded from the underwriting requirement.
Example:
Net offer = 1,00,000 shares.
75% compulsory QIB portion = 75,000 shares.
These 75,000 shares cannot be covered by underwriting.
The remaining portion may be subject to the applicable underwriting requirement.
(b). Underwriting Agreement for Rejected Bids
Before filing the prospectus, the issuer shall enter into an underwriting agreement with:
Lead manager(s).
Syndicate member(s).
The agreement shall specify the number of specified securities that the lead manager(s) and syndicate member(s) shall subscribe to because of rejection of bids.
They may subscribe to these securities: By themselves, or By procuring subscription from others.
The subscription price shall not be less than the issue price.
The issuer shall disclose the existence of the underwriting agreement in the prospectus.
Example:
Issue price = ₹100 per share.
Securities arising from rejected bids = 20,000 shares.
The underwriting agreement may require the lead manager(s) and syndicate member(s) to subscribe to or procure subscription for those 20,000 shares.
The agreed price cannot be below ₹100 per share.
(c). Underwriting to Cover Under-subscription
If the issuer wants the issue to be underwritten to cover possible under-subscription, it shall enter into an underwriting agreement before filing the red-herring prospectus.
The underwriting agreement shall be entered into with:
Lead manager(s).
Syndicate member(s), acting as underwriters.
The agreement shall specify the maximum number of specified securities that the underwriters shall subscribe to:
By themselves, or By procuring subscription from others.
The subscription price shall not be less than the issue price.
The issuer shall disclose the fact of the underwriting agreement in the red-herring prospectus.
Example:
Issue size = 10 lakh shares.
Underwriting commitment = maximum 2 lakh shares.
If the issue is under-subscribed, the underwriters may have to subscribe to or procure subscription for up to 2 lakh shares.
The underwriting price cannot be below the issue price.
(d). Failure of Syndicate Member to Meet Underwriting Obligation
If a syndicate member fails to fulfil its underwriting obligations, the lead manager(s) shall fulfil those underwriting obligations.
Therefore, the underwriting responsibility does not remain unfulfilled because of the syndicate member’s failure.
The lead manager(s) acts as the back-up for the syndicate member’s underwriting obligation.
(e). Restriction on Subscription by Lead Manager(s) and Syndicate Member(s)
The lead manager(s) and syndicate member(s) shall not subscribe to the issue in any manner.
The only exception is where they subscribe to fulfil their underwriting obligations.
Therefore, their participation in the issue is restricted to meeting their obligations as underwriters.
They cannot subscribe merely as investors or for any other purpose.
(f). Minimum Underwriting Obligation of Lead Manager(s)
In every underwritten issue, the lead manager(s) shall undertake minimum underwriting obligations.
The minimum underwriting obligation must comply with the requirements specified under the SEBI (Merchant Bankers) Regulations, 1992.
Therefore, the lead manager(s) have a mandatory minimum underwriting commitment in every underwritten issue.
The exact extent of this minimum obligation is determined by the Merchant Bankers Regulations.
(g). Underwriting Obligations and Minimum Subscription
Where an issue is required to be underwritten, the underwriting obligations must be at least equal to the minimum subscription.
The underwriters must therefore commit to subscribe to securities up to an amount sufficient to meet the minimum subscription requirement.
Regulation 137. Monitoring agency
137(1). Monitoring of Issue Proceeds
If the issue size, excluding the offer for sale portion by selling shareholders, exceeds ₹100 crore, the issuer must arrange for monitoring of the use of issue proceeds.
The monitoring must be carried out by a credit rating agency registered with SEBI.
The offer for sale portion is excluded while determining whether the ₹100 crore threshold is crossed.
Example:
Exception for Banks, Public Financial Institutions and Insurance Companies
Under circumstances where the issuer is a bank, public financial institution, or insurance company, this particular requirement does not apply.
The exemption covers an issue of specified securities made by:
A bank.
A public financial institution.
An insurance company.
Therefore, such issuers are not required to comply with the specific requirement contained in the preceding clause.
This exception applies specifically to the issue of specified securities made by these entities.
137(2).
Quarterly Report by Monitoring Agency
The monitoring agency must submit a report to the issuer on a quarterly basis.
The report must be prepared in the format specified in Schedule XI.
The reporting continues until 100% of the issue proceeds have been utilised.
Therefore, the monitoring agency continues monitoring and reporting until the entire issue proceeds have been used.
The requirement is not limited to the initial period after the issue. It continues until full utilisation of the proceeds.
Example:
Issue proceeds = ₹100 crore.
After the first quarter, ₹40 crore has been utilised → the monitoring agency submits its quarterly report.
After the next quarter, ₹75 crore has been utilised → another quarterly report is submitted.
Reporting continues until the entire ₹100 crore has been utilised.
Once 100% of the proceeds have been utilised, the quarterly reporting requirement under this clause ends.
137(3).
Comments on Monitoring Agency’s Findings
The Board of Directors and the management of the issuer must provide their comments on the findings reported by the monitoring agency.
The comments must address the findings made by the monitoring agency regarding the utilisation of the issue proceeds.
The comments must be provided in the format specified in Schedule XI.
So, the monitoring agency reports its findings, and the issuer’s Board and management must respond to those findings.
Example:
The monitoring agency reports that ₹20 crore of the issue proceeds has not been utilised in accordance with the stated objects.
The Board of Directors and management must provide their comments on this finding.
Their response must be made in the manner and format prescribed in Schedule XI.
137(4).
Public Dissemination of Monitoring Agency Report
The issuer must publicly disseminate the monitoring agency’s report after the end of each quarter.
The report must be disseminated within 45 days from the end of that quarter.
The issuer must make the report available in two ways:
Upload the report on its own website.
Submit the report to all stock exchange(s) where its equity shares are listed.
Example:
Quarter ends on 30 June.
The issuer must disseminate the monitoring agency’s report within 45 days from 30 June.
The issuer must upload it on its website and submit it to every stock exchange where its equity shares are listed.
Regulation 138. Public communications, publicity materials, advertisements and research reports
Compliance with Schedule IX
All public communications made by the issuer must comply with Schedule IX.
This includes:
Public communications.
Publicity materials.
Advertisements.
Research reports.
The content, presentation and manner of communication must therefore follow the requirements and restrictions prescribed under Schedule IX.
Example:
If a company is making an IPO and publishes an advertisement promoting the issue, that advertisement must comply with Schedule IX.
Similarly, a research report discussing the issuer or its securities must also follow Schedule IX requirements.
Regulation 139. Issue-related advertisements
139(1).
Pre-Issue and Price Band Advertisement
The requirement is subject to the Companies Act, 2013.
After filing the relevant offer document with the Registrar of Companies (RoC), the issuer must publish a pre-issue and price band advertisement.
The document filed depends on the type of issue:
In a book built issue, the issuer must first file the Red Herring Prospectus (RHP) with the RoC.
In a fixed price issue, the issuer must first file the Prospectus with the RoC.
After this filing, the issuer must publish the pre-issue and price band advertisement.
The advertisement must be published in the same newspapers in which the public announcement under Regulation 124(2) was published.
Example:
Company A is making a book built IPO.
It files the RHP with the RoC.
It then publishes the pre-issue and price band advertisement.
If its Regulation 124(2) public announcement was published in Newspaper X and Newspaper Y, the advertisement must also be published in Newspaper X and Newspaper Y.
139(2).
Format and Disclosures of Advertisement
The pre-issue and price band advertisement must follow the prescribed format.
The advertisement must contain the disclosures specified in Part A of Schedule X.
Therefore, the issuer cannot create the advertisement in any format or with any content it chooses.
Both aspects must be complied with:
Format prescribed under Part A of Schedule X.
Disclosures specified under Part A of Schedule X.
139(3).
Advertisements for Issue Opening and Closing
The issuer may release advertisements for:
Issue opening.
Issue closing.
These advertisements are optional because the regulation uses the word “may”.
If the issuer releases such advertisements, they must follow the prescribed formats under Schedule X.
The specific formats are:
Part B of Schedule X: Advertisement for issue opening.
Part C of Schedule X: Advertisement for issue closing.
139(4).
Restriction on Advertisements During the Issue
During the period when the issue is open for subscription, the issuer cannot release advertisements that:
Give an impression that the issue is fully subscribed.
Give an impression that the issue is oversubscribed.
Indicate or suggest the level of investors’ response to the issue.
The purpose is to prevent the issuer from influencing investors by publicly highlighting subscription levels while the issue is still open.
Investors should not be encouraged to subscribe based on claims about how many other investors have already subscribed.
Example:
An IPO is open from 10 October to 14 October.
On 12 October, the issuer cannot publish an advertisement saying:
“Our IPO is already 2.5 times subscribed.”
“Investors have shown overwhelming response.”
“The issue is almost fully subscribed.”
Such advertisements could create an impression of strong investor demand while the issue is still open.
Regulation 140. Opening of the issue
140(1).
Time Limit for Opening a Public Issue
The public issue must comply with the Companies Act, 2013.
Normally, the public issue may be opened within 12 months from the date on which the Board issues its observations under Regulation 123(4).
The 12-month period is therefore calculated from the date of issuance of the Board's observations.
The issuer must open the issue within this prescribed period.
For a fast track issue:
A separate rule applies.
The issue must open within the period specifically prescribed under the Companies Act, 2013.
Therefore, the 12-month period mentioned above does not govern the fast track issue in the same manner.
Example:
SEBI issues its observations on 1 January 2026.
For a normal public issue, the issuer may open the issue within 12 months from 1 January 2026, subject to the Companies Act, 2013.
For a fast track issue, the issuer must follow the specific opening period prescribed under the Companies Act, 2013.
140(2).
Time Limit for First Issue under Shelf Prospectus
In case of a shelf prospectus, a special time limit applies to the first issue.
The first issue may be opened within 3 months from the date of issuance of observations by the Board.
The 3-month period is therefore calculated from the date on which the Board issues its observations.
This is different from the general 12-month period applicable to a normal public issue.
Example:
SEBI issues its observations on 1 January 2026.
In case of a shelf prospectus, the first issue may be opened within 3 months from that date.
Therefore, the issuer should open the first issue within the prescribed 3-month period.
140(3).
Minimum Gap Before Opening the Issue
The issue cannot be opened immediately after filing the relevant offer document with the Registrar of Companies (RoC).
There must be a minimum gap of 3 working days between the filing date and the issue opening date.
For a book built issue:
The issuer must file the Red Herring Prospectus (RHP) with the RoC.
The issue can be opened only after at least 3 working days from the date of filing the RHP.
For a fixed price issue:
The issuer must file the Prospectus with the RoC.
The issue can be opened only after at least 3 working days from the date of filing the Prospectus.
Example:
RHP is filed with the RoC on Monday.
The issuer must wait at least 3 working days before opening the issue.
The required gap is counted in working days, not calendar days.
