Module 3: Primary Market Operations - IPOs & Capital Raising

The ICDR Regulations, 2018 replaced the earlier ICDR Regulations, 2009 with a simplified structure and enhanced disclosure requirements.

Under Regulation 6(1), the issuer must have net tangible assets of at least Rs. 3 crore in each of the preceding 3 full years.

Under the QIB Route for companies not meeting profitability norms, 75% of the net offer must be mandatorily allotted to QIBs.

An issuer is disqualified if any promoter or director is a wilful defaulter or fugitive economic offender.

Post the 2022 amendment, promoter lock-in for minimum contribution was reduced from 3 years to 18 months.

Schedule VI of ICDR Regulations prescribes the format for Due Diligence Certificate to be submitted by lead managers.

For IGP (Innovators Growth Platform) listings, the minimum application amount is Rs. 2 lakh, restricting participation to more sophisticated investors.

For large cap companies (market cap exceeding Rs. 4000 crore), minimum public shareholding is 10% (compared to 25% for others).

DRHP stands for Draft Red Herring Prospectus, the document filed with SEBI containing all disclosures except final price.

SEBI reviews the DRHP and issues observations typically within 30 days, which may be extended if clarifications are needed.

The Red Herring Prospectus (RHP) is filed with the Registrar of Companies (ROC) after incorporating SEBI observations.

Current SEBI guidelines mandate T+6 listing timeline (reduced from T+12), where T is the issue closure date.

SEBI observations are valid for 12 months from the date of issuance. The company must complete the IPO within this period.

Schedule VIII prescribes the contents and disclosures required in offer documents including DRHP.

Under Regulation 30, the cap price cannot exceed the floor price by more than 20% of the floor price.

Each anchor investor must invest a minimum of Rs. 10 crore in the IPO.

Up to 60% of the QIB portion can be allocated to anchor investors under Regulation 32.

Under profitability route: QIB 50%, NII 15%, Retail 35%.

Anchor investors have a 30-day lock-in period from the date of allotment.

ASBA stands for Application Supported by Blocked Amount, where funds remain blocked in investor's account until allotment.

When retail category is oversubscribed, allotment is done on lottery basis, ensuring fair chance to all applicants.

sNII (Small NII) includes applications between Rs. 2 lakh to Rs. 10 lakh; above Rs. 10 lakh is bNII (Big NII).

1:5 ratio means 1 new share for every 5 held. 500/5 = 100 new shares entitlement.

Rights Entitlement shares trade with -RE suffix (e.g., RELIANCE-RE) during the trading window.

Fast Track Rights Issue requires average market cap of Rs. 1000 crore or more.

FPO stands for Follow-on Public Offer, a public issue by an already listed company.

Minimum promoter contribution is 20% of post-issue paid-up capital (Regulation 14).

Preferential allotment requires special resolution (75% majority) of shareholders under Regulation 158.

Preferential issue minimum price = Higher of 26-week and 2-week weekly high-low averages (Regulation 164).

QIP stands for Qualified Institutional Placement, allowing listed companies to issue securities to QIBs.

QIP can be issued at maximum 5% discount to the floor price (which is 2-week average).

QIP floor price is based on 2-week average (unlike preferential which uses higher of 26-week or 2-week).

Non-promoter equity shares in preferential allotment have 1 year lock-in (Regulation 167).

QIP shares have 1 year lock-in, but can be transferred to other QIBs during lock-in (Regulation 175).

For QIP above Rs. 250 crore, minimum 5 QIB allottees required (2 for up to Rs. 250 crore).

Category I Merchant Banker must maintain minimum net worth of Rs. 5 crore at all times.

BRLM stands for Book Running Lead Manager, the merchant banker managing a book-built issue.

The 78-day post-issue report is filed with SEBI covering utilization of funds and other compliance.

Under SEBI Act S.15H, penalty can be up to Rs. 25 crore or 3 times the gains made from violation.

For issues above Rs. 100 crore, a monitoring agency (CRA) must be appointed to monitor utilization of proceeds.

3-day post-issue report must be filed within 3 days of listing (i.e., by T+9).

Criminal prosecution under SEBI Act S.24 can result in imprisonment up to 10 years.

RTI stands for Registrar to the Issue, handling bid processing, allotment, and refunds.

Individual HNIs are NOT QIBs. They fall under NII category. QIBs are institutional investors like MFs, FPIs, banks, insurance companies.

Cut-off price bidding is available only to Retail Individual Investors, allowing them to bid at whatever price is finally determined.

Retail individual investor category is for applications up to Rs. 2 lakh. Above this falls in NII category.

OFS stands for Offer for Sale, where existing shareholders sell their shares (no fresh capital raised).

Green Shoe Option allows over-allotment of up to 15% of issue size for post-listing price stabilization.

LODR stands for Listing Obligations and Disclosure Requirements Regulations, 2015.

Relevant date = 30 days before GM OR date of Board meeting, whichever is earlier (Regulation 164).