Chapter 2 - ELIGIBILITY NORMS FOR COMPANIES ISSUING SECURITIES - SEBI (Disclosure and Investor Protection Guidelines) 2000

CHAPTER II ELIGIBILITY NORMS FOR COMPANIES ISSUING SECURITIES 2.0 Conditions for issue of securities 1 (The companies issuing securities offered through an offer document shall satisfy the following at the time of filing the draft offer document with SEBI 2 (, unless specified otherwise in the Chapter) and also at the time of filing the final offer document with the Registrar of Companies/ Designated Stock Exchange:) 2.1 Filing of offer document 2.1.1 3 (No issuer company shall make any public issue of securities, unless a draft Prospectus has been filed with the Board through a Merchant Banker, at least 30 days prior to the filing of the Prospectus with the Registrar of Companies (ROC): Provided that if the Board specifies changes or issues observations on the draft Prospectus (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Prospectus or comply with the observations issued by the Board before filing the Prospectus with ROC. Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 30 days from the date of receipt of the draft Prospectus by the Board. Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Prospectus shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue. Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Prospectus after receipt of comments or reply from such regulator or other agencies. Provided further that the Board may specify changes or issue observations, if any, on the draft Prospectus only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Prospectus.) 2.1.2 4 (No listed issuer company shall make any rights issue of securities, 5 (where the aggregate value of such securities, including premium, if any, exceeds 50 lacs,) unless a draft letter of offer has been filed with the Board, through a Merchant Banker, at least 30 days prior to the filing of the letter of offer with the Designated Stock Exchange (DSE). Provided that if the Board specifies changes or issues observations on the draft Letter of Offer (without being under any obligation to do so), the issuer company or the Lead Manager to the Issue shall carry out such changes in the draft Letter of Offer or comply with the observations issued by the Board before filing the Letter of Offer with DSE. Provided further that the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 30 days from the date of receipt of the draft Letter of Offer by the Board. Provided further that where the Board has sought any clarification or additional information from the Lead Manager/s to the Issue, the period within which the Board may specify changes or issue observations, if any, on the draft Letter of Offer shall be 15 days from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue. Provided further that where the Board has made any reference to or sought any clarification or additional information from any regulator or such other agencies, the Board may specify changes or issue observations, if any, on the draft Letter of Offer after receipt of comments or reply from such regulator or other agencies . Provided further that the Board may specify changes or issue observations, if any, on the draft Letter of Offer only after receipt of copy of in-principle approval from all the stock exchanges on which the issuer company intends to list the securities proposed to be offered through the Letter of Offer.) 6 (2.1.2A Fast Track Issues 2.1.2A.1 Nothing contained in clauses 2.1.1 and 2.1.2 shall apply to a public issue of securities by a listed issuer company or a rights issue of securities by a listed issuer company, where the aggregate value of such securities, including premium, if any, exceeds 50 lacs, if the following conditions are satisfied: (a) The shares of the company have been listed on any stock exchange having nationwide terminals for a period of at least three years immediately preceding the reference date; (b) The average market capitalisation of public shareholding of the company is at least 10,000 crores for a period of one year up to the end of the quarter preceding the month in which the proposed issue is approved by the Board of Directors / shareholders of the issuer; (c) The annualized trading turnover of the shares of the company during six calendar months immediately preceding the month of the reference date has been at least two percent of the weighted average number of shares listed during the said six months period; (d) The company has redressed at least 95% of the total shareholder / investor grievances or complaints received till the end of the quarter immediately preceding the month of the reference date; (e) The company has complied with the listing agreement for a period of at least three years immediately preceding the reference date; (f) The impact of auditors qualifications, if any, on the audited accounts of the company in respect of the financial years for which such accounts are disclosed in the offer document does not exceed 5% of the net profit/ loss after tax of the company for the respective years. (g) No prosecution proceedings or show cause notices issued by the Board are pending against the company or its promoters or whole time directors as on the reference date; and (h) The entire shareholding of the promoter group is held in dematerialised form as on the reference date. Explanation : For the purposes of this clause: (a) Reference date shall mean: (i) in case of a public issue of securities by a listed company satisfying all the requirements specified in this clause, the date of filing of red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC; and (ii) in case of a rights issue of securities by a listed company satisfying all the requirements specified in this clause, where the aggregate value of such securities, including premium, if any, exceeds 50 lacs, the date of filing of letter of offer with Designated Stock Exchange. (b) Average market capitalisation of public shareholding shall mean the sum of daily market capitalization of public shareholding for a period of one year up to the end of the quarter preceding the month in which the proposed issue was approved by the Board/ shareholders, as the case may be, divided by the number of trading days. For this purpose, public shareholding shall have the same meaning as assigned to it in clause 40A of the Listing Agreement. 2.1.2A.2 A listed issuer company satisfying all the requirements specified in this clause and filing a red herring prospectus (in case of a book built issue) or prospectus (in case of a fixed price issue) with ROC or letter of offer with Designated Stock Exchange, as the case may be, shall simultaneously with such filing or as soon thereafter as reasonably practicable, but in any case not later than the opening of the issue, file a copy thereof with the Board. ) 2.1.3 Companies barred not to issue security No company shall make an issue of securities if the company has been prohibited from accessing the capital market under any order or direction passed by the Board. 2.1.4 Application for listing No company shall make any public issue of securities unless it has made an application for listing of those securities in the stock exchange (s). 7 (Provided that in case of an unlisted company making an Initial Public Offer, the company shall make an application for listing of those securities on at least one stock exchange having nationwide trading terminals.) 2.1.5 Issue of securities in dematerialised form 2.1.5.1 No company shall make public or rights issue or an offer for sale of securities, unless: (a) the company enters into an agreement with a depository for dematerialisation of securities already issued or proposed to be issued to the public or existing shareholders; and (b) the company gives an option to subscribers/ shareholders/ investors to receive the security certificates or hold securities in dematerialised form with a depository. Explanation: A depository shall mean a depository registered with the Board under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. 2.2 8 (Initial Public Offerings by Unlisted Companies) 2.2.1 9 (An unlisted company may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets all the following conditions: (a) The company has net tangible assets of at least 3 crores in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets: Provided that if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/project; (b) The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three (3) out of immediately preceding five (5) years; Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of Companies Act, 1956; (c) The company has a net worth of at least 1 crore in each of the preceding 3 full years (of 12 months each); (d) In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name; and (e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters contribution through the offer document), does not exceed five (5) times its pre-issue networth as per the audited balance sheet of the last financial year.) 2.2.2 10 (An unlisted company not complying with any of the conditions specified in Clause 2.2.1 may make an initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, only if it meets both the conditions (a) and (b) given below: (a) (i) The issue is made through the book-building process, with at least 11 (50% of net offer to public) being allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. OR (a) (ii) The project has at least 15% participation by Financial Institutions/ Scheduled Commercial Banks, of which at least 10% comes from the appraiser(s). In addition to this, at least 10% of the issue size shall be allotted to QIBs, failing which the full subscription monies shall be refunded AND (b) (i) The minimum post-issue face value capital of the company shall be 10 crores. OR (b) (ii) There shall be a compulsory market-making for at least 2 years from the date of listing of the shares, subject to the following: 12 (a) Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares; 13 (b) Market makers undertake to ensure that the bid-ask spread (difference between quotations for sale and purchase) for their quotes shall not at any time exceed 10%: 14 (c) The inventory of the market makers on each of such stock exchanges, as on the date of allotment of securities, shall be at least 5% of the proposed issue of the company.) 15 (2.2.2A An unlisted public company shall not make an allotment pursuant to a public issue or offer for sale of equity shares or any security convertible into equity shares unless, in addition to satisfying the conditions mentioned in Clause 2.2.1 or 2.2.2 as the case may be, the prospective allottees are not less than one thousand (1000) in number.) 16 (2.2.2B For the purposes of clauses 2.2.1 and 2.2.2 above: (i) Net Tangible Assets shall mean the sum of all net assets of the company, excluding intangible assets , as defined in Accounting Standard 26 (AS 26) issued by the Institute of Chartered Accountants of India. (ii) Project means the object for which the monies proposed to be raised to cover the objects of the issue. (iii) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered only if the financial statements of the partnership business for the said years conform to and are revised in the format prescribed for companies under the Companies Act, 1956 and also comply with the following: a. adequate disclosures are made in the financial statements as required to be made by the companies as per Schedule VI of the Companies Act, 1956; b. the financial statements shall be duly certified by a Chartered Accountant stating that: I. the accounts as revised or otherwise and the disclosures made are in accordance with the provisions of Schedule VI of the Companies Act, 1956; and II. the accounting standards of the Institute of Chartered Accountants of India (ICAI) have been followed and that the financial statements present a true and fair picture of the firm s accounts. (iv) In case of an unlisted company formed out of a division of an existing company, the track record of distributable profits of the division spun off shall be considered only if the requirements regarding financial statements as specified for partnership firms in 17 (sub-clause (iii)) above are complied with. (v) 18 (Deleted) 2.2.3 Offer for sale 2.2.3.1 19 (An offer for sale shall not be made of equity shares of a company or any other security which may be converted into or exchanged with equity shares of the company at a later date, unless the conditions laid down in clause 2.2.1 or 2.2.2, as the case may be and in clause 2.2.2A, are satisfied.) 2.2.4 Offer for sale can also be made if provisions of clause 2.2.2 are complied at the time of submission of offer document with Board. 2.3 Public Issue by Listed Companies 2.3.1 20 (A listed company shall be eligible to make a public issue of equity shares or any other security which may be converted into or exchanged with equity shares at a later date: Provided that the aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters contribution through the offer document), issue size does not exceed 5 times its pre-issue networth as per the audited balance sheet of the last financial year. Provided 21 (further) that in case there is a change in the name of the issuer company within the last 1 year (reckoned from the date of filing of the offer document), the revenue accounted for by the activity suggested by the new name is not less than 50% of its total revenue in the preceding 1 full-year period.) 2.3.2 22 (A listed company which does not fulfill the conditions given in the provisos to Clause 2.3.1 above shall be eligible to make a public issue, subject to complying with the conditions specified in clause 2.2.2.) 2.3.3 23 (Deleted) 2.4 Exemption from Eligibility Norms 2.4.1 The provisions of clauses 24 (2.2 and 2.3) shall not be applicable in case of: i) a banking company including a Local Area Bank (hereinafter referred to as Private Sector Banks) set up under sub-section (c) of Section 5 of the Banking Regulation Act, 1949 and which has received license from the Reserve Bank of India; or ii) a corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, State Bank of India Act 1955 and State Bank of India (Subsidiary Banks) Act, 1959 (hereinafter referred to as public sector banks ); iii) an infrastructure company: a) 25 (whose project has been appraised by a Public Financial Institution (PFI) or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financing Services Ltd. (IL FS) or a bank which was earlier a PFI; and) b) not less than 5% of the project cost is financed by any of the institutions referred to in sub-clause (a), jointly or severally, irrespective of whether they appraise the project or not, by way of loan or subscription to equity or a combination of both; iv) rights issue by a listed company. Explanation: 26 (Deleted) 2.5 Credit Rating for Debt Instruments 27 (2.5.1A No issuer company shall make a public issue or rights issue of 28 (convertible debt instruments), unless the following conditions are also satisfied, as on date of filing of draft offer document with SEBI and also on the date of filing a final offer document with ROC/ Designated Stock Exchange: (i) 29 (credit rating is obtained from at least one credit rating agency registered with the Board and disclosed in the offer document;) (ii) The company is not in the list of willful defaulters of RBI; (iii) The company is not in default of payment of interest or repayment of principal in respect of debentures issued to the public, if any, for a period of more than 6 months. 2.5.1B 30 (Deleted) 2.5.2 31 (Where credit ratings are obtained from more than one credit rating agencies, all the ratings, including the unaccepted ratings, shall be disclosed in the offer document.) 2.5.3 32 (Deleted.) 2.5.4 All the credit ratings obtained during the three (3) years preceding the pubic or rights issue of debt instrument (including convertible instruments) for any listed security of the issuer company shall be disclosed in the offer document. 33 (2.5A IPO Grading 2.5A.1 No unlisted company shall make an IPO of equity shares or any other security which may be converted into or exchanged with equity shares at a later date, unless the following conditions are satisfied as on the date of filing of Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue) with ROC: (i) the unlisted company has obtained grading for the IPO from at least one credit rating agency; (ii) disclosures of all the grades obtained, along with the rationale/ description furnished by the credit rating agency(ies) for each of the grades obtained, have been made in the Prospectus (in case of fixed price issue) or Red Herring Prospectus (in case of book built issue); and (iii) the expenses incurred for grading IPO have been borne by the unlisted company obtaining grading for IPO.) 2.6 Outstanding Warrants or Financial Instruments 2.6.1 No unlisted company shall make a public issue of equity share or any security convertible at later date into equity share, if there are any outstanding financial instruments or any other right which would entitle the existing promoters or shareholders any option to receive equity share capital after the initial public offering. 2.7 Partly Paid-up Shares 2.7.1 No company shall make a public or rights issue of equity share or any security convertible at later date into equity share, unless all the existing partly paid-up shares have been fully paid or forfeited in a manner specified in clause 8.6.2. 34 (2.8 Means of Finance No company shall make a public or rights issue of securities unless firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount to be raised through proposed Public/ Rights issue, have been made.) ****** 1 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: The companies issuing securities offered through an offer document, shall, satisfy the following: 2 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007. 3 Substituted clause 2.1.1, vide SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007, for the following: No company shall make any issue of a public issue of securities, unless a draft prospectus has been filed with the Board, through an eligible Merchant Banker, atleast 21 days prior to the filing of Prospectus with the Registrar of Companies (ROCs). Provided that if, within 21 days from the date of submission of draft Prospectus, the Board specifies changes, if any, in the draft Prospectus (without being under any obligation to do so), the issuer or the Lead Merchant banker shall carry out such changes in the draft prospectus before filing the prospectus with ROCs. 4 Substituted clause 2.1.2, vide SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007, for the following: No listed company shall make any issue of security through a rights issue where the aggregate value of securities, including premium, if any, exceeds 50 lacs, unless the letter of offer is filed with the Board, through an eligible Merchant Banker, at least 21 days prior to the filing of the Letter of Offer with Regional Stock Exchange (RSE). Provided that if, within 21 days from the date of filing of draft letter of offer, the Board specifies changes, if any, in the draft letter of offer, (without being under any obligation to do so), the issuer or the Lead Merchant banker shall carry out such changes before filing the draft letter of offer with RSE. Prior to the above, clause 2.1.2 was substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: No listed company shall make any issue of security through a rights issue where the aggregate value of securities, including premium, if any, exceeds 50 lacs, unless the letter of offer is filed with the Board, through an eligible Merchant Banker, at least 21 days prior to the filing of the Letter of Offer with Regional Stock Exchange (RSE). Provided that if, within 21 days from the date of filing of draft letter of offer, the Board specifies changes, if any, in the draft letter of offer, (without being under any obligation to do so), the issuer or the Lead Merchant banker shall carry out such changes before filing the draft letter of offer with RSE. 5 In SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007, the words where the aggregate value of such securities, including premium, if any, exceeds 50 lacs, were inadvertently omitted in the opening para of the amended clause 2.1.2. The same clarified vide SEBI Circular No. SEBI/CFD/DIL/DIP/26/ 2007/24/5 dated May 24, 2007. 6 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 7 Inserted vide SEBI/CFD/DIL/DIP/36/2009/09/07 dated July 9, 2009 8 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: Public Issue by Unlisted Companies . 9 Substituted clause 2.2.1, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: 2.2.1 An unlisted company shall make a public issue of any equity shares or any security convertible into equity shares at a later date subject to the following:- i.) It has a pre-issue networth of not less than 1 crore in three (3) out of preceding five (5) years, with a minimum networth to be met during immediately preceding two (2) years; and ii.) It has a track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three (3) out of immediately preceding five (5) years. Provided that the issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) does not exceed five (5) times its pre-issue networth as per the last available audited accounts, either at the time of filing draft offer document with the Board or at the time of opening of the issue . Prior to the above, clause 2.2.1 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: 2.2.1 No unlisted company shall make a public issue of any equity share or any security convertible at a later date into equity share unless the company has;- i.) a track record of distributable profits in terms of section 205 of Companies Act, for at least three (3) out of immediately preceding five (5) years; and ii.) a pre-issue networth of not less than Rupees One crore in three (3) out of preceding five (5) years, with the minimum networth to be met during immediately preceding two (2) years. 10 Substituted clause 2.2.2, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: 2.2.2 An unlisted company can make a public issue of equity shares or any security convertible into equity shares at a later date, only through the book-building process if , i.) it does not comply with the conditions specified in clause 2.2.1 above, or, ii.) its proposed issue size exceeds five times its pre-issue networth as per the last available audited accounts either at the time of filing draft offer document with the Board or at the time of opening of the issue Provided that sixty percent (60%) of the issue size shall be allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. Explanation 1: i.) Profits emanating only from the information technology business or activities of the company, shall be considered for the purposes of computation of the track record of distributable profits in following cases: a. for companies in Information Technology sector or proposing to raise moneys for projects in information technology sector, b. for companies whose name suggests that they are engaged in information technology activities / business, etc. viz. the company s name containing the words software, hardware, info, infotech, .com, informatics, technology, computer, information, etc.; ii.) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered only if the financial statements of the partnership business for the said years conform to and are revised in the format prescribed for companies under the Companies Act, 1956 and also comply with the following: a. adequate disclosures are made in the financial statements as required to be made by the companies as per Schedule VI of the Companies Act, 1956; b. the financial statements shall be duly certified by a Chartered Accountant stating that: I. the accounts as revised or otherwise and that the disclosures made are in accordance with the provisions of Schedule VI of the Companies Act, 1956; and II. the accounting standards of the Institute of Chartered Accountants of India(ICAI) have been followed and that the financial statements present a true and fair picture of the firm s accounts. iii) the lead merchant banker shall also verify and confirm that the financial statements furnished on behalf of the partnership firm are in accordance with the Accounting Standards prescribed by the ICAI. iv) In case of an unlisted company formed out of a division of an existing company, the track record of distributable profits of the division spun off shall be considered only if the requirements regarding financial statements as specified for partnership firms in clause (ii) above are complied with. Explanation 2: For the purposes of clause 2.2 above, the term - i.) Three years out of immediately preceding five years , shall mean that at least three (3) audited accounts for a period of not less than thirty six (36) months are available for computation of the minimum track record of three (3) years of distributable profits. ii.) Qualified Institutional Buyer shall mean - a. public financial institution as defined in section 4A of the Companies Act, 1956; b. scheduled commercial banks; c. mutual funds; d. foreign institutional investor registered with SEBI; e. multilateral and bilateral development financial institutions; f. Venture capital funds registered with SEBI.) g. 39(Foreign Venture capital investors registered with SEBI.) h. 39(State Industrial Development Corporations) iii.) Information Technology shall comprise the following activities: a. Production of computer software i.e. any representation of instruction, data, sound or image including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine. b. Information technology services i.e. any service which results from the use of any information technology software over a system of information technology products for realizing value addition and will consist of (I) IT software including data processing services (II) Consumer systems, communication and network services and (III) other IT related services. c. manufacturing of information technology hardware d. Manufacturing of information technology products i.e. computer systems, communications and network products and peripherals and subsystems. e. Manufacturing of information technology components i.e. active and passive electronic components, plastic, metal, non-metal, parts and sub assemblies of IT products. f. computer education and training g. computer maintenance h. computer consultancy i. e-commerce / internet related activities. Prior to the above, sub-clauses (g) and (h) of sub-clause (ii) of Explanation 2 were substituted vide SEBI Circular No. RMB (Compendium) Series Circular No. 1 (2001-2002) dated July 17, 2001 for the following: g) Foreign Venture Capital investors registered with SEBI h) State Industrial Development corporations Prior to the above, clause 2.2.2 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: 2.2.2 An unlisted company which does not satisfy the requirement specified in Clause 2.2.1 above, can make a public issue of equity share capital or any security convertible at later date into equity share capital, provided a public financial institution or a scheduled commercial bank:- a) has appraised the project to be financed through the proposed offer to the public; and ; b) not less than 10% of the project cost is financed by the said appraising bank or institution by way of loan, equity, participation in the issue of security in the proposed issue or combination of any of them. c) the appraising bank or institution shall bring in the minimum specified contribution at least one day before the opening of the public issue. Explanation: For the purpose of the term track record : (A) At least three (3) audited accounts shall be available comprising not less than thirty six (36) months for determining the minimum track record of three (3) years, (B) In case of companies in the information technology sector, the track record of distributable profits shall be considered for the purpose of eligibility requirements only if the profits are emanating from the information technology business or activities. (C) In case of partnership firms which have since been converted into companies, the track record of distributable profits of the firm shall be considered for the purpose of eligibility requirements if, the financial statements for the respective years pertaining to partnership business conform to and are revised in a format identical to that required for companies and also comply with the following: (i) adequate disclosures are made in the financial statements similar to that of companies as specified in Schedule VI of the Companies Act, 1956, and the financial statements shall be duly certified by a Chartered Accountant stating unequivocally that: (a) the accounts as revised or otherwise and disclosures made are in line with the provision of Schedule VI of the Companies Act, 1956; and (b) the accounting standards of the Institute of Chartered Accountants of India (ICAI) have been followed and that the financial statements present a true and fair picture of the firm s accounts, (ii) the lead merchant banker shall also conform that the financial statements furnished on behalf of the Partnership firms are in accordance with accounting standards prescribed by the ICAI. (D) In case of an unlisted company formed out of a division of an exiting company, the track record of distributable profits of the division spun off shall be considered for the purpose of eligibility criteria if the requirements regarding financial statements as specified for partnership firms in clause (C) above are complied with. 11 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/16/2005/19/9 dated September 19, 2005 for the letters and figures 50% of the issue size . 12 Numbered the bulleted sub-clause, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 13 Numbered the bulleted sub-clause, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 14 Numbered the bulleted sub-clause, vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 15 Inserted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003. . 16 Inserted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003. 17 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/34/2009/24/09 dated February 24, 2009, for the words sub-clause (iv) . 18 Omitted the following sub-clause 2.2.2B(v) vide SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008: (v) Qualified Institutional Buyer shall mean: a. public financial institution as defined in section 4A of the Companies Act, 1956; b. scheduled commercial banks; c. mutual funds; d. foreign institutional investor registered with SEBI; e. multilateral and bilateral development financial institutions; f. venture capital funds registered with SEBI; g. foreign venture capital investors registered with SEBI; h. state industrial development corporations; i. insurance companies registered with the Insurance Regulatory and Development Authority (IRDA); j. provident funds with minimum corpus of 25 crores; k. pension funds with minimum corpus of 25 crores); 47(l. National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of Government of India published in the Gazette of India. Prior to the above, sub-clause (l) was inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/30/2008/17/03 dated March 17, 2008. 19 Substituted clause 2.2.3.1, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: A company, whose equity shares or any security convertible at later date into equity shares are offered through an offer for sale, shall comply with the provisions of Clause 2.2. . Prior to the above, clause 2.2.3.1 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: A company, whose equity share or any security convertible at later date into equity shares are offered through an offer for sale, has to comply with the provisions of Clause 2.2.1 or Clause 2.2.2 . 20 Substituted clause 2.3.1, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: A listed company shall be eligible to make a public issue of equity shares or any security convertible at later date into equity share. Provided that the issue size (i.e. offer through offer document + firm allotment + promoters contribution through the offer document) does not exceed five (5) times its pre-issue networth as per the last available audited accounts either at the time of filing draft offer document with the Board or at the time of opening of the issue. Prior to the above, clause 2.3.1 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: 2.3.1 A listed company shall be eligible to make a public issue of equity shares or any security convertible at later date into equity share. Provided that, if as a result of the proposed issue, networth of the company becomes more than five times the networth prior to the issue, the company shall satisfy either the provisions of Clause 2.2.1 or Clause 2.2.2, before it can make the proposed public issue. 21 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 22 Substituted clause 2.3.2, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: A listed company which does not fulfill the condition given in the proviso to clause 2.3.1 above, shall be eligible to make a public issue only through the book building process. Provided that sixty percent (60%) of the issue size shall be allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. Prior to the above, clause 2.3.2 was substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for the following: 2.3.2 Public issue by listed companies which has changed its name to indicate as if it was engaged in the business / activities in information technology sector during a period of three years prior to filing of offer document with the Board, shall be eligible to make a public issue of equity share or securities convertible at a later date into equity share, if; (a) (i) it has a track record of distributable profits in terms of Section 205 of Companies Act, for at least three (3) out of immediately preceding five (5) years from the information technology business / activities, and (ii) it has a pre-issue networth of not less than Rs.One Crore in three (3) out of preceding five (5) years, with the minimum networth to be met during immediately preceding two (2) years. (b) if the company does not satisfy the requirements specified in clause (a) above, it can make a public issue provided that it satisfies the requirements laid down in sub-clauses (a), (b) and (c ) of clause 2.2.2. 23 Omitted the following clause 2.3.3, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003: A listed company which has changed its name so as to indicate that it is a company in the information technology sector as defined in Clause iii of Explanation 2 of Clause 2.2.1, during a period of three years prior to filing of offer document with the Board, shall comply with the requirements of Clause 2.2 for unlisted companies, before it can make a public issue of equity shares or securities convertible at a later date into equity shares. 24 Substituted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000 for 2.2.1, 2.2.2 and 2.3.1 . 25 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: whose project has been appraised by a Public Financial Institution or Infrastructure Development Finance Corporation (IDFC) or Infrastructure Leasing and Financing Services Ltd. (IL FS) and . 26 Omitted the following explanation, vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000, for the following: For the purposes of Clauses 2.2.1 and 2.3.1, networth shall mean aggregate of value of the paid up Equity capital and Free Reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulated losses and deferred Expenditure not written off including miscellaneous expenses not written off) . 27 Substituted clause 2.5.1A and clause 2.5.1B, vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for the following: 2.5.1 No public or rights issue of debt instrument (including convertible instruments) irrespective of their maturity or conversion period shall be made unless credit rating from a credit rating agency is obtained and disclosed in the offer document. 28 Substituted vide SEBI/CFD/DIL/DIP/32/200/28/8 dated August 28, 2008 for the words and brackets debt instruments (whether convertible or not) . 29 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/29/2007/03/12 dated December 3, 2007 for the following: (i) credit rating of not less than investment grade is obtained from not less than two credit rating agencies registered with SEBI and disclosed in the offer document; 30 Omitted vide circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008 the following 2.5.1B An issuer company shall not make an allotment of non-convertible debt instrument pursuant to a public issue if the proposed allottees are less than fifty (50) in number. In such a case the company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the company shall pay interest @15% p.a. to the investors.) Prior to the above, clause 2.5.1B was substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003, for clause 2.5.1, the details of which are given in the footnote on pre-page. 31 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/29/2007/03/12 dated December 3, 2007 for the following: Where credit ratings are obtained from more than two credit rating agencies, all the credit rating/s, including the unaccepted credit ratings, shall be disclosed Prior to the above, clause 2.5.2 was substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: Where credit rating is obtained from more than one credit rating agencies, all the credit rating/s, including the unaccepted credit ratings, shall be disclosed. 32 Omitted the following vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003: For a public and rights issue of debt-securities of issue size greater than or equal to 100 crores, two ratings from two different credit rating agencies shall be obtained. 33 Inserted clause 2.5A, vide SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007. 34 Inserted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003.