Calicut University Curriculum Compliance — Module I Overview
Course Code: COM6EJ315 (8) • Course Title: Fundraising Services in Investment Banking • Semester: VI • Credits: 4 • Contact Hours: 60
Module I Title: ISSUE MANAGEMENT (15 Contact Hours)
Syllabus Units Covered: Unit 1: Introduction to Issue Management, Merchant Banking Eligibility u/s SEBI Regulations, Types of Issues Requiring Issue Manager, Conceptual Framework of Going Public, Strategic Considerations for an Initial Public Offering (IPO) • Unit 2: Follow-on Public Offer (FPO), Rights Issue Strategic Dynamics, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 Framework • Unit 3: Chronological Stages of an IPO, Process Overview of Public Offers in India, Post-issue Process & Allotment, Listing Day Volatility Management (Pre-open Call Auction, Circuit Breakers) • Unit 4: Role of Lead Merchant Banker as Issue Manager, Syndicate Agreements & Allocation of Responsibilities, Issue Capital Structuring • Unit 5: Legal & Financial Due Diligence, Preparation & Filing of Offer Documents (DRHP, RHP, Prospectus), Issue Marketing (Roadshows & Anchor Investor Bidding), Functions During the Issue • Unit 6: Pricing of Public Issues (Fixed Price vs. Book Building Mechanism, Price Band & Cut-off Pricing), Pre-Issue & Post-Issue Regulatory Compliance (Minimum Promoters' Contribution, Lock-in Norms, Minimum Public Shareholding) • Calicut University Academic Examination Bank.
1. Fundamentals of Issue Management and Going Public
Issue Management is a core financial service rendered by investment banks (registered as Category I Merchant Bankers with SEBI) encompassing the entire gamut of planning, structuring, marketing, regulatory clearance, and execution of public and rights issues of corporate securities.
The primary capital market serves as the economic conduit through which corporate enterprises raise long-term capital directly from institutional and retail investors. Under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, only a corporate entity holding a valid Category I Merchant Banker registration issued by SEBI is authorized to act as the Lead Manager (Book Running Lead Manager - BRLM) to manage public and rights offerings.
A. Conceptual Framework of Going Public (The IPO Decision)
An Initial Public Offering (IPO) is the maiden sale of shares by an unlisted company to the public, leading to subsequent listing and trading of the equity shares on recognized stock exchanges (such as BSE and NSE).
Strategic Advantages of Going Public
- Substantial Capital Access: Raises massive equity capital to finance expansion, debt repayment, R&D, or mergers without fixed debt service obligations.
- Liquidity & Price Discovery: Creates a liquid secondary market for company stock, allowing early venture capital and private equity investors to exit profitably.
- Enhanced Corporate Reputation: Public listing brings brand prestige, transparency, higher credibility with suppliers, customers, and international lenders.
- Currency for M&A: Publicly traded shares can be used as acquisition currency in share-swap transactions.
- Employee Motivation: Facilitates high-value Employee Stock Option Plans (ESOPs) to attract and retain top tier executive talent.
Strategic Burdens and Trade-offs
- Loss of Confidentiality & Autonomy: Mandatory continuous disclosure of quarterly financials, price-sensitive information, and material events under SEBI LODR Regulations.
- Heavy Issue Expenses: High upfront underwriting fees, lead manager fees, legal fees, advertising, registrar, and exchange listing fees.
- Market Volatility Exposure: Market sentiment, macroeconomic shocks, and short-term quarterly earnings pressures can depress share valuations.
- Dilution of Promoter Control: Loss of absolute voting control; mandatory minimum public shareholding of 25% within 3 years.
B. Types of Capital Issues Requiring an Issue Manager
Under SEBI ICDR Regulations, the appointment of an independent, registered Merchant Banker as Issue Manager is statutorily mandatory for:
- Initial Public Offer (IPO): A public issue of specified securities by an unlisted issuer, comprising either a Fresh Issue of shares (infusing fresh capital into the company) or an Offer for Sale (OFS) by existing shareholders (promoters/PE funds offloading their stake), or a combination of both.
- Follow-on Public Offer (FPO): A subsequent public issue of specified securities by an already listed company to raise additional capital or dilute promoter holding.
- Rights Issue: An offer of specified securities to existing shareholders as on a record date in proportion to their existing holdings under Section 62(1)(a) of the Companies Act, 2013 (mandatory if issue size exceeds ₹50 Crore).
- Qualified Institutions Placement (QIP): Private placement of equity shares or convertible securities by a listed company to Qualified Institutional Buyers (QIBs).
2. Regulatory Framework: SEBI (ICDR) Regulations, 2018
The primary capital market in India is strictly governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. SEBI mandates stringent financial and operational eligibility benchmarks that an unlisted company must fulfill prior to launching an IPO.
A. Basic Eligibility Criteria for an IPO (Regulation 6)
SEBI ICDR Regulation 6: Dual Route for IPO Eligibility
Regulation 6(1) & 6(2)
| Eligibility Route | Statutory Conditions & Financial Thresholds | Allotment Allocation Constraint |
|---|---|---|
| Route 1: Profitability Route (Regulation 6(1)) |
The issuer company must satisfy ALL three cumulative financial criteria:
1. Net Tangible Assets: At least ₹3 Crore in each of the preceding 3 full years (not more than 50% held in monetary assets). 2. Operating Profit: Minimum average pre-tax operating profit of ₹15 Crore during the 3 most profitable years out of the immediately preceding 5 years. 3. Net Worth: Net worth of at least ₹1 Crore in each of the preceding 3 full years. 4. If name changed in last 1 year, at least 50% revenue earned under new activity. |
Quota Allocation:
• QIB: Up to 50% • Non-Institutional (NII/HNI): At least 15% • Retail Individual (RII): At least 35% |
| Route 2: Alternative Route / Book-Building Route (Regulation 6(2)) |
An issuer company that does NOT satisfy the profitability track record under Regulation 6(1) (e.g., tech startups, unicorns, new-age capital-intensive companies) can still access the IPO market ONLY IF:
• The issue is made entirely through the Book-Building Process, AND • At least 75% of the net offer to the public is mandatorily allotted to Qualified Institutional Buyers (QIBs)! • If the 75% QIB threshold is not subscribed, the entire issue fails and all application moneys must be refunded immediately! |
Quota Allocation:
• QIB: At least 75% • Non-Institutional: Up to 15% • Retail Individual: Up to 10% (capped at 10% to protect retail investors). |
B. Promoters' Contribution and Lock-in Provisions (Regulations 14, 15 & 16)
- Minimum Promoters' Contribution (MPC): The promoters of the issuer must contribute at least 20% of the post-issue capital (or 20% of the total issue size).
- Lock-in Period for Minimum Contribution: The mandatory 20% promoter contribution is locked in for a period of 18 months from the date of allotment (reduced from 3 years by SEBI amendments in 2021). If the IPO proceeds are used for capital expenditure on a project, the lock-in remains 3 years.
- Lock-in Period for Excess Promoter Holding: Any promoter holding in excess of the mandatory 20% is locked in for 6 months from allotment.
- Pre-IPO Shareholder Lock-in: The entire pre-issue share capital held by non-promoters (e.g., private equity funds, angel investors) is locked in for 6 months from allotment (except for employee stock options and shares held by venture capital funds).
- Anchor Investor Lock-in: 50% of the shares allotted to Anchor Investors are locked in for 30 days, and the remaining 50% are locked in for 90 days from the date of allotment.
3. Chronological Stages of an Initial Public Offering (IPO)
An IPO is a multi-disciplinary financial operation spanning 6 to 12 months. The process is partitioned into three chronological phases: Pre-Issue, Issue Period, and Post-Issue.
Chronological Process Flowchart of an IPO
Deal Execution
| Phase | Key Operational & Legal Activities | Statutory Deliverables |
|---|---|---|
| Phase 1: Pre-Issue Preparation & Structuring |
• Board and Shareholder approvals (Special Resolution u/s 62(1)(c) of Companies Act, 2013). • Appointment of Intermediaries: Book Running Lead Managers (BRLMs), Syndicate Members, Legal Counsel (Domestic & International), Statutory Auditors, Registrar to Issue, Bankers to Issue. • Capital restructuring, bonus issuance, dematerialization of shares. • Comprehensive Legal, Financial, Environmental & Tax Due Diligence. |
• Due Diligence Certificate. • Intermediary Agreements. • Board & AGM Resolutions. |
| Phase 2: Offer Documents & Regulatory Clearance |
• Drafting of Draft Red Herring Prospectus (DRHP). • Filing DRHP with SEBI and Stock Exchanges. • 21-day public comment window; hosting DRHP on websites. • Addressing SEBI observations and queries. • In-principle approval from BSE and NSE. |
• DRHP. • SEBI Observation Letter. • In-principle Stock Exchange Approvals. |
| Phase 3: Marketing & Book Building |
• Roadshows and institutional investor presentations across financial hubs. • Anchor Investor Bidding (conducted 1 day prior to issue opening). • Filing Red Herring Prospectus (RHP) with Registrar of Companies (ROC) with Price Band. • Public bidding window opens (minimum 3 working days, maximum 10 days). • Real-time order collection via ASBA (Application Supported by Blocked Amount) and UPI mechanism. |
• Red Herring Prospectus (RHP). • Anchor Investor Allocation Notice. • Daily Subscription Status. |
| Phase 4: Pricing, Allocation & Listing |
• Determination of Cut-off Price based on book-building bids. • Filing Final Prospectus with ROC containing final price and issue quantum. • Basis of Allotment finalized in consultation with Designated Stock Exchange. • Fund unblocking / debit through ASBA. • Credit of shares to demat accounts. • Listing and commencement of trading (T+3 settlement timeline!). |
• Final Prospectus. • Approved Basis of Allotment. • Listing Day Trading Commencement. |
A. Listing Day Volatility Management (Pre-Open Call Auction)
To prevent extreme price swings and facilitate orderly price discovery on the listing day of an IPO, stock exchanges implement specialized market microstructure controls:
- Pre-Open Call Auction Session: On the listing day, trading commences with a special 60-minute pre-open call auction session (9:00 AM to 10:00 AM) where buy and sell orders are collected and matched at a single equilibrium price, without execution during the order collection phase.
- Circuit Breakers / Price Bands:
- For IPOs where the issue price is ≤ ₹100: circuit filter is typically 50%.
- For IPOs where the issue price is > ₹100: circuit filter is typically 20% on the discovered equilibrium price during the normal trading session.
4. Role of the Investment Banker as Issue Manager
The Lead Merchant Banker (Issue Manager) is the central architect of the public issue. The roles and responsibilities encompass:
Due Diligence & Offer Document Drafting
- Exhaustive Due Diligence: Investigating company titles, material litigation, promoter backgrounds, financial statements, and related-party transactions.
- Due Diligence Certificate: Formally certifying to SEBI that all statements in the prospectus are true, fair, and adequate, with no material omissions. Lead Managers face statutory disqualification and criminal liability for negligent due diligence!
- Drafting DRHP/RHP: Writing the business overview, industry dynamics, risk factors, capital structure, and management discussion & analysis (MD&A).
Issue Structuring, Pricing & Syndication
- Capital Structuring: Advising on the ratio between fresh equity issue and offer for sale (OFS) to balance company cash needs with promoter dilution.
- Valuation & Pricing: Performing Discounted Cash Flow (DCF), Comparable Companies Multiple (P/E, EV/EBITDA), and precedent transaction analysis to establish the price band.
- Syndicate Formation: Appointing underwriting syndicates, institutional brokers, and managing inter-se allocation of marketing responsibilities.
5. Pricing Mechanisms: Fixed Price vs. Book-Building Mechanism
In India, public offerings can be priced through two distinct statutory methodologies:
Comparative Analysis: Fixed Price Method vs. Book-Building Process
Pricing Methods
| Feature | Fixed Price Issue | Book-Building Issue |
|---|---|---|
| Pricing Determination | The issue price is fixed by the company and lead manager upfront before the issue opens and stated in the Prospectus (e.g., ₹250 per share). | No fixed price is stated upfront. Only a Price Band (e.g., ₹280 to ₹300) or a Floor Price is announced in the Red Herring Prospectus. Price is discovered through dynamic market bidding. |
| Price Band Spread | Not Applicable. | Under SEBI ICDR, the Cap Price must not exceed 120% of the Floor Price (i.e., maximum spread of 20%). E.g., if Floor is ₹100, Cap cannot exceed ₹120. |
| Investor Bidding | Investors apply for a specific number of shares at the fixed predetermined price. | Investors submit electronic bids specifying the number of shares and the price within the band at which they are willing to buy. |
| Cut-off Price Facility | Not Applicable. | Available only to Retail Individual Investors (RIIs). Retailers can tick the "Cut-off" box to indicate willingness to purchase at whatever final strike price is discovered. QIBs and Non-Institutional Bidders cannot bid at cut-off price! |
| Demand Visibility | Demand is known only after the issue closes and application forms are processed. | Demand is known dynamically in real-time on a second-by-second basis through the electronic book-building terminal of the stock exchanges. |
| Offer Document Filed | Prospectus containing price is filed directly with the ROC before the issue opens. | Red Herring Prospectus (RHP) containing quantity/band is filed with ROC before issue; Final Prospectus with discovered price is filed after book closure. |
A. Investor Category Quotas under Book-Building (Regulation 32)
1. Qualified Institutional Buyers (QIB)
- Quota: Up to 50% (Profitable route) or at least 75% (Alternative route).
- Anchor Investor Reservation: Up to 60% of the QIB portion can be allocated to Anchor Investors at a discretionary price on the day prior to issue opening.
- Mutual Fund Reservation: 5% of remaining QIB portion reserved for domestic mutual funds.
2. Non-Institutional Investors (NII / HNI)
- Quota: At least 15% (Profitable route) or up to 15% (Alternative route).
- Sub-categories:
• One-third reserved for bids between ₹2 Lakh and ₹10 Lakh.
• Two-thirds reserved for bids exceeding ₹10 Lakh. - Allotment is done on a proportional basis / lottery if oversubscribed.
3. Retail Individual Investors (RII)
- Quota: At least 35% (Profitable route) or up to 10% (Alternative route).
- Definition: An individual investor who applies or bids for securities for an aggregate value of not more than ₹2,00,000.
- Allotment: Guaranteed minimum lot basis via computerized lottery in case of oversubscription.
Practical Illustration: Mathematical Mechanics of Cut-Off Price Discovery in Book Building
Case Study: Bharat Dynamic Logistics Ltd. issues 1,00,000 equity shares through a 100% book-built IPO. The lead manager announces a price band of ₹250 to ₹300 per share (Cap ≤ 120% of Floor). When the bidding closes, the electronic order book reveals the following cumulative demand schedule:
| Bid Price (₹) | Number of Shares Bid | Cumulative Demand (Shares) | Subscription Status |
|---|---|---|---|
| ₹300 (Cap Price) | 25,000 | 25,000 | 25% of Issue |
| ₹290 | 35,000 | 60,000 | 60% of Issue |
| ₹280 (Cut-Off Price) | 45,000 | 1,05,000 | 105% (Fully Absorbed!) |
| ₹270 | 40,000 | 1,45,000 | 145% |
| ₹260 | 30,000 | 1,75,000 | 175% |
| ₹250 (Floor Price) | 20,000 | 1,95,000 | 195% |
Cut-Off Price Determination Analysis:
• The total number of shares offered is 1,00,000 shares.
• At ₹300, cumulative demand is 25,000 shares (issue undersubscribed).
• At ₹290, cumulative demand is 60,000 shares (issue undersubscribed).
• At ₹280, cumulative demand reaches 1,05,000 shares, which is sufficient to fully absorb the 1,00,000 shares offered!
• Therefore, the Discovered Strike / Cut-Off Price is ₹280.
• All bids received at ₹280, ₹290, and ₹300 are successful and eligible for allotment at ₹280.
• Bidders who bid below ₹280 (at ₹270, ₹260, ₹250) are rejected and their funds are unblocked via ASBA.
• Investors who bid at ₹300 and ₹290 receive refunds of the excess application amount (₹20 and ₹10 per share respectively).
• The total number of shares offered is 1,00,000 shares.
• At ₹300, cumulative demand is 25,000 shares (issue undersubscribed).
• At ₹290, cumulative demand is 60,000 shares (issue undersubscribed).
• At ₹280, cumulative demand reaches 1,05,000 shares, which is sufficient to fully absorb the 1,00,000 shares offered!
• Therefore, the Discovered Strike / Cut-Off Price is ₹280.
• All bids received at ₹280, ₹290, and ₹300 are successful and eligible for allotment at ₹280.
• Bidders who bid below ₹280 (at ₹270, ₹260, ₹250) are rejected and their funds are unblocked via ASBA.
• Investors who bid at ₹300 and ₹290 receive refunds of the excess application amount (₹20 and ₹10 per share respectively).
6. Follow-on Public Offer (FPO) and Rights Issue Dynamics
A. Follow-on Public Offer (FPO)
An FPO is an issuance of shares by a company that is already listed on a stock exchange. Strategic motivations for an FPO include:
- Dilution for Minimum Public Shareholding (MPS): Rule 19A of the Securities Contracts (Regulation) Rules mandates that every listed company must maintain a Minimum Public Shareholding of at least 25%. Promoters holding excess stakes utilize FPOs or Offer for Sale (OFS) to achieve MPS compliance.
- De-leveraging Corporate Balance Sheet: Raising large-scale equity to pay off expensive bank term loans and reduce interest burdens.
- Fast-Track FPO (Regulation 156): Listed companies satisfying specific market capitalization and governance benchmarks can access the FPO market without filing a draft offer document with SEBI, significantly accelerating fund mobilization.
B. Strategic Considerations for a Rights Issue
Under Section 62(1)(a) of the Companies Act, 2013, a Rights Issue provides existing shareholders the pre-emptive right to subscribe to additional shares in proportion to their existing shareholding:
- Preservation of Ownership Proportions: Prevents involuntary dilution of voting power for existing shareholders.
- Lower Cost of Capital: Avoids expensive public roadshows, advertising campaigns, and underwriting commissions associated with an IPO.
- Right of Renunciation: An existing shareholder has the legal right to renounce their rights entitlement (RE) in full or in part in favour of any third party. Rights Entitlements are credited to demat accounts and can be traded on the stock exchange floor during the renunciation window!
7. Calicut University Academic Examination Bank
Part A: Conceptual Questions (2 Marks Each)
Short Answer
Q1. Define Issue Management in Investment Banking.
Ans: Issue Management refers to the comprehensive financial and advisory services provided by registered Merchant Bankers involving the planning, structuring, due diligence, regulatory clearance, marketing, pricing, allotment, and listing of securities in primary capital markets.
Q2. What is an Offer for Sale (OFS) in an IPO?
Ans: An Offer for Sale (OFS) is a process where existing shareholders (such as promoters, private equity, or venture capital investors) offload their existing shareholding to the public. Unlike a fresh issue, the sale proceeds go directly to the selling shareholders and not into the company's bank account.
Q3. State the profitability track record requirement under SEBI ICDR Regulation 6(1).
Ans: Under Regulation 6(1), an issuer must have: (1) Net tangible assets of at least ₹3 Crore in each of the preceding 3 full years; (2) Average pre-tax operating profit of at least ₹15 Crore during the 3 most profitable of the preceding 5 years; and (3) Net worth of at least ₹1 Crore in each of the preceding 3 full years.
Q4. What is the maximum permissible spread between Floor Price and Cap Price in Book Building?
Ans: Under SEBI ICDR Regulations, the Cap Price in a book-built price band must not exceed 120% of the Floor Price (i.e., a maximum spread of 20%).
Q5. What is the role of an Anchor Investor in an IPO?
Ans: An Anchor Investor is a Qualified Institutional Buyer (QIB) that applies for a minimum of ₹10 Crore in a book-built issue one day before the issue opens. Anchor investors provide price discovery confidence and credibility to the market. Up to 60% of the QIB quota can be allocated to anchor investors.
Q6. What is the T+3 listing timeline introduced by SEBI?
Ans: SEBI mandated that equity shares issued through a public issue must be listed and commence trading on stock exchanges within 3 working days (T+3) from the date of issue closure, significantly reducing capital lock-in time for investors.
Part B: Analytical & Practical Problems (5 Marks Each)
Problem Solving
Q7. Explain the alternative eligibility route under SEBI ICDR Regulation 6(2) for unprofitable companies.
Ans: An unlisted company that does not satisfy the 3-year profitability track record under Regulation 6(1) can access the primary market under Regulation 6(2) subject to two strict conditions: (1) The issue must be conducted 100% through the Book-Building process; and (2) At least 75% of the net offer to the public must be mandatorily allotted to Qualified Institutional Buyers (QIBs). Furthermore, the retail allocation is capped at 10% to protect retail investors from high-risk unproven business models. If the 75% QIB threshold is not achieved, the entire issue fails and funds must be refunded immediately.
Q8. Distinguish between Draft Red Herring Prospectus (DRHP), Red Herring Prospectus (RHP), and Final Prospectus.
Ans:
• DRHP: The preliminary draft offer document submitted to SEBI and stock exchanges for review and public comments for at least 21 days. It contains complete business and financial details but excludes the price band and issue dates.
• RHP: The offer document filed with the Registrar of Companies (ROC) prior to issue opening. It contains either the price band (floor and cap) or issue size, but omits the final issue price and exact quantity of shares.
• Final Prospectus: The comprehensive statutory document filed with ROC after book closure containing the exact discovered cut-off price, final number of shares allotted, and gross proceeds raised.
• DRHP: The preliminary draft offer document submitted to SEBI and stock exchanges for review and public comments for at least 21 days. It contains complete business and financial details but excludes the price band and issue dates.
• RHP: The offer document filed with the Registrar of Companies (ROC) prior to issue opening. It contains either the price band (floor and cap) or issue size, but omits the final issue price and exact quantity of shares.
• Final Prospectus: The comprehensive statutory document filed with ROC after book closure containing the exact discovered cut-off price, final number of shares allotted, and gross proceeds raised.
Q9. Explain the mechanism and significance of ASBA (Application Supported by Blocked Amount) in public issues.
Ans: ASBA is an application mechanism developed by SEBI whereby application money is not debited immediately from the investor's bank account upon applying for an IPO. Instead, the application money remains blocked in the investor's own bank account under lien until the basis of allotment is approved. If shares are allotted, only the required amount is debited and transferred to the issuer; the balance is unblocked immediately. If no shares are allotted, the lien is removed instantly. ASBA eliminates refund delays, prevents interest loss for applicants, and completely eradicates fraudulent refund orders.
Part C: Comprehensive Essay & Analytical Case (10/15 Marks)
Comprehensive Issue Management
Q10. A leading technology unicorn in Bengaluru plans to raise ₹2,000 Crore through an Initial Public Offering (IPO). The company incurred operating losses in two of the preceding three financial years.
Required:
(a) Examine the regulatory route through which this company can access the public equity market under SEBI ICDR Regulations, 2018.
(b) Detail the mandatory investor category reservation quotas that the Lead Managers must structure.
(c) Describe the Promoters' Contribution and lock-in requirements applicable to this issue.
(d) Outline the duties and due diligence liabilities of the Book Running Lead Managers (BRLMs) throughout the issue cycle.
Required:
(a) Examine the regulatory route through which this company can access the public equity market under SEBI ICDR Regulations, 2018.
(b) Detail the mandatory investor category reservation quotas that the Lead Managers must structure.
(c) Describe the Promoters' Contribution and lock-in requirements applicable to this issue.
(d) Outline the duties and due diligence liabilities of the Book Running Lead Managers (BRLMs) throughout the issue cycle.
(a) Regulatory Eligibility Route:
Since the company incurred operating losses in two of the preceding three financial years, it fails the traditional 3-year profitability criteria mandated under Regulation 6(1). Therefore, the company must access the market via the Alternative Route under Regulation 6(2) of SEBI ICDR Regulations, 2018. Under this route: • The IPO must be conducted 100% through the Book-Building process.
• At least 75% of the net offer to the public must be mandatorily subscribed and allotted to Qualified Institutional Buyers (QIBs).
Since the company incurred operating losses in two of the preceding three financial years, it fails the traditional 3-year profitability criteria mandated under Regulation 6(1). Therefore, the company must access the market via the Alternative Route under Regulation 6(2) of SEBI ICDR Regulations, 2018. Under this route: • The IPO must be conducted 100% through the Book-Building process.
• At least 75% of the net offer to the public must be mandatorily subscribed and allotted to Qualified Institutional Buyers (QIBs).
(b) Investor Category Quota Structuring:
The BRLMs must structure the net public offer of ₹2,000 Crore as follows: • QIB Portion (Minimum 75% = ₹1,500 Crore):
- Up to 60% of QIB portion (₹900 Crore) may be allocated to Anchor Investors on a discretionary basis 1 day prior to issue opening.
- 5% of remaining QIB portion (₹30 Crore) is reserved exclusively for domestic Mutual Funds.
• Non-Institutional Investors (NII / HNI - Maximum 15% = ₹300 Crore):
- One-third (₹100 Crore) reserved for bids between ₹2 Lakh and ₹10 Lakh.
- Two-thirds (₹200 Crore) reserved for bids above ₹10 Lakh.
• Retail Individual Investors (RII - Maximum 10% = ₹200 Crore): Capped at 10% to insulate retail investors from speculative volatility.
The BRLMs must structure the net public offer of ₹2,000 Crore as follows: • QIB Portion (Minimum 75% = ₹1,500 Crore):
- Up to 60% of QIB portion (₹900 Crore) may be allocated to Anchor Investors on a discretionary basis 1 day prior to issue opening.
- 5% of remaining QIB portion (₹30 Crore) is reserved exclusively for domestic Mutual Funds.
• Non-Institutional Investors (NII / HNI - Maximum 15% = ₹300 Crore):
- One-third (₹100 Crore) reserved for bids between ₹2 Lakh and ₹10 Lakh.
- Two-thirds (₹200 Crore) reserved for bids above ₹10 Lakh.
• Retail Individual Investors (RII - Maximum 10% = ₹200 Crore): Capped at 10% to insulate retail investors from speculative volatility.
(c) Promoters' Contribution and Lock-in Provisions:
• Minimum Promoters' Contribution (MPC): The promoters must contribute at least 20% of the post-issue capital.
• Lock-in on MPC: The 20% MPC is locked in for 18 months from the date of allotment (or 3 years if funds are utilized for capital projects).
• Excess Promoter Holding: Any promoter holding beyond 20% is locked in for 6 months.
• Pre-IPO Non-Promoter Shareholders: All existing shares held by VC/PE funds are locked in for 6 months from allotment.
• Anchor Investor Lock-in: 50% locked in for 30 days; 50% locked in for 90 days.
• Minimum Promoters' Contribution (MPC): The promoters must contribute at least 20% of the post-issue capital.
• Lock-in on MPC: The 20% MPC is locked in for 18 months from the date of allotment (or 3 years if funds are utilized for capital projects).
• Excess Promoter Holding: Any promoter holding beyond 20% is locked in for 6 months.
• Pre-IPO Non-Promoter Shareholders: All existing shares held by VC/PE funds are locked in for 6 months from allotment.
• Anchor Investor Lock-in: 50% locked in for 30 days; 50% locked in for 90 days.
(d) Duties & Due Diligence Liabilities of BRLMs:
1. Independent Legal & Financial Audit: Verify all material contracts, intellectual property rights, tax assessments, pending criminal/civil litigations against company and promoters.
2. Filing Due Diligence Certificate: Submitting formal statutory certificate confirming that the DRHP/RHP contains true, fair, and adequate disclosures.
3. Book Building & Price Band Advisory: Conducting institutional roadshows, establishing the price band (Cap ≤ 120% of Floor), and determining cut-off price.
4. Legal Liability: Under Section 447 of Companies Act, 2013 and SEBI Act, 1992, lead managers are jointly and severally liable for any material misstatements, fraudulent omissions, or reckless due diligence in the offer documents.
1. Independent Legal & Financial Audit: Verify all material contracts, intellectual property rights, tax assessments, pending criminal/civil litigations against company and promoters.
2. Filing Due Diligence Certificate: Submitting formal statutory certificate confirming that the DRHP/RHP contains true, fair, and adequate disclosures.
3. Book Building & Price Band Advisory: Conducting institutional roadshows, establishing the price band (Cap ≤ 120% of Floor), and determining cut-off price.
4. Legal Liability: Under Section 447 of Companies Act, 2013 and SEBI Act, 1992, lead managers are jointly and severally liable for any material misstatements, fraudulent omissions, or reckless due diligence in the offer documents.