issue of securities

1. • Shall be used only for projects that are specified
under objects in the offer document.
• The issuers shall maintain a bank account in which
the amount raised from the issue shall be
transferred immediately after the closure of the
issue and such amount shall only be utilized for
specific project(s)
• The issuer shall disclose the schedule of
implementation of the project in the offer
document in a tabular form and the funds raised
by the issuer shall be utilized in accordance with
the said schedule.

2. • The issuer shall establish a separate project implementation
cell and designate a project officer who shall not be below the
rank of deputy commissioner, who shall monitor the progress of
the project(s) and shall ensure that the funds raised are
utilised only for the project(s) for which the debt securities
were issued.
• Issuer’s contribution for each project shall not be less than
twenty per cent. of the project costs, which shall be
contributed from their internal resources or grants.

3. WHAT DOES SECURITIES
INCLUDE
As per sec2(81) companies act
2013 securities means the
securities as defined in sec2(h)
securities contracts regulation act:
It includes-shares, scripts, stocks,
bonds, debentures, or other
maretable securities of a like
nature in any incorporated
company or other body corporate.

4. MEANING OF SHARE
 Capital of a company termed as share
capital, is divided into units. Each unit is
called share.
 Nature of Share –According to section 44 of
the companies act shares of any member in
a company is movable property, transferable
in the manner provided by the articles of
the company.

5. KINDS OF SHARES
 Equity shares-under this a)With voting rights b)With differential rights
 Preference Shares
 Rules for Issuing preference Shares-1)Issue of such shares should be authorized by
passing a SR in the general meeting of the company.
 2)Explanatory statement attached to the notice of meeting for passing SR should
include size of the issue, and number of preference shares to be issued and
nominal value of each share, nature of shares, objectives of the issue etc
 3)The company at the time of issue of preference shares should not have any
subsisting defaults
 4)Register of members required to be maintained under section 88 must contain
all the particulars in respect of such preference issue
 5)A company intending to list its preference shares on a recognized stock
exchange shall issue such shares in accordance with the regulations made by the
SEBI

7. MODES OF ISSUE OF SHARES BY
PRIVATE COMPANY
Private
company
Private
Placement
Right or
Bonus
Issue

8. PRIVATE PLACEMENT OF SHARES
 According to sec 81 (1a) of the companies act,1956 private placement of
shares implies issue and allotment of shares to a selected group of persons
such as UTI,LIC
 Preferential allotment: It is one that is made at a predetermined price to
the preidentified people who wish to take a stake in the company such as
promoters, venture capitalists, Financial institutions, buyers of companies
products or its suppliers
 Employee Stock Option Plan: In order to retain high caliber employees or to
give them a sense of belonging , companies may offer their equity shares to
be purchased at their will. Characteristics of this scheme:
 1)ESOP implies the right but not an obligation
 2)The Employee has a right to exercise the option of purchase of shares
within the vesting period.
 3)Any share issued under the scheme of ESOP shall be locked in for a
minimum period of one year from the date of allotment.

9.  Right shares-Under sec 81 of the companies act the
existing shareholders have a right to subscribe in their
existing proportion to the fresh issue of capital or to
reject the offer or sell their rights. The existing
shareholders can authorize the company by passing a
special resolution to offer such shares to the public

10. Public
Company
Through prospectus
i.e. public offer
Private Placement
Right or Bonus Issue
Issue of
securities

11. Meaning-Book building is essentially a process used
by companies raising capital through public
offerings either IPOS or FPOS to aid price and
demand discovery
Book Building
Method

12. CHARACTERISTICS OF BOOK
BUILDING
 Price Band-
 Floor Price-
 Tendering process-
 Intermediaries involved in a book building process are:
 The Issuer /Company
 The Book Running Lead Manager who is a merchant banker registered with
SEBI
 The syndicate members who are registered with SEBI

13.  Bid-
 Allotment-
 Participants-
A)Retail Individual Investors-RII is an investor who applies for securities for
a value of not more than 200000.
B)Non Institutional Investors-NII are referred to as high net worth
individuals.
C)Qualified Institutional Buyers- QIB are institutional investors who possess
the expertise and funds to invest in the securities market.

14. BOOK BUILDING
PROCESS
 Nominate Book Runner
 Form Syndicate of Brokers, Arrangers, Underwriters, Financial
Institutions
 Submit Draft offer Document to SEBI Indicating the price band
(without mentioning the price of the issue)
 Circulate Offer Document among the syndicate members
 Ask for bids on price (within the price Band)
and Quantity of securities
 Aggregate and forward all offers to BRLM

15.  Run the Book to maintain a record of subscribers, their offer price
and orders

 Consult with issuer and BRLM to determine the final issue price
based on the offers received
 Firm up Underwriting Commitments
 Issue Final Prospectus specifying the price and size of the offer
 Allot Securities to the successful Bidders/syndicate members
 Securities issued and listed

17. LIMITATIONS
 It is appropriate for mega issues only
 It is Suitable only for the issuer companies which are fundamentally
strong and well known to the investors
 It works very well in matured market conditions
 It works where the investors are aware of the various parameters
affecting the market price of the securities.

18. DIFFERENCE BETWEEN BOOK
BUILDING AND NORMAL PUBLIC
ISSUE
Fixed Price Process
 Price at which the securities are
offered/allotted is known in
advance to the investor
 Demand for the securities offered
is known only after the closure of
the issue
 Payment is made at the time of
subscription wherein refund is
given after allocation
Book Building Process
 Price at which securities will be
offered is not in advance to the
investor. Only an indicative price
range is known.
 Demand for the securities
offered can be known everyday
as the book is built
 Payment is made only after
allocation