Chapter 13A - GUIDELINES FOR QUALIFIED INSTITUTIONS PLACEMENT - SEBI (Disclosure and Investor Protection Guidelines) 2000

1 (CHAPTER XIII-A GUIDELINES FOR QUALIFIED INSTITUTIONS PLACEMENT 13A.1 Applicability 13A.1.1 This Chapter shall apply to any issue of equity shares / fully convertible debentures (FCDs) / partly convertible debentures (PCDs) 2 (/ nonconvertible debentures (NCDs) with warrants or any securities (other than warrants)), which are convertible into or exchangeable with equity shares at a later date (hereinafter referred to as specified securities ), made to Qualified Institutional Buyers (QIBs) pursuant to this chapter, by a listed company which fulfills the following conditions: (a) 3 its equity shares of the same class were listed on a stock exchange having nation wide trading terminals for a period of at least one year as on the date of issuance of notice to its shareholders for convening the meeting referred to in Explanation (a) to clause 13A.3.1; and) 4 (Provided that in case of a listed company, being the transferee company in a scheme of merger/ demerger/ amalgamation/ arrangement sanctioned by Court(s) under sections 391 to 394 of the Companies Act, 1956, the period for which the equity shares of the same class of the transferor company were listed on a stock exchange having nation wide trading terminals shall also be considered for the purpose of computation of the period of one year.) (b) it is in compliance with the prescribed minimum public shareholding requirements of the listing agreement. Explanation: (i) 5 (Deleted) (ii) For the purpose of sub-clause (a) of clause 13A.1.1, securities that are convertible into or exchangeable with securities which are listed on a stock exchange having nation wide trading terminals, 6 (and satisfy the conditions laid down in Explanation to Rule 19(4) of the Securities Contracts (Regulation) Rules, 1957) shall be deemed to be securities of the class into which they are convertible or with which they are exchangeable. 13A.2 Investors 13A.2.1 Only QIBs shall be eligible for allotment of specified securities issued pursuant to this Chapter. 13A.2.2 Minimum of 10 per cent of specified securities issued pursuant to this chapter shall be allotted to mutual funds. 13A.2.3 If no mutual fund is agreeable to take up the minimum portion mentioned in clause 13A.2.2 or any part thereof, such minimum portion or part thereof may be allotted to other QIBs. 13A.2.4 No allotment shall be made under this chapter, either directly or indirectly, to any QIB being a promoter or any person related to promoter/s. Explanation: For the purpose of this clause, QIB who has all or any of the following rights shall also be deemed to be a person related to promoter/s: (a) rights under a shareholders agreement or voting agreement entered into with promoters or persons related to the promoters; (b) veto rights; or (c) right to appoint any nominee director on the board of the issuer. Provided that a QIB who does not hold any shares in the issuer and who has acquired the aforesaid rights in the capacity of a lender shall not be deemed to be a person related to promoter/s. 7 (13A.2.4A) Where the specified security is NCD with warrant, an investor can subscribe to the combined offering of NCDs with warrants or to the individual instruments, i.e., either NCDs or warrants. 13A.2.5 Investors shall not be allowed to withdraw their bids after the closure of issue. 13A.3 Pricing 13A.3.1 8 (An issue of specified securities made under this Chapter shall be made at a price not less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date.) Explanation: a) 9 ( relevant date for the purpose of this clause means the date of the meeting in which the Board of the company or the Committee of Directors duly authorised by the Board of the company decides to open the proposed issue.) b) stock exchange for the purpose of this clause means any of the recognised stock exchanges in which the equity shares of the issuer of the same class are listed and in which the highest trading volume in such shares has been recorded during the 10 (two weeks) immediately preceding the relevant date. 13A.3.2 Pricing of shares on conversion 13A.3.2.1 Where securities which are convertible into or exchangeable with equity shares at a later date are issued pursuant to this Chapter, the issuer shall determine the price of the resultant shares in terms of clause 13A.3.1 above, subject to clause 13A.3.2.2. 13A.3.2.2 The relevant date for the above purpose may, at the option of the issuer, be either the one referred in Explanation (a) to clause 13A.3.1 or 11 (Deleted) the date on which the holder of the securities which are convertible into or exchangeable with equity shares at a later date becomes entitled to apply for the said shares. 13A.3.3 The specified securities allotted pursuant to this Chapter shall be made fully paid up at the time of their allotment. 13A.4 Adjustments in price 13A.4.1 The prices considered for determination of issue price of specified securities as provided in clause 13A.3.1 and 13A.3.2.1 shall be subject to appropriate adjustments if the issuer company: a. makes an issue of shares by way of capitalization of profits or reserves (other than by way of a dividend on shares); b. makes an issue of shares on rights basis c. consolidates its outstanding shares into a smaller number of shares; d. divides its outstanding shares (including by way of stock split); e. re-classifies any of its shares into other securities of the company; f. is involved in such other similar events or circumstances, which in the opinion of the concerned Stock Exchange, requires adjustments. 13A.5 Currency of the Security 13.A.5.1 In case of a security which is convertible into or exchangeable with equity shares at a later date, the same may be converted/ exchanged in to equity shares at any time after the date of allotment of the security, no later than sixty months from the date of allotment. 13.A.6 Shareholders Resolution 13A.6.1 Allotment of specified securities issued pursuant to this Chapter shall be completed within twelve months from the date of passing of the resolution in terms of sub-section (1A) of Section 81 of the Companies Act, 1956 or any other applicable provision. 13A.6.2 The resolution passed at the meeting of shareholders referred to in clause 13A.6.1 above shall specify that the allotment is proposed to be made to QIBs pursuant to this Chapter and shall also specify the relevant date on the basis of which price of the resultant shares as specified under clause 13A.3.2.2 shall be determined. 13A.6.3 The placements made pursuant to authority of the same shareholders resolution shall be separated by at least six months between each placement. 13A.7 Placement Document 13A.7.1 Specified securities shall be issued pursuant to this Chapter on the basis of a placement document. 13A.7.2 The placement document shall contain all material information, including the information specified in Schedule XXIA. 13A.7.3 The placement document shall be a private document provided to select investors, through serially numbered copies. 13A.7.4 The placement document shall also be placed on the website of the concerned stock exchange and of the issuer with a disclaimer to the effect that it is in connection with an issue to QIBs under this Chapter and that no offer is being made to the public or to any other category of investors. 13A.7.5 A copy of the placement document shall be filed with the Board for record purpose within 30 days of the allotment of specified securities. 13A.8 Number of allottees 13A.8.1 The minimum number of allottees for each placement of specified securities made pursuant to this Chapter shall not be less than: (a) two, where the issue size is less than or equal to 250 crores; (b) five, where the issue size is greater than 250 crores. Provided that no single allottee shall be allotted more than 50% of the issue size. Provided further that QIBs belonging to the same group or those who are under common control shall be deemed to be a single allottee for the purpose of this clause. Explanation: For the purpose of this clause i. The expression QIBs belonging to the same group shall derive meaning from the concept of companies under the same group as provided in sub-section (11) of Section 372 of the Companies Act, 1956; ii. Control shall have the same meaning as is assigned to it by clause (c) of Regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 13A.9 Restrictions on amount raised 13A.9.1 The aggregate of the proposed placement and all previous placements made in the same financial year pursuant to this Chapter shall not exceed five times the net worth of the issuer as per the audited balance sheet of the previous financial year. 13A.10 Transferability of specified securities 13A.10.1 Specified securities allotted pursuant to this Chapter shall not be sold by QIB for a period of one year from the date of allotment, except on a recognised stock exchange. Explanation: For the purpose of this clause, it is clarified that any sale by way of a bulk or block transaction in accordance with the procedures prescribed by the Board and the stock exchange, shall also be treated as a sale on a recognised stock exchange. 13A.11 Obligations of Merchant Bankers 13A.11.1 Any issue and allotment of specified securities pursuant to this Chapter shall be managed by Merchant Banker(s) registered with SEBI. 13A.11.2 The merchant banker shall exercise due diligence. 13A.11.3 The merchant banker shall furnish to each stock exchange on which the same class of shares or other securities are listed, a due diligence certificate stating that the issue is being made pursuant to this Chapter and complies with its requirements, along with the application made for seeking in-principle approval for listing of the specified securities. 13A.11.4 The merchant banker shall also furnish to each stock exchange on which the same class of shares or other securities are listed, the documents, undertakings, etc, if any, specified in the listing agreement for the purpose of seeking in-principle approval and final permission from Stock Exchanges for listing of the specified securities. 13A.12 Issuer Certification 13A.12.1 The issuer shall furnish a copy of the placement document to each stock exchange on which the same class of shares or other securities are listed. 13A.12.2 The issuer shall also furnish to each stock exchange on which the same class of shares or other securities are listed, a certificate stating that the issue is being made pursuant to this Chapter and complies with its requirements, along with the application made for seeking inprinciple approval for listing of the specified securities. 13A.12.3 The issuer shall also furnish to each stock exchange on which the same class of shares or other securities are listed, the documents, undertakings, etc, if any, specified in the listing agreement for the purpose of seeking in-principle approval and final permission from Stock Exchanges for listing of the specified securities. 13A.13 Non-applicability of Chapter XIII 13A.13.1 Nothing contained in Chapter XIII shall apply to an issue of specified securities made pursuant to this Chapter. ******** 1 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/22/2006/8/5 dated May 8, 2006. 2 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/33/2008/08/12 dated December 8, 2008 for the words or any securities other than warrants . 3 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/25/2007/30/4 dated April 30, 2007 for the following: its equity shares of the same class are listed on a stock exchange having nation wide trading terminals; and 4 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008. 5 Omitted vide SEBI Circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008 the following: The term Qualified Institutional Buyers shall have the same meaning as assigned to it in clause 2.2.2B (v). 6 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008. 7 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/33/2008/08/12 dated December 8, 2008. 8 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/2008/28/8 dated August 28, 2008 for the following: An issue of specified securities made under this Chapter shall be made at a price not less than the higher of the following: i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date; OR ii) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date. 9 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/2008/28/8 dated August 28, 2008 for the following: relevant date for the purpose of this clause means the day which is thirty days prior to the date on which the meeting of general body of shareholders is held, in terms of sub-section (1A) of Section 81 of the Companies Act, 1956 or other applicable provision to consider the proposed issue. 10 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/32/2008/8 dated August 28, 2008. 11 Omitted the words a day thirty days prior to vide SEBI Circular No. SEBI/CFD/DIL/DIP/32/2008/28/08 dated August 28, 2008.