Regulation 42 - Reservation on competitive basis - Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Reservation on competitive basis 42. (1) In case of an issue made through the book building process, the issuer may make reservation on competitive basis out of the issue size excluding promoters contribution and net offer to public in favour of the following categories of persons: (a) 1 [employees; and in case of a new issuer, persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies;] (b) shareholders (other than promoters) of: (i) listed promoting companies, in case of a new issuer; and (ii) listed group companies, in case of an existing issuer: Provided that if the promoting companies are designated financial institutions or state and central financial institutions, the shareholders of such promoting companies shall not be eligible for the reservation on competitive basis; (c) persons who, as on the date of filing the draft offer document with the Board, are associated with the issuer as depositors, bondholders or subscribers to services of the issuer making an initial public offer: Provided that the issuer shall not make the reservation to the issue management team, syndicate members, their promoters, directors and employees and for the group or associate companies of the issue management team and syndicate members and their promoters, directors and employees; (2) In case of an issue made other than through the book building process, the issuer may make reservation on competitive basis out of the issue size excluding promoters contribution and net offer to public in favour of the following categories of persons: (a) 2 [employees; and in case of a new issuer, persons who are in the permanent and full time employment of the promoting companies excluding the promoters and an immediate relative of the promoter of such companies;] (b) shareholders (other than promoters) of: (i) listed promoting companies, in the case of a new issuer; and (ii) listed group companies, in the case of an existing issuer: Provided that if the promoting companies are designated financial institutions or state and central financial institutions, the shareholders of such promoting companies shall not be eligible for the reservation on competitive basis. (3) In case of a further public offer (not being a composite issue), the issuer may make reservation on competitive basis out of the issue size excluding promoters contribution and net offer to public in favour of retail individual shareholders of the issuer. (4) The reservation on competitive basis shall be subject to following conditions: (a) the aggregate of reservations for employees shall not exceed 3 [five per cent. of the post issue capital of the issuer]; (b) reservation for shareholders shall not exceed ten per cent. of the issue size; (c) reservation for persons who as on the date of filing the draft offer document with the Board, have business association as depositors, bondholders and subscribers to services with the issuer making an initial public offer shall not exceed five per cent. of the issue size; (d) no further application for subscription in the net offer to public category shall be entertained from any person (except an employee and retail individual shareholder) in favour of whom reservation on competitive basis is made; (e) any unsubscribed portion in any reserved category may be added to any other reserved category and the unsubscribed portion, if any, after such inter-se adjustments among the reserved categories shall be added to the net offer to the public category; (f) in case of under-subscription in the net offer to the public category, spill-over to the extent of under-subscription shall be permitted from the reserved category to the net public offer category; (g) 4 [value of allotment to any employee in pursuance of reservation made under sub-regulations (1) or (2), as the case may be, shall not exceed 5 [two lakhs] rupees.] 6 [Provided that in the event of under-subscription in the employee reservation portion, the unsubscribed portion may be allotted on a proportionate basis, for a value in excess of two lakhs rupees, subject to the total allotment to an employee not exceeding five lakhs rupees.] (5) In the case of reserved categories, a single applicant in the reserved category may make an application for a number of specified securities which exceeds the reservation. Explanation: For the purposes of this regulation: (I) The term reservation on competitive basis means reservation wherein specified securities are allotted in proportion of the number of specified securities applied for in respect of a particular reserved category to the number of specified securities reserved for that category; (II) The term new issuer means an issuer which has not completed twelve months of commercial operation and its audited operative results are not available. ******** 1 Substituted by the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2010, w.e.f. 13.04.2010. Prior to substitution, clause (a) read as under: (a) employees of the issuer including employees of the promoting companies in case of a new issuer; 2 Substituted by SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2010, w.e.f. 13.04.2010. Prior to substitution, clause (a) read as under: (a) employees of the issuer including employees of the promoting companies in case of a new issuer; 3 Substituted for the words ten per cent. of the issue size by SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2009 w.e.f. 11.12.2009. 4 Inserted by SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2009 w.e.f. 11.12.2009. 5 Substituted for one lakh by the SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2010, w.e.f. 12.11.2010. 6 Inserted by SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2016 w.e.f. 30.11.2016.