*Issue Management 0

*To understand the process of issue management and SEBI guidelines related to issue management activity.To understand the role of intermediaries in the issue management activity and SEBI norms for intermediaries in relation to issue management activities.Learning Outcomes0

*Issue Management0Issue management, now days, is one of the very important fee based services provided by the financial institutions.To protect the investors interest and for orderly growth and development of market, SEBI has put in place guidelines as ground rules relating to new issue management activities.These guidelines are in addition to the company law requirements in relation to issues of capital / securities.

*Types of Issues

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IssuesPublicPrivate placementRightsInitial Public Offering(For unlisted companies)Further Public Offering(For listed companies)Fresh IssueOffer for saleFresh IssueOffer for salePrivate placement (For unlisted companies)Preferential Issue(For listed companies)Qualified Institutions Placement (For listed companies)

*Types of IssuesInitial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.Further public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document.Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date.A private placement is an issue of shares or of convertible securities by a company to a selected group of persons which is neither a rights issue nor a public issue.0

*Eligibility norms for making issues0Filing of Offer Document:Issue of security, by a listed company through rights issue in excess of Rs. 50 lakh, a draft prospectus should be filed with SEBI through an eligible registered merchant banker at least 21 days prior to filing it.

Public issue / Offer for sale by Unlisted CompaniesPre issue net worth of Rs. 1 croreTrack record of distributable profit in terms of Sec. 205 of the Companies ActOtherwise, shares / convertible security can be issued only through book building process - 60% of the issue size would be allotted to qualified institutional buyers (QIB).

Public issue by listed companies:Issue size does not exceed five times its pre issue net worth as per the last available audited accounts.Otherwise, eligibility only through book building process on the condition that 60% of the issue size would be allotted to QIBs.

*Eligibility norms for making issues0BOOK BUILDING:

Book-building means a process by which a demand for thesecurities proposed to be issued by a body corporate is elicitedand built up and the price for such securities is assessed for thedetermination of the quantum of such securities to be issuedby means of notice/ circular / advertisement/ document orinformation memoranda or offer document.

*Eligibility norms for making issues0Credit Rating for Debt Instruments: For issue, both public and rights, of a debt instrument, including convertibles, credit rating irrespective of the maturity or conversion period is mandatory and should be disclosed.

Outstanding Warrants / Financial Instruments:An unlisted company is prohibited from making a public issue if there are any outstanding financial instruments / any other rights entitling the existing promoters / shareholders any option to receive equity share capital after the initial public offering.

Partly Paid-up Shares: Before making a public / rights issue all the existing partly paid up shares should be made fully paid up or forfeited if the investor fails to pay call money within 12 months.

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Pricing of IssuesA listed company can freely price shares/convertible securities through a public/ rights issue. An unlisted company eligible to make a public issue and desirous of getting its securities listed on a recognized stock exchange can also freely price shares and convertible securities. The free pricing of equity shares by an infrastructure company is subject to the compliance with disclosure norms as specified by SEBI from time to time.Freely pricing their initial public issue of shares/ convertible, all banks require approval by the RBI.0

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Pricing of IssuesDifferential Pricing:Listed/unlisted companies may issue shares/convertible securities in the firm allotment category at a price different from the price at which the net offer to the public is made, provided the price at which the securities are offered to public.Price Band: The issuer can mention a price band of 20% (cap in the price band should not exceed 20% of the floor price) in the offer document filed with SEBI and the actual price can be determined at a later date before filing it.Payment of Discount / Commissions: Any direct or indirect payment in the nature of discount / commission / allowance or otherwise cannot be made by the issuer to any firm allottee in a public issue.0

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Pricing of Issues and AdvertisementDenomination of Shares: Public / rights issue of equity shares can be made in any denomination in accordance with Sec.13(4) of the Companies Act and in compliance with norms specified by SEBI from time to time. The companies which have already issued shares in the denominations of Rs. 10 or Rs. 100 may change their standard denomination by splitting / consolidating them. ISSUE ADVERTISEMENTIncludes notices, brochures, pamphlets, circulars, show cards, catalogues, placards, posters, insertions in newspapers, pictures, films, cover pages of offer documents or any other print medium, radio, television programs through any electronic media.The lead merchant banker should ensure compliance with the guidelines on issue advertisement by the issuing companies.0

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Issue IntermediariesMERCHANT BANKER:SEBI (Merchant Banker) Regulations, 1992, defines merchant banker as:any person engaged in issue mgt.selling, buying or subscribing to securitiesacting as manager, consultant or advisor for such services.mandatory in case of public issues, right issues, open offers or buy-back.Merchant bankers require compulsory registration with the SEBI to carry out their activities

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Issue IntermediariesMERCHANT BANKER:The lead manager performs following:pricing the issue.timing the issue.marketing the issue.preparing the offer document.listing & allotment/refund.

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Issue IntermediariesUNDERWRITERS:Another important intermediary in the new issue/ primary market is the underwriters to issue of capital who agree to take up securities which are not fully subscribed. They make a commitment to get the issue subscribed either by others or by themselves.Underwriters are appointed by the issuing companies in consultation with the lead managers / merchant bankers to the issues.

To act as underwriter, a certificate of registration must be obtained from SEBI.0

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Issue IntermediariesUNDERWRITERS:The fuctions of Underwriters are:to abide by the code of conduct; he has to maintain a high standard of integrity, dignity and fairness in all his dealings.Agreement with clientsAn underwriter cannot derive any direct or indirect benefit from underwriting the issue other than by the underwriting commission.0

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Issue IntermediariesBROKERS TO THE ISSUE:Brokers are persons mainly concerned with the procurement of subscription to the issue from the prospective investors.The managers to the issue and the official brokers organize the preliminary distribution of securities and procure direct subscription from as large or as wide a circle of investors as possible.The brokerage applicable to all types of public issue of industrial securities is fixed at 1.5%, whether the issue is underwritten or not.REGISTRARS to an Issue and SHARE TRANSFER AGENTS:intermediary in the primary market, carry on activities such as collecting applications from the investors, keeping a proper record of applications and money received from the investors or paid to the sellers of securities and assisting companies.0

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Issue IntermediariesREGISTRARS to an Issue and SHARE TRANSFER AGENTS:Funtions:allotment of securities in consultation with the stock exchanges.finalizing the allotment of securities and processing / dispatching allotment letters, refund orders, certificates and other related documents in respect of the issue of capital.DEBENTURE TRUSTEES:A debenture trustee is a trustee for a trust deed needed for securing any issue of debentures by a company.a certificate from the SEBI is necessary.Only scheduled commercial banks, PFIs, Insurance companies and companies are entitled to act as a debenture trustees.0

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Issue IntermediariesDEBENTURE TRUSTEES:Call for periodical report from the company.Inspection of books of accounts, records, registration of the company and the trust property to the extent necessary for discharging claims.Take possession of trust property, in accordance with the provisions of the trust deed.Enforce security in the interest of the debenture holders.Carry out all the necessary acts for the protection of thedebenture holders and to the needful to resolve theirgrievances.Ensure refund of money in accordance with the CompaniesAct and the stock exchange listing agreement.Inform the SEBI immediately of any breach of trust deed /provisions of law.0

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Issue IntermediariesPORTFOLIO MANAGERS:Portfolio manager are defined as persons who in pursuance of a contract with clients, advise, direct, undertake on their behalf the management/ administration of portfolio of securities/ funds of clients.FUNCTIONS:The composition and the value of the portfolio, description of security, number of securities, value of each security held in portfolio, cash balances aggregate value of the portfolio as on the date of report.Transactions undertaken during the period of report including the date of transaction and details of purchases and sales.Beneficial interest received during that period in respect of interest, dividend, bonus shares, rights shares and debentures.0

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THANK YOU0

Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*2Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*Chapter 6Chapter 6Issues Management and Crisis Management*