Regulation 6 - Eligibility requirements for an initial public offer - Securities And Exchange Board of India (Issue Of Capital And Disclosure Requirements) Regulations, 2018

Eligibility requirements for an initial public offer 6. (1) An issuer shall be eligible to make an initial public offer only if: a) it has net tangible assets of at least three crore rupees, calculated on a restated and consolidated basis, in each of the preceding three full years (of twelve months each), of which not more than fifty per cent. are held in monetary assets: Provided that if more than fifty per cent. of the net tangible assets are held in monetary assets, the issuer has utilised or made firm commitments to utilise such excess monetary assets in its business or project; Provided further that the limit of fifty per cent. on monetary assets shall not be applicable in case the initial public offer is made entirely through an offer for sale. b) it has an average operating profit of at least fifteen crore rupees, calculated on a restated and consolidated basis, during the preceding three years (of twelve months each), with operating profit in each of these preceding three years; c) it has a net worth of at least one crore rupees in each of the preceding three full years (of twelve months each), calculated on a restated and consolidated basis; d) if it has changed its name within the last one year, at least fifty per cent. of the revenue, calculated on a restated and consolidated basis, for the preceding one full year has been earned by it from the activity indicated by its new name. (2) An issuer not satisfying the condition stipulated in sub-regulation (1) shall be eligible to make an initial public offer only if the issue is made through the book-building process and the issuer undertakes to allot at least seventy five per cent. of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to do so. 1 [ (3) If an issuer has issued SR equity shares to its promoters/ founders, the said issuer shall be allowed to do an initial public offer of only ordinary shares for listing on the Main Board subject to compliance with the provisions of this Chapter and these clauses - i. the issuer shall be intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition. 2 [ (ii) the net worth of the SR shareholder, as determined by a Registered Valuer, shall not be more than rupees one thousand crore. Explanation : While determining the individual net worth of the SR shareholder, his investment/shareholding in other listed companies shall be considered but not that of his shareholding in the issuer company. ] iii. The SR shares were issued only to the promoters/ founders who hold an executive position in the issuer company; iv. The issue of SR equity shares had been authorized by a special resolution passed at a general meeting of the shareholders of the issuer, where the notice calling for such general meeting specifically provided for - a. the size of issue of SR equity shares, b. ratio of voting rights of SR equity shares vis- -vis the ordinary shares, c. rights as to differential dividends, if any d. sunset provisions, which provide for a time frame for the validity of such SR equity shares, e. matters in respect of which the SR equity shares would have the same voting right as that of the ordinary shares, 3 [ (v) the SR equity shares have been issued prior to the filing of draft red herring prospectus and held for a period of at least three months prior to the filing of the red herring prospectus; ] vi. The SR equity shares shall have voting rights in the ratio of a minimum of 2:1 upto a maximum of 10:1 compared to ordinary shares and such ratio shall be in whole numbers only; vii. The SR equity shares shall have the same face value as the ordinary shares; viii. The issuer shall only have one class of SR equity shares; ix. The SR equity shares shall be equivalent to ordinary equity shares in all respects, except for having superior voting rights. ] ********** NOTES:- 1. Inserted vide Notification No. SEBI/LAD-NRO/GN/2019/29 dated 29-07-2019 2. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/52 dated 26-10-2021 before it was read as ii. the SR shareholder shall not be part of the promoter group whose collective net worth is more than rupees 500 crores: Explanation : While determining the collective net worth, the investment of SR shareholder in the shares of the issuer company shall not be considered. 3. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/52 dated 26-10-2021 before it was read as v. The SR equity shares have been held for a period of at least 6 months prior to the filing of the red herring prospectus;