Amendments to the SEBI (Disclosure and Investor Protection) {DIP} Guidelines, 2000 - SEBI - SEBI/CFD/DIL/DIP/16 / 2005/19/9

Neelam Bhardwaj Deputy General Manager Division of Issues and Listing Phone: +91 22 2285 0451-56, 2288 0962-70 (Extn: 367) Fax: +91 22 2204 5633. Email: [email protected] SEBI/CFD/DIL/DIP/16 / 2005/19/9 September 19, 2005 To All Registered Merchant Bankers/Stock exchanges Dear Sirs, Sub.: Amendments to the SEBI (Disclosure and Investor Protection) {DIP} Guidelines, 2000 1.0 This circular is being issued under Section 11(1) of SEBI Act amending SEBI (DIP) Guidelines, 2000; (hereinafter referred as the guidelines ), modifying the provisions pertaining to the book building process. 2.0 The amendments are detailed in the Annexure and are summarized as under: 2.1 Provision for specific allocation for mutual funds within the QIB category : 2.1.1 Presently, mutual funds registered with SEBI in terms of SEBI (Mutual Funds) Regulations, are not given any specific allocation within the QIB category in book-built issues. It has now been decided to provide 5% of the 50% or 60% {in case of issues in terms of Rule 19(2)(b) of SCRR} of net offer to public available for allocation to QIBs, for mutual funds. 2.1.2 Effectively, out of the portion available for allocation to QIBs, 5% will be available for allocation to mutual funds. All eligible bids by mutual funds will be considered for allocation in the afore mentioned 5% as well as in the balance available for QIBs. An illustration explaining the method of allocation to mutual funds has also been incorporated in the guidelines. In the event of inadequate response from the mutual funds, the shares may be made available to QIBs other than mutual funds. 2.2 Proportionate allotment to QIBs 2.2.1 Presently, the allotment to QIBs is decided by Issuer Company in consultation with Book Running Lead Managers (BRLMs). It has been decided to extend the existing provisions of proportionate allotment as applicable for Retail individual investors (RIIs) and Non Institutional Investors (NIIs) to the QIB category. It has also been decided that where BRLMs have reasons not to accept a QIB bid, the same should be done at the time of receipt of the bids and the reasons therefor should be disclosed to the bidders. Necessary disclosures in this regard shall also be made in the offer document. 2.3 Margin requirements for QIBs 2.3.1 The guidelines have not mandated any specific margin for any of the categories eligible for applying in public issues, whether RIIs, NIIs or QIBs. However, it has been observed that in practice, in all the book built issues, there has invariably been 100% margin for RIIs and NIIs, but no margin for QIBs. It has now been decided to bring in margin of 10% in QIB category. 3.0 Applicability 3.1 The amendments made vide this circular shall be applicable to the public issues (through book building mechanism), draft offer documents in respect of which are filed with SEBI on or after the date of this circular. 4.0 This circular along with the annexure is available in SEBI website at www.sebi.gov.in. Full text of SEBI (DIP) guidelines 2000 including the amendments issued vide this circular is also available in SEBI s web site under Issues and Listing. Yours faithfully, Neelam Bhardwaj Encl.: a/a ANNEXURE AMENDMENTS TO THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 CHAPTER I - PRELIMINARY 1. Sub clause (xix)( a) of clause 1.2.1 shall b renumbered as sub clause (xix)(b) thereof and before the sub clause so renumbered, the following sub clause shall be inserted, namely: (xix)(a) mutual fund means a mutual fund registered with the Board under the SEBI (Mutual Funds) Regulations, 1996 . CHAPTER II XI GUIDELINES ON BOOK BUILDING 2. In clause 2.2.2, in sub clause (a)(i), for the words 50% of the issue size the words 50% of net offer to public shall be substituted. 3. In clause 11.3.1 a. After sub clause (xvii-a), the following sub-clause shall be inserted, namely: (xvii-aa) The broker/syndicate member shall collect an amount of not less than ten percent of the application money as margin money in respect of bids placed by qualified institutional buyers. b. After sub clause (xvii-b) the following sub clause shall be inserted, namely: (xvii-c) The lead book runner may reject a bid placed by a qualified institutional buyer for reasons to be recorded in writing provided that such rejection shall be made at the time of acceptance of the bid and the reasons therefor shall be disclosed to the bidders. Necessary disclosures in this regard shall also be made in the offer document. 4. In clause 11.3.2, sub clause (iv) shall be omitted. 5. In clause 11.3.5- a. In sub clause (i), in the first proviso, for the words and figures 50% of the issue size the words and figures 50% of net offer to public shall be substituted. b. In sub-clause (ii), in the proviso, for the words and figures 50% of issue size the words and figures 50% of the net offer to public shall be substituted. c. After sub clause (ii), the following sub clause shall be inserted, namely: (ii-a) Out of the portion available for allocation to qualified institutional buyers under sub clause (i) or (ii) or any proviso thereof, as the case may be, 5% shall be allocated proportionately to mutual funds. Mutual fund applicants shall also be eligible for proportionate allocation under the balance available for Qualified Institutional Buyers as illustrated in Schedule XIX-A d. Sub clause (iii) shall be substituted with following, namely: (iii) Allotment to retail individual investors, non-institutional investors and qualified institutional buyers shall be made proportionately as illustrated in Schedule XVIII. e. Sub clause (v)(a) shall be omitted. 6. After Schedule XIX, the following Schedule shall be inserted, namely: Schedule XIX-A [Clause 11.3.5(ii-a)] ILLUSTRATION REGARDING ALLOTMENT TO QIBs A. ISSUE DETAILS Sr. No. Particulars Issue details 1 Issue size 200 crore equity shares 2 Allocation to QIB ( 50%) 100 crore equity shares Of which a. Reservation to MF (5%) 5 crore equity shares b. Balance for all QIBs including MFs 95 crore equity shares 3 No. of QIB applicants 10 4 No. of shares applied for 500 crore equity shares B. DETAILS OF QIB BIDS S.No Type of QIB bidders No. of shares bid for (in crores) 1 A1 50 2 A2 20 3 A3 130 4 A4 50 5 A5 50 6 MF1 40 7 MF2 40 8 MF3 80 9 MF4 20 10 MF5 20 TOTAL 500 A1-A5 ( QIB bidders other than MFs) MF1-MF5 ( QIB bidders which are MFs) C. DETAILS OF ALLOTMENT TO QIB BIDDERS/APPLICANTS (No. of equity shares in crores) Type of QIB bidders Shares bid for Allocation of 5 crore shares to MF proportionately (See Note 2) Allocation of balance 95 crore shares to QIBs proportionately(See Note 4) Aggregate allocation to MFs (I) (II) (III) (IV) (V) A1 50 0 9.60 0 A2 20 0 3.84 0 A3 130 0 24.95 0 A4 50 0 9.60 0 A5 50 0 9.60 0 MF1 40 1 7.48 8.48 MF2 40 1 7.48 8.48 MF3 80 2 14.97 16.97 MF4 20 0.5 3.74 4.24 MF5 20 0.5 3.74 4.24 500 5 95 42.42 Notes : 1. The illustration presumes compliance with the provisions of clause .7.6.1.1 of the guidelines pertaining to minimum allotment. 2. Out of 100 crore equity shares allocated to QIBs, 5 crores (i.e. 5%) will be allocated on proportionate basis among 5 mutual fund applicants who applied for 200 shares in QIB category. 3. The balance 95 crore equity shares [i.e. 100 - 5 (available for MFs)] will be allocated on proportionate basis among 10 QIB applicants who applied for 500 shares (including 5 MF applicants who applied for 200 shares). 4. The figures at Col. No. IV are arrived as under : a. For QIBs other than mutual funds (A1 to A5)= No. of shares bid for (i.e Col II) X 95 / 495 b. For mutual funds (MF1 to MF5)= { (No. of shares bid for (i.e Col II) less shares allotted ( i.e col III )} X 95/495 c. The numerator and denominator for arriving at allocation of 95 crore shares to the 10 QIBs are reduced by 5 crore shares, which has already been allotted to mutual funds at Col. No. (III) 7. In Schedule XX - a. In the fourth paragraph of Part (ii), the words Allocation would be determined by the book runner(s) in consultation with the issuer as well as the syndicate members on the basis of prior commitment, quality of investor, earliness of bid, price aggression etc. shall be omitted. b. In the fifth paragraph of Part (iii), the words Allocation would be determined by the book runner(s) in consultation with the issuer as well as the syndicate members on the basis of prior commitment, quality of investor, earliness of bid, price aggression etc shall be omitted. 8. In Schedule XX A a. In Part A, the word discretionary appearing in the disclosure clause shall be substituted with the word proportionate . b. In Part B, the word discretionary appearing in the disclosure clause shall be substituted with the word proportionate . c. In Part C, the word discretionary appearing in the disclosure clause shall be substituted with the word proportionate .