( Expert )
05 February 2010
Eligibility Criteria for Listing
IPOs by Companies
Qualifications for listing Initial Public Offerings (IPO) are as below:
1. Paid up Capital
The paid up equity capital of the applicant shall not be less than Rs. 10 crores * and the capitalisation of the applicantâ€™s equity shall not be less than Rs. 25 crores**
Provided however that where the market capitalisation (at issue price) of the applicantâ€™s equity is not less than Rs.100 crores, the paid up capital of the applicant can be less than Rs. 10 crores but in any case it shall not be less Rs. 5 crores.
* Explanation 1
For this purpose, the post issue paid up equity capital for which listing is sought shall be taken into account.
** Explanation 2
For this purpose, capitalisation will be the product of the issue price and the post issue number of equity shares. In respect of the requirement of paid-up capital and market capitalisation, the issuers shall be required to include, in the disclaimer clause of the Exchange required to put in the offer document, that in the event of the market capitalisation (Product of issue price and the post issue number of shares) requirement of the Exchange not being met, the securities would not be listed on the Exchange.
2. Conditions Precedent to Listing:
The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.
3. Atleast three years track record of either:
a. the applicant seeking listing; or
b. the promoters****/promoting company, incorporated in or outside India or
c. Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing. The Company subsequently formed would be considered for listing only on fulfillment of conditions stipulated by SEBI in this regard.
For this purpose, the applicant or the promoting company shall submit annual reports of three preceding financial years to NSE and also provide a certificate to the Exchange in respect of the following:
â€¢ The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).
â€¢ The networth of the company has not been wiped out by the accumulated losses resulting in a negative networth
â€¢ The company has not received any winding up petition admitted by a court.
****Promoters mean one or more persons with minimum 3 years of experience of each of them in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally.
4. The applicant desirous of listing its securities should satisfy the exchange on the following:
a) No disciplinary action by other stock exchanges and regulatory authorities in past three years
There shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company. In respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company, there shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year.
b) Redressal Mechanism of Investor grievance
The points of consideration are:
* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances
* The applicantâ€™s arrangements envisaged are in place for servicing its investor.
* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) general approach and philosophy to the issue of investor service and protection
* defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) shall also be considered while evaluating a companyâ€™s application for listing. The auditorâ€™s certificate shall also be obtained in this regard. In case of defaults in such payments the securities of the applicant company may not be listed till such time it has cleared all pending obligations relating to the payment of interest and/or principal.
c) Distribution of shareholding
The applicantâ€™s/promoting company(ies) shareholding pattern on March 31 of last three calendar years separately showing promoters and other groupsâ€™ shareholding pattern should be as per the regulatory requirements.
d) Details of Litigation
The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, status of litigation during the preceding three years period need to be clarified to the exchange.
e) Track Record of Director(s) of the Company
In respect of the track record of the directors, relevant disclosures may be insisted upon in the offer document regarding the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences etc.
a) In case a company approaches the Exchange for listing within six months of an IPO, the securities may be considered as eligible for listing if they were otherwise eligible for listing at the time of the IPO. If the company approaches the Exchange for listing after six months of an IPO, the norms for existing listed companies may be applied and market capitalisation be computed based on the period from the IPO to the time of listing.