Chapter 3 - PRICING BY COMPANIES ISSUING SECURITIES - SEBI (Disclosure and Investor Protection Guidelines) 2000

CHAPTER III PRICING BY COMPANIES ISSUING SECURITIES 3.0 The companies eligible to make public issue can freely price their equity shares or any security convertible at later date into equity shares in the following cases: 3.1 Public/ Rights Issue by Listed Companies 3.1.1 A listed company whose equity shares are listed on a stock exchange, may freely price its equity shares and any security convertible into equity at a later date, offered through a public or rights issue. 3.2 Public Issue by Unlisted Companies 3.2.1 An unlisted company eligible to make a public issue and desirous of getting its securities listed on a recognised stock exchange pursuant to a public issue, may freely price its equity shares or any securities convertible at a later date into equity shares. 1 (3.2A) Infrastructure company 2 (3.2A.1) An eligible infrastructure company shall be free to price its equity shares, subject to the compliance with the disclosure norms as specified by SEBI from time to time. 3.3 Initial public Issue by Banks 3.3.1 The banks (whether public sector or private sector) may freely price their issue of equity shares or any securities convertible at a later date into equity share, subject to approval by the Reserve Bank of India. 3.4 Differential Pricing 3.4.1 Any unlisted company or a listed company making a public issue of equity shares or securities convertible at a later date into equity shares, may issue such securities to applicants in the firm allotment category at a price different from the price at which the net offer to the public is made, provided that the price at which the security is being offered to the applicants in firm allotment category is higher than the price at which securities are offered to public. Explanation: The net offer to the public means the offer made to the Indian public and does not include firm allotments or reservations or promoters contributions. 3 (3.4.1A An unlisted company or a listed company making a public issue of equity shares or securities convertible at a later date into equity shares may issue such securities to retail individual investors and/or retail individual shareholders at a price lower than the price at which net offer is made to other categories of public. Provided that the difference between the price at which the securities are issued to retail individual investors and/or retail individual shareholders and the price at which the net offer is made to other categories of public, is not more than 10% of the price at which securities are offered to other categories of public.) 3.4.2 A listed company making a composite issue of capital may issue securities at differential prices in its public and rights issue. 3.4.3 In the public issue which is a part of a composite issue, differential pricing as per 4 (sub-clauses 3.4.1 and 3.4.1A) above is also permissible. 3.4.4 Justification for the price difference shall be given in the offer document for 5 (sub-clauses 3.4.1, 3.4.1A and 3.4.2). 3.5 Price Band 3.5.1 Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the offer documents filed with the Board and actual price can be determined at a later date before filing of the offer document with ROCs. 3.5.2 If the Board of Directors has been authorised to determine the offer price within a specified price band such price shall be determined by a Resolution to be passed by the Board of Directors. 3.5.3 6 (The Lead Merchant Bankers shall ensure that in case of the listed companies, a 48 hours notice of the meeting of the Board of Directors for passing resolution for determination of price is given to the Designated Stock Exchange.) 7 (3.5.4 In case of public issue by listed issuer company, issue price or price band may not be disclosed in the draft prospectus filed with the Board.) 8 (3.5.5 In case of a rights issue, issue price or price band may not be disclosed in the draft letter of offer filed with the Board. The issue price may be determined anytime before fixation of the record date, in consultation with the Designated Stock Exchange.) 9 (3.5.6) The final offer document shall contain only one price and one set of financial projections, if applicable. 3.6 Payment of Discounts/ Commissions, etc. 3.6.1 No payment, direct or indirect in the nature of a discount, commission, allowance or otherwise shall be made either by the issuer company or the promoters in any public issue, to the persons who have received firm allotment in such public issue. 3.7 Freedom to determine the denomination of shares for public / rights issues and to change the standard denomination 3.7.1 10 (An eligible company shall be free to make public or rights issue of equity shares in any denomination determined by it in accordance with Sub-section (4) of Section 13 of the Companies Act, 1956 and in compliance with the following and other norms as may be specified by SEBI from time to time: i. In case of initial public offer by an unlisted company, a. if the issue price is 500/- or more, the issuer company shall have a discretion to fix the face value below 10/- per share subject to the condition that the face value shall in no case be less than 1 per share; b. if issue price is less than 500 per share, the face value shall be 10/- per share; 11 (Provided that nothing contained in sub-clause (i) shall apply to initial public offer made by any government company, statutory authority or corporation or any special purpose vehicle set up by any of them, which is engaged in infrastructure sector. Explanation: For the purposes of this proviso, the term Infrastructure sector shall include the following facilities/services: (i) Transportation (including inter modal transportation), including the following: (a) Roads, national highways, state highways, major district roads, other district roads and village roads, including toll roads, bridges, highways, road transport providers and other road-related services; (b) Rail system, rail transport providers, metro rail roads and other railway related services; (c) Ports (including minor ports and harbours), inland waterways, coastal shipping including shipping lines and other port related services; (d) Aviation, including airports, heliports, airlines and other airport related services; (e) Logistics services; (ii) Agriculture, including the following: (a) Infrastructure related to storage facilities; (b) Construction relating to projects involving agro-processing and supply of inputs to agriculture; (d) Construction for preservation and storage of processed agro-products, perishable goods such as fruits, vegetables and flowers including testing facilities for quality; (iii) Water management, including the following: (a) Water supply or distribution; (b) Irrigation; (c) Water treatment, etc. (iv) Telecommunication, including the following: (a) Basic or cellular, including radio paging; (b) Domestic satellite service (i.e., satellite owned and operated by an Indian company for providing telecommunication service); (c) Network of trunking, broadband network and internet services; (v) Industrial, Commercial and Social development and maintenance, including the following: (a) Real estate development, including an industrial park or special economic zone; (b) Tourism, including hotels, convention centres and entertainment centres; (c) Public markets and buildings, trade fair, convention, exhibition, cultural centres, sports and recreation infrastructure, public gardens and parks; (d) Construction of educational institutions and hospitals; (e) Other urban development, including solid waste management systems, sanitation and sewerage systems, etc.; (vi) Power, including the following: (a) Generation of power through thermal, hydro, nuclear, fossil fuel, wind and other renewable sources; (b) Transmission ,distribution or trading of power by laying a network of new transmission or distribution lines; (vii) Petroleum and natural gas, including the following: (a) Exploration and production; (b) Import terminals; (c) Liquefaction and re-gasification; (d) Storage terminals; (e) Transmission networks and distribution networks including city gas infrastructure; (viii) Housing, including the following: (a) Urban and rural housing including public / mass housing, slum rehabilitation etc; (b) Other allied activities such as drainage, lighting, laying of roads, sanitation facilities etc.; (ix) Other miscellaneous facilities/services, including the following: (a) Mining and related activities; (b) Technology related infrastructure; (c) Manufacturing of components and materials or any other utilities or facilities required by the infrastructure sector like energy saving devices and metering devices, etc; (d) Environment related infrastructure; (e) Disaster management services; (f) Preservation of monuments and icons; (g) Emergency services (including medical, police, fire, and rescue); (x) Such other facility/service which, in the opinion of the Board, constitutes infrastructure sector.) ii. The disclosure about the face value of shares (including the statement about the issue price being X times of the face value) shall be made in the advertisement, offer documents and in application forms in identical font size as that of issue price or price band.) 3.7.2 The companies which have already issued shares in the denomination of 10/- or 100/- may change the standard denomination of the shares by splitting or consolidating the existing shares. 3.7.3 The companies proposing to issue shares in any denomination or changing the standard denomination in terms of clause 3.7.1 or 3.7.2 above shall comply with the following: (a) the shares shall not be issued in the denomination of decimal of a rupee; (b) the denomination of the existing shares shall not be altered to a denomination of decimal of a rupee; (c) at any given time there shall be only one denomination for the shares of the company; (d) the companies seeking to change the standard denomination may do so after amending the Memorandum and Articles of Association, if required; (e) the company shall adhere to the disclosure and accounting norms specified by SEBI from time to time. ******** 1 Numbered vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 2 Renumbered clause 3.2.3 as 3.2A.1, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 3 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 4 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007 for the words sub-clause 3.4.1 . 5 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007 for the words sub-clauses 3.4.1 and 3.4.2 6 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: The Lead Merchant Bankers shall ensure that in case of the listed companies, a 48 hours notice of the meeting of the Board of Directors for passing resolution for determination of price is given to the regional Stock Exchange. 7 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/19/2006/31/3 dated March 31, 2006. 8 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/19/2006/31/3 dated March 31, 2006. 9 Renumbered clause 3.5.4 as clause 3.5.6 , vide SEBI Circular No. SEBI/CFD/DIL/DIP/19/2006/31/3 dated March 31, 2006. 10 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/13/2004/28/5 dated May 28, 2004 for the following: An eligible company shall be free to make public or rights issue of equity shares in any denomination determined by it in accordance with sub-section (4) of section 13 of the Companies Act, 1956 and in compliance with the norms as specified by SEBI in circular no.SMDRP/POLICY/CIR-16/99 dated June 14, 1999 and other norms as may be specified by SEBI from time to time. 11 Inserted proviso to sub-clause (i) and Explanation to the proviso, vide SEBI Circular No. SEBI/CFD/DIL/DIP/ 27/2007/10/7 dated July 10, 2007.