Issue Conditions & Procedures - Part 2
Regulation 41. Monitoring agency
41(1).
Monitoring of Issue Proceeds
If the issue size, excluding the offer for sale (OFS) portion, exceeds ₹100 crore, monitoring of the issue proceeds is required.
The issuer must make arrangements for the use of the issue proceeds to be monitored.
The monitoring must be carried out by a credit rating agency registered with SEBI.
The OFS amount is excluded while calculating the ₹100 crore threshold.
Therefore, only the fresh issue portion is considered for determining whether the ₹100 crore limit is exceeded.
Example:
Fresh issue = ₹120 crore
OFS by selling shareholders = ₹50 crore
Total issue size = ₹170 crore
For this requirement, only ₹120 crore is considered.
Since ₹120 crore exceeds ₹100 crore, monitoring of issue proceeds is required.
Exemption from Monitoring of Issue Proceeds
The requirement to have issue proceeds monitored does not apply to certain specified issuers.
The exemption applies when the issue of specified securities is made by:
A bank.
A public financial institution.
An insurance company.
Therefore, even if the issue size exceeds ₹100 crore, these entities are not required to arrange monitoring of issue proceeds under this clause.
Example:
A bank makes an issue of specified securities worth ₹150 crore.
Normally, an issue exceeding ₹100 crore would require monitoring of issue proceeds.
However, the bank falls within the exemption.
Hence, this monitoring requirement does not apply.
41(2).
Quarterly Monitoring 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 monitoring continues until 100% of the issue proceeds have been utilised.
Therefore, the monitoring agency does not stop reporting merely because the issue has been completed.
It continues submitting quarterly reports until the entire issue proceeds are utilised.
Example:
An issuer raises ₹200 crore through an issue.
The monitoring agency submits its report every quarter.
If only 80% of the proceeds have been utilised, quarterly reporting continues.
Once 100% of the proceeds have been utilised, the monitoring requirement under this clause ends.
41(3).
Comments on Monitoring Agency’s Findings
The board of directors and management of the issuer must provide comments on the findings of the monitoring agency.
These comments must be given in the manner specified in Schedule XI.
Therefore, the issuer’s management and board must review the monitoring agency’s findings and respond to them.
The comments are intended to address the observations made regarding the utilisation of issue proceeds.
41(4).
Public Dissemination of Monitoring Agency Report
The issuer must publicly disseminate the monitoring agency’s report.
The report must be made public within 45 days from the end of each quarter.
The issuer must upload the report on its own website.
The issuer must also submit the report to the stock exchange(s) where its equity shares are listed.
Therefore, the report must be made available both to the public and to the stock exchange(s).
Regulation 42. Public communications, publicity materials, advertisements and research reports
Compliance with Schedule IX
All public communications relating to the issue must comply with Schedule IX.
All publicity materials must comply with Schedule IX.
All advertisements must comply with Schedule IX.
All research reports must also comply with Schedule IX.
Therefore, every such communication or material connected with the issue must follow the requirements prescribed in Schedule IX.
Example:
The issuer releases an advertisement about the public issue.
The issuer publishes publicity material or a research report about the issue.
Each of these must comply with the requirements of Schedule IX.
Regulation 43. Issue-related advertisements
43(1).
Pre-Issue and Price Band Advertisement
The issuer must comply with the Companies Act, 2013 while making the advertisement.
After filing the red herring prospectus with the Registrar of Companies (RoC), the issuer must make the advertisement in a book-built issue.
After filing the prospectus with the RoC, the issuer must make the advertisement in a fixed-price issue.
The advertisement is called the pre-issue and price band advertisement.
It must be published in the same newspapers in which the public announcement under Regulation 26(2) was published.
Therefore, the newspapers used for the Regulation 26(2) public announcement and this advertisement must be the same.
Example:
Book-built issue: Red herring prospectus is filed with the RoC.
The issuer then publishes the pre-issue and price band advertisement in the same newspapers used for the Regulation 26(2) public announcement.
Fixed-price issue: The same process applies after filing the prospectus with the RoC.
43(2).
Format and Disclosures of Pre-Issue and Price Band Advertisement
The pre-issue and price band advertisement must follow the prescribed format.
The format is specified in Part A of Schedule X.
The advertisement must also contain all disclosures specified in Part A of Schedule X.
Therefore, the issuer cannot use any arbitrary format or omit the prescribed disclosures.
Example:
The issuer prepares a pre-issue and price band advertisement.
It must be prepared according to Part A of Schedule X.
All disclosures required under Part A of Schedule X must be included.
43(3).
Advertisements for Issue Opening and Closing
The issuer may publish advertisements announcing the opening and closing of the issue.
The issue opening advertisement must follow the format specified in Part B of Schedule X.
The issue closing advertisement must follow the format specified in Part C of Schedule X.
Therefore, separate prescribed formats apply to the opening and closing advertisements.
Example:
The issuer publishes an advertisement announcing that the issue is opening.
The advertisement must follow Part B of Schedule X.
When the issue is closing, the issuer may publish a closing advertisement following Part C of Schedule X.
43(4).
Restriction on Advertisements During the Issue
During the period when the issue is open for subscription, the issuer cannot release advertisements showing investors’ response to the issue.
The issuer cannot publish an advertisement suggesting that the issue is fully subscribed.
The issuer cannot publish an advertisement suggesting that the issue is oversubscribed.
The issuer also cannot indicate the level of subscription or other investor response through advertisements.
This prevents the issuer from influencing investors by creating an impression of strong or weak demand while the issue is still open.
Example:
An issue is open for subscription from 1 June to 5 June.
On 3 June, the issuer cannot advertise that “the issue is already 3 times oversubscribed.”
It also cannot publish an advertisement saying “100% subscribed” to encourage further applications.
Regulation 44. Opening of the issue
44(1).
Time Limit for Opening the Public Issue
The public issue must comply with the Companies Act, 2013.
The issuer may open the public issue within 12 months from the date on which SEBI issues its observations under Regulation 25.
The 12-month period is counted from the date of issuance of SEBI’s observations.
Therefore, the issue must be opened within this 12-month period.
Example:
SEBI issues its observations on 1 January 2026.
The issuer can open the public issue any time within the next 12 months.
The issue must therefore be opened by 31 December 2026.
44(2).
Minimum Gap Before Opening the Issue
The issue cannot be opened immediately after filing the offer document with the Registrar of Companies (RoC).
A minimum gap of 3 working days must be maintained before opening the issue.
For a book-built issue, the relevant document is the red herring prospectus.
For a fixed-price issue, the relevant document is the prospectus.
The 3 working days are counted from the date of filing the relevant document with the RoC.
Example:
RHP is filed with the RoC on Monday.
The issuer must wait at least 3 working days.
The issue can be opened only after completing this minimum waiting period.
Regulation 45. Minimum subscription
45(1).
Minimum Subscription Requirement
The issue must receive a minimum subscription of at least 90% of the offer size mentioned in the offer document.
This 90% requirement does not apply to an offer for sale (OFS) of specified securities.
The minimum subscription requirement is also subject to the allotment of the minimum number of specified securities.
The minimum number of specified securities is prescribed under the Securities Contracts (Regulation) Rules, 1957.
Therefore, meeting the 90% threshold alone is not sufficient if the required minimum number of securities cannot be allotted.
Example:
Offer size = ₹100 crore.
Minimum subscription required = 90% = ₹90 crore.
If only ₹85 crore is subscribed, the minimum subscription requirement is not met.
However, even if ₹90 crore is received, the issuer must also satisfy the minimum-number-of-securities requirement under the SCR Rules.
45(2).
Refund When Minimum Subscription Is Not Received
If the issue does not receive the required minimum subscription, all application money received must be refunded.
The refund must be made to all applicants.
The refund must be made forthwith, meaning without unnecessary delay.
In any case, the refund must be completed within 4 days from the closure of the issue.
Therefore, the issuer cannot retain the application money when the minimum subscription requirement is not met.
Example:
Issue closes on 10 June.
The required minimum subscription is not received.
All application money must be refunded to the applicants.
The refund must be completed no later than 14 June.
Regulation 46. Period of subscription
46(1).
Duration of an Initial Public Offer
An initial public offer (IPO) must generally remain open for at least 3 working days.
The IPO cannot remain open for more than 10 working days.
Therefore, the normal IPO opening period must be between 3 and 10 working days.
However, if these regulations specifically provide otherwise, that specific provision will apply.
Example:
IPO opens on Monday.
It must remain open for at least 3 working days.
It cannot remain open beyond 10 working days, unless the regulations provide an exception.
46(2).
Extension of Issue Period on Revision of Price Band
If the issuer revises the price band during the issue, the bidding period must be extended.
The extension must be for at least 3 working days.
The extension is made to the bidding/issue period originally disclosed in the red herring prospectus.
The extension must also comply with the overall limit prescribed under sub-regulation (1).
Therefore, the issuer cannot revise the price band without giving investors at least 3 additional working days to bid.
Example:
The RHP states that the issue will remain open for 5 working days.
The issuer revises the price band during the issue.
The bidding period must be extended by at least 3 working days.
The total issue period must still remain within the maximum period permitted under 46(1).
46(3).
Extension of Issue Period Due to Unforeseen Circumstances
The issuer may extend the issue period when unforeseen circumstances disrupt the issue.
Examples include force majeure, banking strikes or similar unforeseen circumstances.
The issuer must record the reasons for the extension in writing.
For a book-built issue, the extension applies to the bidding period disclosed in the red herring prospectus.
For a fixed-price issue, the extension applies to the issue period disclosed in the prospectus.
The extension must be for a minimum of 1 working day.
The extended issue period must still comply with the maximum period prescribed under 46(1).
Example:
An IPO is scheduled to close on Friday.
A banking strike occurs and affects the issue process.
The issuer records the reasons in writing and extends the issue period.
The extension must be for at least 1 working day.
Regulation 47. Application and minimum application value
47(1).
Maximum Application in the Net Offer Category
A person applying in the net offer category cannot apply for more specified securities than the total number offered to the public.
For non-institutional investors (NIIs), a separate maximum limit is prescribed.
An NII cannot apply for more specified securities than the total public offer minus the portion reserved for qualified institutional buyers (QIBs).
Therefore, the QIB portion must be deducted when calculating the maximum application allowed for an NII.
Example:
Total specified securities offered to the public = 10 lakh shares.
QIB portion = 7.5 lakh shares.
Maximum application by an NII = 10 lakh − 7.5 lakh = 2.5 lakh shares.
Hence, an NII cannot apply for more than 2.5 lakh shares.
47(2).
Minimum Application Size
The issuer must specify the minimum application size in the offer document.
The minimum application size must be stated in terms of the number of specified securities.
The value of this minimum application must be within the range of ₹10,000 to ₹15,000.
Therefore, the minimum number of securities an investor must apply for should result in an application value between ₹10,000 and ₹15,000.
The exact number of securities depends on the issue price.
Example:
Issue price = ₹100 per share.
If the issuer fixes the minimum application at 100 shares, the application value is ₹10,000.
Hence, the minimum application falls within the prescribed range.
47(3).
Applications in Multiples of Minimum Application Value
The issuer must allow investors to apply only in multiples of the minimum application value.
The minimum application value is the value fixed under the preceding provision.
Therefore, applications cannot be made for arbitrary amounts.
The method for determining these multiples is illustrated in Part B of Schedule XIV.
Example:
Minimum application value = ₹10,000.
Investors can apply for ₹10,000, ₹20,000, ₹30,000, ₹40,000, etc.
An application for ₹15,000 would not be a valid multiple of ₹10,000.
47(4).
Minimum Amount Payable on Application
The investor must pay at least 25% of the issue price for each specified security at the time of application.
Therefore, the application money cannot be less than one-fourth of the issue price per security.
The remaining amount of the issue price can be collected later, as applicable.
Example:
Issue price = ₹100 per share.
Minimum payable on application = 25% of ₹100 = ₹25 per share.
For 1,000 shares, the minimum application money = ₹25 × 1,000 = ₹25,000.
Full Payment in Offer for Sale
In an offer for sale (OFS), the investor must pay the full issue price at the time of application.
The 25% minimum application payment rule does not apply to an OFS.
Therefore, there is no option to pay only part of the issue price initially.
The entire amount payable for each specified security must be paid along with the application.
Example:
Issue price = ₹100 per share.
OFS application = 1,000 shares.
Total amount payable at application = ₹100 × 1,000 = ₹1,00,000.
The investor cannot pay only 25% (₹25,000) at the application stage.
Explanation:
Minimum Application Value
The “minimum application value” is calculated with reference to the issue price of the specified securities.
It is not calculated based on the amount that the investor actually has to pay at the time of application.
Therefore, the 25% minimum application payment is not used to determine the minimum application value.
The full issue price of the specified securities is considered for calculating the minimum application value.
Example:
Issue price = ₹100 per share.
Minimum application value = ₹10,000.
Minimum application size = 100 shares because 100 × ₹100 = ₹10,000.
Even though only 25% of the issue price, i.e. ₹25 per share, may be payable on application, the minimum application value is still based on ₹100 per share.
Regulation 48. Manner of Calls
Payment of Subscription Money in Calls
If the issuer collects subscription money through calls, the remaining amount must be called within 12 months from the date of allotment.
The issuer must therefore collect the outstanding subscription money within this 12-month period.
If an applicant fails to pay the call money within 12 months, the equity shares with calls in arrears shall be forfeited.
The subscription money already paid on those forfeited shares shall also be forfeited.
However, the 12-month requirement does not apply if the issuer has appointed a monitoring agency under Regulation 41.
Example:
Face value of a share = ₹100.
₹40 is collected at allotment and ₹60 is payable through calls.
The issuer must call the outstanding ₹60 within 12 months.
If the applicant fails to pay the ₹60 within this period, the shares and the ₹40 already paid can be forfeited.
If a monitoring agency has been appointed under Regulation 41, the issuer need not call the outstanding amount within 12 months.
Regulation 49. Allotment procedure and basis of allotment
49(1).
The issuer cannot make an allotment pursuant to a public issue if there are fewer than 1,000 prospective allottees.
There must be at least 1,000 prospective allottees for the public issue.
If the number of prospective allottees is below 1,000, the allotment cannot be made.
49(2).
The issuer cannot allot more specified securities than those offered in the offer document.
The number of securities allotted must therefore normally be limited to the issue size.
An exception is allowed when the issue is oversubscribed.
In case of oversubscription, a small excess allotment may be made only for rounding off the allotment.
Such rounding-off must be done in consultation with the designated stock exchange.
Example:
Securities offered = 10,00,000.
The issuer normally cannot allot more than 10,00,000 securities.
If oversubscription results in fractional calculations during proportionate allotment, a small additional number may be allotted to round off the figures.
This must be done in consultation with the designated stock exchange.
1% Additional Allotment for Minimum Lots
In case of oversubscription, the issuer may make an additional allotment.
The additional allotment can be made only for completing allotments in minimum lots.
The additional allotment cannot exceed 1% of the net offer to the public.
This 1% is calculated on the net offer to the public.
Example:
Net offer to public = 10 lakh shares.
1% of the net offer = 10,000 shares.
Therefore, up to 10,000 additional shares may be allotted for completing minimum lots.
49(3).
Proportionate Allotment to Other Investor Categories
This rule applies to applicants other than retail individual investors, non-institutional investors and anchor investors.
Allotment must be made on a proportionate basis within each respective investor category.
The number of securities allotted must be rounded off to the nearest whole number.
The minimum allotment to an applicant must be equal to the minimum application size.
The minimum application size must be determined and disclosed in the offer document.
Example:
An investor is entitled to 1,250.6 shares on a proportionate basis.
The allotment is rounded to 1,251 shares.
However, the allotment cannot be below the minimum application size disclosed in the offer document.
Maximum Allotment Under Reserved Categories
The value of specified securities allotted to one person under the reservation cannot exceed the prescribed limit.
For retail investors, the maximum allotment value is ₹2 lakh.
For eligible employees, the maximum allotment value is ₹5 lakh.
The ₹5 lakh limit applies only to employees; the normal ₹2 lakh limit applies to other persons.
This limit applies to reservations made under Regulation 33(1)(a) or Regulation 33(2)(a).
The ₹5 lakh employee limit is available even though employees are excluded from the ₹2 lakh limit.
Example:
Retail investor receives specified securities worth ₹2 lakh → permitted.
Retail investor receives securities worth ₹2.5 lakh → not permitted under this reservation.
Eligible employee receives securities worth ₹5 lakh → permitted.
Eligible employee receives securities worth ₹5.5 lakh → not permitted.
49(4).
Minimum Allotment to Retail Individual Investors
Each retail individual investor should receive at least the minimum bid lot.
This minimum allotment is subject to the availability of shares in the retail investor category.
If enough shares are available, every successful retail investor must receive at least one minimum bid lot.
After giving the minimum bid lot to each retail investor, any shares still remaining are allotted on a proportionate basis.
Example:
Minimum bid lot = 100 shares.
10,000 shares are available for retail investors.
80 retail investors are eligible for allotment.
Each investor first receives at least 100 shares.
Any shares remaining after this are distributed proportionately among the eligible retail investors.
49(4A).
Minimum Allotment to Non-Institutional Investors
Each non-institutional investor (NII) should receive at least the minimum application size.
This minimum allotment is subject to the availability of shares in the NII category.
If sufficient shares are available, each eligible NII receives at least the minimum application size.
Any shares remaining after such minimum allotments are distributed on a proportionate basis.
The proportionate allotment must follow the conditions prescribed in Schedule XIII.
Example:
Minimum application size = ₹2 lakh.
100 NIIs are eligible for allotment.
Sufficient shares are available to satisfy the minimum application size for all 100 applicants.
Each investor first receives the minimum application size.
Any shares remaining are then allotted proportionately.
49(5).
Finalisation of Basis of Allotment
Authorised employees of the designated stock exchange must ensure that the basis of allotment is finalised properly.
The lead manager(s) must also ensure proper finalisation of the basis of allotment.
The registrars to the issue must also participate in ensuring proper finalisation.
The basis of allotment must be fair and proper.
The allotment process must follow the procedure specified in Part A of Schedule XIV.
Example:
If an IPO is oversubscribed, the shares cannot be allotted arbitrarily.
The designated stock exchange officials, lead manager(s) and registrars must ensure that allotment follows the prescribed procedure fairly.
Regulation 50. Allotment, refund and payment of interest
50(1).
Timely Allotment and Refund or Unblocking
The issuer and lead manager(s) must ensure that the specified securities are allotted within the period prescribed by SEBI.
If securities are not allotted, the application money must be refunded within the prescribed period.
Where the application money was blocked under ASBA, the amount must be unblocked within the prescribed period.
The applicable time limit is the period specified by SEBI.
Example:
An investor applies for ₹1 lakh through ASBA.
If shares are allotted, the required amount is debited and shares are allotted within the prescribed period.
If shares are not allotted, the blocked ₹1 lakh must be unblocked within the prescribed period.
50(2).
Electronic Allotment, Credit and Refund
The lead manager(s) must ensure that the entire post-issue process is carried out electronically.
The allotment of specified securities must be done electronically.
Allotted securities must be credited to investors’ demat accounts electronically.
Where applicable, application money must be refunded electronically.
Where ASBA is used, the blocked application money must be unblocked electronically.
Therefore, physical processing is not used for these allotment, credit, refund or unblocking activities.
Example:
An investor is allotted 500 shares.
The 500 shares are electronically credited to the investor’s demat account.
If no shares are allotted, the blocked application money is electronically unblocked.
50(3).
Interest for Delay in Allotment, Refund or Unblocking
If securities are not allotted within the prescribed period, the issuer must pay interest to the investors.
If application money is not refunded within the prescribed period, the issuer must also pay interest.
If application money is not unblocked within the prescribed period, the issuer must pay interest.
The interest rate is 15% per annum.
The interest must be paid within the time period disclosed in the offer document.
The lead manager(s) must ensure that the issuer pays this interest.
Example:
An investor’s ₹1 lakh application money remains blocked beyond the prescribed period.
The issuer must pay interest at 15% per annum for the applicable period of delay.
The lead manager(s) must ensure that the payment is made within the disclosed timeline.
Regulation 51. Post-issue advertisements
51(1).
The lead manager(s) must ensure that a post-issue advertisement is published.
The advertisement must be released within 10 days from completion of the relevant post-issue activities.
It must contain details relating to subscription received for the issue.
It must include the basis of allotment.
It must disclose the number, value and percentage of all applications, including ASBA applications.
It must disclose the number, value and percentage of successful allottees, including ASBA applicants.
It must mention the date on which refund orders were dispatched, wherever applicable.
It must mention the date on which the registrar gave instructions to self-certified syndicate banks, wherever applicable.
It must mention the date on which specified securities were credited to investors.
It must mention the date on which the listing application was filed.
The advertisement may also contain other relevant post-issue details.
Newspapers in Which the Advertisement Must Appear
The advertisement must be published in at least one English national daily newspaper with wide circulation.
It must also appear in at least one Hindi national daily newspaper with wide circulation.
It must also appear in at least one regional-language daily newspaper with wide circulation.
The regional-language newspaper must have wide circulation at the place where the issuer’s registered office is situated.
Example:
The relevant post-issue activities are completed on 1 September.
The advertisement must be released within 10 days from completion of those activities.
It must appear in English, Hindi and the relevant regional-language daily newspapers meeting the prescribed circulation requirements.
51(2).
All details mentioned in 51(1) must also be placed on the websites of the stock exchange(s).
This includes subscription, basis of allotment, successful allottees, refunds, demat credit and listing-related details.
Therefore, the information is required to be disclosed both through the prescribed newspaper advertisements and on stock exchange websites.
Regulation 52. Post-issue responsibilities of the lead manager(s)
52(1).
The responsibility of the lead manager(s) continues until the entire issue process is completed.
Their responsibility does not end immediately after the issue closes or securities are allotted.
The lead manager(s) remain responsible for issue-related matters even after completion of the issue process.
This continuing responsibility covers any matter connected with the issue that arises thereafter.
52(2).
The lead manager(s) must regularly monitor investor grievances.
These grievances must arise from activities related to the issue.
The lead manager(s) must ensure that such grievances are being properly addressed.
Monitoring must continue regularly and is not limited to a single review.
53(3).
The lead manager(s) remain responsible for post-issue activities until all specified post-issue requirements are completed.
Applicants must receive their securities certificates, wherever applicable.
Where securities are held in dematerialised form, they must be credited to the applicants’ demat accounts.
Applicants who do not receive an allotment must receive a refund of their application money.
The issuer must enter into the listing agreement with the stock exchange.
The issuer must obtain listing or trading permission from the stock exchange.
The lead manager(s)’ post-issue responsibility continues until all these requirements are completed.
53(4).
Lead Manager(s) Coordinate and Monitor the Post-Issue Process
The lead manager(s) are responsible for coordinating the post-issue activities.
They must coordinate with the registrars to the issue.
They must also coordinate with the various intermediaries involved in the issue.
This coordination must be carried out at regular intervals after the issue closes.
Monitoring of Applications
The lead manager(s) must monitor the flow of applications received from syndicate member(s).
They must also monitor applications received through collecting bank branches.
Applications received through self-certified syndicate banks must also be monitored.
The processing of applications must be monitored, including ASBA application forms.
Monitoring Until Completion
This monitoring continues until the basis of allotment is finalised.
It continues until specified securities are credited to the demat accounts of the allottees.
It continues until ASBA accounts are unblocked.
Where applicable, it continues until refund orders are dispatched.
It continues until the securities are listed.
53(5).
If the lead manager(s) notice any act or omission by an intermediary, they must report it to SEBI.
An act means any action or conduct by the intermediary.
An omission means a failure by the intermediary to perform a required duty.
The lead manager(s) must duly report such acts or omissions to the Board.
Therefore, the lead manager(s) cannot ignore or conceal misconduct or failure by an intermediary.
53(6).
Devolvement occurs when the underwriters have to fulfil their underwriting commitment because the issue is under-subscribed.
If there is a devolvement on the underwriters, the lead manager(s) must ensure that a notice for devolvement is issued.
The notice must specify the underwriting obligation of each underwriter.
The notice must be issued within 10 days from the date of closure of the issue.
Example:
An issue closes on 1 September.
A shortfall remains and the underwriters are required to subscribe to the unsubscribed securities.
The lead manager(s) must ensure that the devolvement notice is issued by the prescribed 10-day period.
The notice will mention the number/value of securities each underwriter is required to subscribe to.
53(7).
Reporting Underwriters Who Fail to Meet Devolvement
This requirement applies to underwritten issues that are under-subscribed.
If an underwriter fails to fulfil its underwriting devolvement, the lead manager(s) must report the matter to SEBI.
The information must specifically identify the underwriters who failed to meet their devolved obligations.
The information must be furnished in the format prescribed in Schedule XVIII.
Therefore, the lead manager(s) must formally report any underwriter’s failure to fulfil its devolvement obligation.
Example:
An issue is under-subscribed.
An underwriter is required to subscribe to 50,000 shares due to devolvement.
The underwriter fails to fulfil this obligation.
The lead manager(s) must report this failure to SEBI in the Schedule XVIII format.
Regulation 53. Release of subscription money
53(1).
Confirmation to Bankers Before Release of Money
The lead manager(s) must confirm to the bankers to the issue that all issue-related formalities have been completed.
This confirmation must be given through copies of the listing and trading approvals.
After receiving this confirmation, the banker can release the money to the issuer.
If the issue fails, the banker can instead release the money for refund to the applicants.
Therefore, the money is released only after the lead manager(s) confirm completion of the required formalities.
53(2).
Refund When Listing or Trading Permission Is Not Obtained
If the issuer fails to obtain listing or trading permission from the stock exchanges, the issuer must refund the entire money received from investors.
The refund must be made through verifiable means.
The refund must be completed within 4 days of receiving intimation from the stock exchanges rejecting the listing application.
If the issuer fails to repay the money within these 4 days, it becomes liable to pay interest.
From the expiry of the 4th day, the issuer and every director who is an officer in default become jointly and severally liable.
Interest is payable on the amount at 15% per annum.
Jointly and severally means the investors can recover the amount and interest from the issuer and/or the responsible directors.
Example:
Stock exchange rejects the issuer’s listing application.
The issuer receives the rejection intimation on 1 June.
The issuer must refund the entire money within 4 days.
If the money is not refunded within those 4 days, the issuer and every director who is an officer in default become liable.
Interest at 15% p.a. starts from the expiry of the 4th day.
53(3).
The lead manager(s) must ensure that the money received from investors for the issue is released to the issuer.
The release must comply with Section 40(3) of the Companies Act, 2013.
The requirement applies wherever Section 40(3) is applicable.
Therefore, the lead manager(s) must ensure that issue proceeds are released only in accordance with the prescribed legal requirements.
Regulation 54. Reporting of transactions of the promoters and promoter group and other pre-IPO transactions
54(1).
Reporting Transactions by Promoters and Promoter Group
The issuer must ensure that all securities transactions by the promoters and promoter group are reported to the stock exchange(s).
This requirement covers the period from the date of filing of the draft offer document or offer document, as applicable.
The reporting period continues until the date of closure of the issue.
Every transaction during this period must be reported within 24 hours of the transaction.
The responsibility for ensuring timely reporting lies with the issuer.
Example:
A promoter sells shares during the IPO period.
The issuer must ensure that this transaction is reported to the stock exchange(s).
The report must be made within 24 hours of the transaction.
54(2).
Reporting Pre-IPO Placement Transactions
The issuer must ensure that any proposed pre-IPO placement disclosed in the draft offer document is reported to the stock exchange(s).
The reporting must be made within 24 hours of the pre-IPO transaction.
The requirement applies whether the pre-IPO placement is completed partly or entirely.
Therefore, even if only a part of the proposed pre-IPO placement is completed, the transaction must be reported.
The disclosure in the draft offer document creates a reporting requirement for the actual pre-IPO transaction.
Example:
The draft offer document discloses a proposed pre-IPO placement of 10 lakh shares.
A transaction covering 4 lakh shares is completed.
The issuer must report that transaction to the stock exchange(s) within 24 hours.
If the remaining 6 lakh shares are subsequently placed, that transaction must also be reported within 24 hours.
Regulation 55. Post-issue reports
Final Post-Issue Report by Lead Manager(s)
The lead manager(s) must submit a final post-issue report.
The report must follow the format specified in Part A of Schedule XVII.
The lead manager(s) must also submit a due diligence certificate.
The due diligence certificate must follow the format specified in Form F of Schedule V.
The report and certificate must be submitted within 7 days.
For a successful issue, the 7-day period is counted from the date of finalisation of the basis of allotment.
If the issue fails, the 7-day period is counted from the date of refund of money.
Therefore, the starting point differs depending on whether the issue succeeds or fails.
Example:
Successful issue: Basis of allotment is finalised on 1 June.
Final post-issue report and due diligence certificate must be submitted within 7 days from 1 June.
Failed issue: Refund is made on 1 June.
The 7-day period is counted from 1 June in this case.
