National Stock Exchange Blog: July 2005

Annex 2. 5: NSE – India 2
Annex 2.5 – National Stock Exchange of India (NSE), Mumbai -

Part 1 – Information on the nature and operation of the listing regime
1. PRINCIPLES OF LISTING REGULATION
1. Give an overall indication of the main characteristics of your listing regime.

Listing means admission of securities of an issuer to trading privileges on a stock exchange
through a formal agreement. The prime objective of admission to dealings on the Exchange is
to provide liquidity and marketability to securities, as also to provide a mechanism for effective
management of trading.

Listing on NSE provides qualifying companies with broad access to investors across every
part of the country increased market depth and liquidity, cost-effective access to capital, high
visibility, fair pricing, and several other benefits. Securities listed on the Exchange are required
to fulfil the eligibility criteria for listing.

2. HISTORICAL DEVELOPMENT, QUALITY OF MARKETS AND LISTING
STANDARDS

1. Briefly describe the history and development of stock markets and listing of
companies on your exchange.

Stock exchanges have existed in Indian markets for over 100 years and were set up as
mutuals for the trading members. However, the nature of the markets have changed
dramatically over the last 10 years with the setting up of National Stock Exchange of India
limited (NSE). The NSE was set-up with the main objectives of:
establishing a nation-wide trading facility for equities, debt instruments and hybrids,
ensuring equal access to investors all over the country through an appropriate communication
network,
providing a fair, efficient and transparent securities market to investors using electronic trading
systems,
enabling shorter settlement cycles and book entry settlements systems, and
meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology have become industry
benchmarks and are being emulated by other market participants. NSE is more than a mere
market facilitator. It is a force that is guiding the industry towards new horizons and greater
opportunities.
From the beginning, NSE has been very selective in listing securities of companies. Only large
companies with good financials, managed by reputed and experienced business houses /
entrepreneurs / professionals can be listed on the Exchange.

2. Is your exchange the only official (regulated) securities exchange in your country?

No. In India there are 24 official stock exchanges.

3. If there are also other regulated exchanges, what is their relationship with your
exchange e.g. do the exchanges compete for listings, and if so what form does the
competition take e.g. lower fees, differential regulations etc? Is there cross-listing /
trading between the exchanges?

Certain restrictions related to capital structure have been imposed by the Regulator for listing
of securities on some of the stock exchanges. Issues with capital below 3 crores could only be
listed on Over The Counter Exchange of India (OTCEI). Companies with higher capital could
list on any other exchange, subject to the threshold limits imposed by each stock exchange.
The exchanges have to compete for listing securities of companies. The basis of competition
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among stock exchanges is wider network, facilitating nationwide reach, technological
superiority, high liquidity, low impact cost etc.

4. Provide statistical information on the profile of your market, including:
ß the dimensions of the listed market e.g. number of companies, market
capitalisation, breakdown between domestic and foreign companies (if
applicable), sizes of company, industry type etc.
ß the investor profile e.g. domestic and international institutional investors, retail
investors etc.
ß listing of domestic companies overseas (equity and depository receipt form)
ß market performance and liquidity.

Business growth of capital market segment and derivatives market (see end of this annex)
List of companies listed on NSE and have issue ADRs / GDRs (see end of this annex).

3. LEGISLATIVE AND REGULATORY FRAMEWORK FOR LISTING

1. Describe the legislative and regulatory context for regulation of public companies and
exchange listing in your jurisdiction/ exchange. For example, is regulation provided for
by company law, securities law and regulations, exchange listing rules, or a
combination of these?

Regulations for public companies and exchange listing are covered through legislative and
delegated legislation. The Companies Act, 1956, The Securities Contracts (Regulation) Act
1956, The Securities Contracts (Regulation) Rules, 1957 and The Securities and Exchange
Board of India Act, 1992 are the major legislations regulating companies and their listing on
exchanges. SEBI Guidelines on Disclosure & Investor Protection as amended from time to
time is one of the main delegated legislation regulating listing of securities.

2. Summarise the main regulatory provisions relating to corporate and listing regulation.

The Securities Contracts (Regulation) Act, 1956 provides for the securities that can be listed,
provisions for regulating the functioning of stock exchanges, conditions for listing, procedure
for appeal against the decision of stock exchange etc.
The Securities Contracts (Regulation) Rules, 1957 provides the details for the recognition,
functioning and compliances by the stock exchanges, requirements with respect to listing of
securities on a stock exchange etc.
SEBI is the supervisory body for all the intermediaries of the capital market.
SEBI DIP Guidelines contains detailed provisions which are to be complied with by companies
for public issues and further issues.

4.INSTITUTIONAL RESPONSIBILITIES FOR CORPORATE AND LISTING
REGULATION

1. Outline the responsibilities and roles in listing regulation of government departments,
securities regulatory bodies (e.g., SEC) and/or the stock exchanges respectively.

SEBI, stock exchanges and Merchant Bankers share the major responsibility in the listing
regulations. Every offer for raising money from public is vetted by SEBI to ensure full
disclosure as per SEBI DIP Guidelines of all the material information to enable investor to take
informed decision. Stock exchanges ensure that the companies meet the minimum listing
criteria of the exchange, Article of Association are in compliance with regulatory provisions
and the companies disclose all relevant and price related information in the offer documents,
and generally meet all other regulatory requirements. The duties and obligations cast on the
Merchant Banker are exhaustively laid down in SEBI (DIP) Guidelines, 2000.

2. Provide details of how regulatory responsibilities are discharged by the Exchange and
how they are regulated by government or securities commission e.g. requirements for
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licensing and supervision of the Exchange.

The Exchange ensures that listed companies comply with the requirements of the continued
listing requirements and the provisions of the listing agreement. Towards this, the Exchange
monitors the disclosures and information filed by of each company vis-à-vis the listing
agreement. Non compliance by a company attracts a show cause notice seeking an
explanation for this finally leading to suspension from trading.

SEBI provides recognition to a stock exchange as well as exercises supervision on them.
Exchanges provide annual reports to SEBI on their performance. Also, SEBI has power to de-
recognise a stock exchange, supersede the management, suspend the business of a stock
exchange if the situation so demands.

3. Describe the arrangements for the delegations from the Exchange’s Board (or
governing body) for the discharge of its regulatory functions e.g. to a Listing
Committee, or through delegation to executive staff, or a mixture of both?

The power to list equities of a company as well as the further issues of existing companies
listed on the exchange is delegated to a senior executive of the Exchange provided the
company meets the listing criteria of the Exchange and complies with other regulatory
requirements. Special circumstances or contentious issues are referred to Listing Advisory
Committee of the Exchange for necessary guidance.

4. What is the ownership and governance model of your exchange, and how does this
impact the Exchange’s discharge of its regulatory functions?

NSE is one of the first de-mutualised stock exchanges in India, where the ownership and
management of the Exchange is completely divorced from the right to trade on it. Though the
impetus for its establishment came from policy makers in the country, it has been set up as a
public limited company, owned by the leading institutional investors in the country.

From day one, NSE has adopted the form of a de-mutualised exchange – the ownership,
management and trading participation is in the hands of three different sets of people. NSE is
owned by a set of leading financial institutions, banks and insurance companies and is
managed by professionals, who do not directly or indirectly trade on the Exchange. This has
completely eliminated any conflict of interest and helped NSE in aggressively pursuing
policies and practices within a public interest framework.

While the Board deals with broad policy issues, decisions relating to market operations are
delegated by the Board to various committees constituted by it. Such committee includes
representatives from trading members, professionals, public and the management. The day-
to-day management of the Exchange is delegated to the Chief Executive Officer and
Managing Director who is supported by a team of professional staff.

5. Are there any plans to alter the ownership and governance structure e.g. by de-
mutualising or broadening ownership of the Exchange?

NSE is a demutualised exchange since inception. There is no plan to alter the ownership and
governance model of the Exchange.

5.LISTING RULES

Summarise briefly the main areas of coverage of your exchange’s listing rules (please note
later questions will require further detail on specific aspects).

The main areas of coverage for listing requirements are:
Paid up capital
Market Capitalisation
Compliance with relevant regulatory provisions
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Three year track record of the company / promoter company
Project appraisal / working capital arrangement
Disciplinary action by regulatory authorities
Redressal mechanism of investor grievances
Details of litigation
Track record of directors of the company
Distribution of shareholding to be as per regulatory requirements.

6. USE OF ADVISERS IN THE LISTING PROCESS AND DUE DILIGENCE
PROCEDURES

1. Describe the roles of the following financial and professional advisers in the listing
process:
– sponsors (see also 2. below)
– corporate finance advisers
– lawyers
– accountants and auditors, and
– valuers and other industry experts.

It is mandatory to appoint a merchant banker for managing a public issue. It is the
responsibility of the merchant banker to ensure that the company is in compliance with all the
regulatory requirements for raising the funds through public.

Most of the times, the merchant banker also provides the services of corporate finance
advisors. However, it is not a compulsory requirement. Auditor of the company is required to
provide audited results that form a part of the prospectus and other confirmations /
declarations.

2. Does your exchange/ securities regulator require the appointment of sponsors (i.e.
specialist the financial intermediaries such as investment bankers, that advise the
issuers or underwrite the issues coming to the market) for initial listing and/ or
ongoing listing?

It is mandatory to appoint a merchant banker for managing the public issue (IPO). However,
for further issue of capital rights, preferential allotment, ESOPs, bonus etc. the company is not
required to appoint these intermediaries.

3. If sponsors are required, what are their regulatory status, responsibilities and
functions?

A merchant banker has to be registered with the regulator (SEBI) and carries out the following
functions:
The lead merchant banker exercises due diligence. The standard of due diligence is such that
the merchant banker satisfies himself about all the aspects of offering, veracity and adequacy
of disclosure in the offer documents.
The liability of the merchant banker continues even after the completion of issue process.
Merchant banker certifies that all amendments suggestion or observations made by the
Regulator have been incorporated in the offer document.
The Lead merchant banker satisfies themselves about the ability of the underwriters to
discharge their underwriting obligations.
The Lead Merchant Banker ensures that the other intermediaries being appointed are duly
registered with the regulator, wherever applicable.

4. Describe the due diligence practices carried out for IPO’s, and how they have
developed.

The responsibility for ensuring due diligence rests with the merchant banker (MB). The due
diligence practices have been documented in SEBI Disclosure and Investor Protection
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Guidelines 2000. These guidelines are prevalent for about 10 years and have been amended /
modified time to time based on the experiences gained and incorporated new procedures /
structures.

7.REQUIREMENTS FOR ELIGIBILITY/SUITABILITY FOR LISTING, MARKET
SEGMENTS AND DIFFERENTIAL REGULATION OF MARKETS AND PRODUCT
TYPES

1. Summarise the main qualitative and quantitative eligibility criteria for initial listing
contained in your listing rules.
- Size
- Operating history
- Audited Financial Track Record
- Profits History
- Sufficiency of working capital
- Minimum public float
- Placement and spread of shareholder base
- Capability of directors and non-executive directors

Qualifications for listing Initial Public Offerings (IPO) are as below:

Paid up Capital and Market Capitalisation:
The post issue paid up equity capital of the applicant shall not be less than Rs. 10 crores and
the market capitalisation of the applicant’s equity shall not be less than Rs. 25 crores (Market
capitalisation is the product of the issue price and the post issue number of shares).
Three Year Track Record:
At least three years track record of either:
The applicant seeking listing or
The promoting company, incorporated in or outside India
For this purpose, the applicant or the promoting company shall submit annual reports of three
preceding financial years to NSE and also provide a certificate to the Exchange in respect of
the following:
The company has not been referred to the Board for Industrial and Financial Reconstruction
(BIFR).
The networth of the company has not been wiped out by the accumulated losses resulting in a
negative networth.
The company has not received any winding up petition accepted by a court.
Project Appraisal / Loans from Banks or Financial Institutions:
The project activity of the applicant must have been appraised by a financial institution or a
state finance corporation or a scheduled commercial bank with a paid up capital exceeding
Rs. 50 crores or a category 1 Merchant Banker with a networth of at least Rs. 10 crores or a
venture capital fund with a networth of at least Rs. 50 crores or
The applicant must have working capital arrangements with a bank having a net worth of at
least Rs. 50 crores.
However, this clause shall not be applicable to listing of equity shares issued by banks and
infrastructure companies. Disciplinary action by other stock exchanges and regulatory
authorities in the past three years.
The promoting company (if any) has not been in default in payment of listing fees to any stock
exchange in the last three years or has not been delisted or suspended in the past and not
been proceeded against by SEBI or other regulatory authority in connection with investor
related issues or otherwise.

Investor grievance track record:
The applicant company’s / promoting company’s
Track record in redressal of investor grievances is taken into account.
Arrangements envisaged are in place for servicing its investor
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General approach and philosophy to the issue of investor service and protection.
Defaults in respect of payment of interest and/or principal to the debenture /bond /fixed
deposit holders if any.

Litigation Record:
The applicant company’s/ promoting company’s (if any) litigation record, nature of the
litigation, status of litigation during the preceding three years period need to be clarified to the
exchange.

Distribution of Shareholding:
The promoting company’s (if any) shareholding pattern on March 31 of last three calendar
years separately showing promoters and other group’s shareholding pattern should be as per
the regulatory requirements.

Track Record of Director(s) of the Company:
In respect of the track record of the directors, relevant disclosures may be insisted upon in the
offer document regarding the status of criminal cases filed or nature of the investigation being
undertaken with regard to alleged commission of any offence by any of its directors and its
effect on the business of the company, where all or any of the directors have been charge-
sheeted with serious crimes.

2. Are there explicit de-listing/ cancellation of listing criteria, and, if so, what are the
procedures for de-listing?

- Voluntary Delisting
- Compulsory delisting by Stock Exchanges
- Delisting pursuant to a Rights Issue

As per the listing requirements, the minimum public shareholding at all times shall be
maintained as per the regulatory requirements. (25% or 10% of the total issued capital as the
case may be). In case, the public shareholding falls below this level, the exchange may de-list
such a company after givi ng an opportunity to the company to bring the public shareholding to
the required level within a given time frame.

The Regulator has prescribed delisting guidelines which have to be followed up for delisting
from any stock exchange. In case the promoters wish to delist the company from all the stock
exchanges where it is listed, they will need to acquire the shares for the remaining
shareholders at a price that is determined through the reverse book building process. A
company can also buy back its shares at a price determined as per the norms stipulated by
SEBI and SEBI Delisting guidelines.

3. Is differential regulation applied to market segments or product types e.g. is there a
second market (also sometime called second board or development companies
market) or other types of securities listed (e.g. debt securities)?

At NSE there is no second board market. We do however admit / list debt instruments
separately for retails and wholesale debt market. Criteria for which is as follows:

Paid up Capital and Market Capitalisation:
The paid up equity capital of the applicant shall not be less than Rs. 10 crores or
The market capitalisation of the applicants equity shall not be less than Rs. 25 crores or
The networth of the applicant in case of unlisted company shall not be less than
Rs. 25 crores.

Credit Rating of the debenture:
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The debentures applied for listing should be of minimum investment grade.
Applicant Corporate should be listed on the Capital Market Segment of the Exchange:
The applicant corporate should be listed on the Capital Market segment of the Exchange for
seeking listing on the Wholesale Debt Market Segment of the Exchange.
However with regard to differential regulation there is a category of issue, where the minimum
public float of 25% of the capital issued need not be maintained and instead public float level
is lowered to 10%.

4. If so, please supply details of the regulatory standards and listing procedures applied
to each separate market and product type.

There is one category of issues for whom a different level of threshold limit is made
applicable. This category is known as Knowledge based companies. Knowledge based
companies are companies in the field of Information technology, Internet Commerce,
Telecommunication, Pharmaceuticals etc. The qualifications for listing Initial Public Offerings
(IPOs) by knowledge based companies are as below:

Paid up Capital and Market Capitalisation:
The post issue paid up equity capital of the applicant shall not be less than Rs. 5 crores and
the market capitalisation of the applicants equity shall not be less than Rs. 50 crores (Market
capitalisation is the product of the issue price and the post issue number of shares).

Three Year Track Record:
At least three years track record of either:
The applicant seeking listing or
The promoting company, incorporated in or outside India

For this purpose, the applicant or the promoting company shall submit annual reports of three
preceding financial years to NSE and also provide a certificate to the Exchange in respect of
the following:
The company has not been referred to the Board for Industrial and Financial Reconstruction
(BIFR).
The networth of the company has not been wiped out by the accumulated losses resulting in a
negative networth.
The company has not received any winding up petition accepted by a court.

Project Appraisal / Loans from Banks or Financial Institutions :
The project activity of the applicant must have been appraised by a financial institution or a
state finance corporation or a scheduled commercial bank with a paid up capital exceeding
Rs. 50 crores or a category 1 Merchant Banker with a networth of at least Rs. 10 crores or a
venture capital fund with a networth of at least Rs. 50 crores or
the applicant must have working capital arrangements with a bank having a net worth of at
least Rs. 50 crores.

However, this clause shall not be applicable to listing of equity shares issued by banks and
infrastructure companies.

Disciplinary action by other stock exchanges and regulatory authorities in the past three years:
The promoting company (if any) has not been in default in payment of listing fees to any stock
exchange in the last three years or has not been delisted or suspended in the past and not
been proceeded against by SEBI or other regulatory authority in connection with investor
related issues or otherwise.
Revenue from the core activity undertaken as stated in the prospectus shall not be less than
75% of the total income during the two immediately preceding years. The Listing Advisory
Committee (LAC) of the Exchange shall approve and recommend the listing.

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Investor grievance track record:
The applicant company’s / promoting company’s.
Track record in redressal of investor grievances is taken into account.
Arrangements envisaged are in place for servicing its investor
General approach and philosophy to the issue of investor service and protection.
Defaults in respect of payment of interest and/or principal to the debenture /bond /fixed
deposit holders if any.

Litigation Record:
The applicant company’s/ promoting company’s (if any) litigation record, nature of the
litigation, status of litigation during the preceding three years period need to be clarified to the
exchange.

Distribution of Shareholding:
The promoting company’s (if any) shareholding pattern on March 31 of last three calendar
years separately showing promoters and other group’s shareholding pattern should be as per
the regulatory requirements.

Track Record of Director(s) of the Company:
In respect of the track record of the directors, relevant disclosures may be insisted upon in the
offer document regarding the status of criminal cases filed or nature of the investigation being
undertaken with regard to alleged commission of any offence by any of its directors and its
effect on the business of the company, where all or any of the directors have been charge-
sheeted with serious crimes.

5. Are differential regulatory requirements applied to any specialist types of issuers (e.g.
property or technology companies)?

No.

6. What are the factors effecting the willingness and ability of public companies to apply
for listing on your exchange (e.g. costs, concerns of founders on diluting control,
requirements of listing rules etc.)?

[Not supplied]

7. Provide detailed information on the cost of initial listing and maintaining a listing on
your exchange, and compare this with the costs of raising funds form alternative
sources of business funding in your economy. If detailed information is not readily
available please provide anecdotal information on the costs, broken down to indicate
the relative costs of advisory/ underwriting fees, accountant’s fees, listing fees payable
to the Exchange, other regulatory fees etc.?

[Not supplied]

8.SOURCES OF INFORMATION AT INITIAL PUBLIC OFFERING/ LISTING, IPO
DOCUMENT APPROVAL AND LISTING APPLICATION PROCEDURES

1. Prospectus and registration requirements:
Summarise the requirements from company law, securities law or other regulations and rules
for the publication of a prospectus or listing document.

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These requirements are summarised in the appendix at the end of this annex.

2. Further issues:
Do further issues of securities require the publication of further information, and if so what are
the specific requirements?

No other public information is required to be made for all further issues other than the rights
issue.

3. Prescribed information disclosure:
What information is required to be disclosed in a prospectus or listing document? Please
summarise the main areas of information required. Examples of areas are information on:
- the persons responsible for the prospectus, auditors and other advisers
- the shares to be listed
- the company and its capital
- the company’s activities
- the issuer’s assets and liabilities, financial position and profits and losses for the track
record period
- the issuer’s management, and
- recent developments and prospects of the company.

See 8.1 above.

4. Financial information:
In particular what financial information is required to be published by an IPO company/ initial
listing applicant? What accounting standards are required to be adhered to by reporting
accountants/ auditors? Is there an explicit working capital requirement at the IPO/ initial listing
stage?

The financial information for the last three years based on the audited statements in respect of
the issuer and all the companies, firms, ventures etc. promoted by the promoter has to be
disclosed in the prospectus. The standards are prescribed by the ICAI and are to be followed
by all companies.

5. Forward-looking information:
Is the inclusion of forward-looking information in offering documents permitted? If so, how is
this presented e.g. are there requirements for a forecast to be reported upon.

No forecast or projections relating to fi nancial performance of the issuer company is allowed
to be given in the offer document.

6. Pro forma financial information:
Is the use of pro forma financial information permitted in offering documents?

No

7. IPO/ initial listing approval:
What methods of assessment are used by the exchange and regulatory authority for the
approval of IPO’s and initial listings e.g. do the authorities pre-vet documentation, or is filing
sufficient?

The authorities (Exchange and SEBI) vet the offer documents before it is published to the
market.

8. Regulation of the marketing of securities:
What approach is taken to the regulation of marketing securities? For example are research
analysts reports used for this purpose? Are “roadshows” used to encourage investor interest
in an IPO?

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Research reports can be used within the allowable parameters along with the roadshows for
marketing the issue. The research report shall be prepared only on the basis of published
information as contained in the offer document and is to be made public to all classes of
investors

Following are the provisions of SEBI (DIP) Guidelines, 2000 pertaining to Research Reports:-
the lead merchant banker shall ensure that the following are complied with in respect of
research reports
the research report is prepared only on the basis of published information as contained in the
offer document.
no selective or additional information or information extraneous to the offer document shall be
made available by the issuer or any member of the issue management team/ syndicate to only
one section of the investors in any manner whatsoever including at road shows,
presentations, in research or sales reports or at bidding centres etc.
no report or information, other than the contents of the draft offer document shall be circulated
by the issuer or any member of the issue management team/ syndicate or their associates,
after the date of receipt of observations from SEBI.
The advertisement code is observed while circulating the research reports, and that the risk
factors are reproduced wherever highlights are given, as in case of an advertisement.

9.CONTINUING OBLIGATIONS OF LISTING – DISCLOSURE REQUIREMENTS

1. Provide a summary of the main types of continuing disclosure requirements under the
following categories:

- Disclosure of “price sensitive” information
- Disclosure of periodic financial information and the accounting standards this is
required to be prepared to
- Specific prescribed disclosures of material information and actions on certain
transactions e.g. acquisitions, disposals and related transactions
- Disclosure of director’s and major shareholder’s dealings, and
- Other prescribed disclosures and actions

All price sensitive or material information are required to be intimated to the Exchange without
delay. It may include acquisition, merger, de-merger, amalgamation, restructuring, scheme of
arrangement, expansion / closure of business, strikes / lock-outs, changes in directors,
change in general character or nature of business, defaults etc.

2. What mechanisms are used to ensure wide dissemination of information to the market.
Investors and the public? For example are company announcements published in the
newspapers and/or on dealer- broker trading screens?

All the information received by the Exchange from the company is disseminated through
Exchange’s trading interface which reaches all terminals of intermediaries

10.CORPORATE GOVERNANCE PROVISIONS

What role does your listing regime play in the overall regulation of corporate governance in
your country?

In particular provide a summary of the main types of requirements under the following
categories, cross-referring to other answers where the information has already been
provided:

- Disclosure of “price sensitive” information
- Directors expertise and experience to manage their business
- Enshrinement of certain shareholder rights
- Takeovers regulation
- Proscription of insider dealing
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- Adoption of corporate governance codes.
- Adoption of codes regulating of directors dealings, and
- Disclosures and action on certain transactions.

Compliance with corporate governance is ensured through Listing Agreement entered
between the company and the Exchange. Regular monitoring of the reports received /
required to be submitted is carried out with reference to each of the clauses of the report.

The main requirements under the stated categories are as follows:
Any decision of the Board having an impact on the price of the security of the company is to
be intimated to the Exchange within 15 minutes of the completion of the board meeting.
Any change in Issuer’s directorate has to be promptly notified to the Exchange.
Any decision related with the shareholders rights has to be promptly notified to the Exchange.
The Issuer has to comply with the relevant provisions of SEBI (Substantial Acquisition of
Shares and Take-overs) Regulations, 1997
For Corporate Governance the Issuer has to comply with the provisions related with i. Board
of Directors ii. Audit Committee iii. Remuneration of Directors iv. Board Procedure v.
Management vi. Shareholders vii. Report on Corporate Governance and viii. Compliance
Dealings of Directors are to be reported to the Exchange as per the Insider Trading
Regulations

11.COMPLIANCE MONITORING OF CONTINUING OBLIGATIONS AND
ENFORCEMENT

1. Summarise the compliance monitoring and enforcement mechanisms in your listing
regime?

Issuers compliance with the requirements of the listing agreement is carried out on a quarterly
and half yearly basis. In case of non-compliance, the Issuer is issued a show cause notice
with a time frame to comply with the provisions of the listing agreement.

2. In particular, provide details of the approach taken in the following categories:

- monitoring the content and timing of disclosures by issuers of information at
initial listing and on an on-going basis
- market surveillance, supervision and compliance monitoring of trading activities,
including review of pricing of orders
- monitoring the timely and orderly release of price-sensitive information
- monitoring of the timing and content of quarterly review statements and half-
yearly and annual financial statements
- vetting of the initial suitability of applicant firms applying to act as Sponsors (i.e.
corporate advisers such as investment banks) and ongoing review of continuing
compliance with eligibility criteria
- monitoring of adherence of Sponsors to their ongoing duties to the Exchange and
instituting disciplinary proceedings against them, and
- investigating suspected market abuses and liaising with other regulatory
agencies.

The Issuer has to ensure that the documents are submitted with in the prescribed time frame.
Any delay is viewed seriously.

Un-usual price movements are monitored and are checked vis-à-vis the price sensitive
disclosures made by the Issuer.

The price sensitive information is first required to be released to the Exchange.

Quarterly, half yearly and yearly financial statements are reviewed for timeliness and
correctness.
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Merchant bankers are registered and their performance is reviewed by the Regulator.

Rugged mechanisms are built in towards efficient surveillance of the trading to ensure integrity
of the market.

3. Is suspension of listing or trading of a company’s securities used as a regulatory
device on your market.? If so, provide details of the situations where suspension takes
place.

Suspension is used as a regulatory device in case the Issuer even after repeated reminders
fails to comply with the listing provisions

Part 2 – Views on how the listing regime could be strengthened and improved

All SAFE member exchanges are asked to make a submission expressing their views on the
strengths, weakness, opportunities and threats of their current listing regime.

Significant changes are taking place in corporate regulation around the world. While Some
countries have rewritten their business and company law, others are in the process. Securities
regulators have also become more demanding and, through the efforts of the International
Organisation of Securities Commissions, there has been a move towards global convergence
in regulation. Stock exchange listing rules are being extended and tightened towards better
disclosures and enhanced governance.

Towards this, NSE has endeavoured to strengthen its due diligence process while scrutinizing
the listing application of companies seeking listing as well as those that are listed. It has kept
the threshold entry limited at a higher level so that only corporate with good financials could
seek listing.

However, in addition to satisfying the listing criteria prescribed by NSE and other exchanges
there are various other statutes, rules, regulations prescribed by the Regulator and the
corporate laws which are required to be complied with by the companies seeking listing. In
order to bring about the uniformity in the exercise of due diligence in scrutinizing listing
applications, a separate agency has recently been instituted by the Regulator titled Central
Listing Authority (CLA).

Part 3 – Views on the scope for regional co-operation and harmonisation on
listing matters

All SAFE members are asked to make a submission expressing their views on the scope for
greater harmonisation of listing standards among SAFE Exchanges, including their
perspectives on the key implementation dependencies. Notes on the development of regional
markets are set out in Annex 6.

[Not supplied]

SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
REGIONAL HARMONISATION PROJECT
Annex 2. 5: NSE – India 14

SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND REGIONAL HARMONISATION PROJECT

Annex 2. 5: NSE – India
S&P CNX NIFTY Index #Month/Year No. of
Companie
s Listed *
No. of
Companies
Permitted *
No. of
Companies
Available
for Trading
* @
No. of
Trading
Days
No. of
Companies
Traded
No. of
Trades
(mn.)
Traded
Quantity
(mn)
Trading
Volume
(Rs. mn.)
Average
Daily
Trading
Volume
(Rs. mn.)
Average
Trade Size
(Rs.)
Demat
Securities
Traded
(mn.)
Demat
Trading
Volume (Rs.
mn.)
Market
Cap
(Rs. mn.)
*
High Low
Nov 94-Mar 95 135 543 678 102 -- 0.3 139 18,050 170 56,310 -- -- 3,633,500 -- --
-96 422 847 1,269 246 -- 7 3,991 672,870 2,760 101,505 -- -- 4,014,590 1067.49 813.12
-97 550 934 1,484 250 -- 26 13,556 2,954,030 11,760 112,086 -- -- 4,193,670 1203.11 775.43
-98 612 745 1,357 244 -- 38 13,569 3,701,930 15,200 97,054 -- -- 4,815,030 1297.10 929.05
-99 648 609 1,254 251 -- 55 16,533 4,144,740 16,510 75,954 854 238,180 4,911,751 1247.15 800.10
-00 720 479 1,152 254 -- 98 24,270 8,390,515 33,030 85,244 15,377 7,117,05710,204,257 1818.15 916.00
2000-01 785 320 1,029 251 1,201 168 32,954 13,395,102 53,367 86,980 30,722 12,643,372 6,578,470 1636.95 1098.75
01 790 319 1,031 19 951 11 2,078 356,160 18,750 31,133 2,073 356,051 6,537,200 1171.85 1000.10
-01 789 318 1,030 22 954 14 2,572 483,290 21,970 34,276 2,571 483,290 5,924,370 1207.00 1096.25
01 790 292 1,001 21 963 13 2,234 427,830 20,373 32,151 2,193 426,254 5,697,965 1175.80 1060.05
01 785 294 994 22 924 10 1,314 272,278 12,376 27,476 1,314 272,266 5,742,599 1127.15 1046.90
-01 786 293 994 21 931 11 1,594 294,172 14,008 26,350 1,593 294,150 5,752,425 1084.00 1051.75
01 788 293 987 20 917 14 1,734 353,230 17,660 26,095 1,734 353,227 5,091,050 1059.90 849.95
01 789 292 986 21 917 14 1,980 353,260 16,820 25,088 1,980 353,240 5,358,460 1000.95 884.65
-01 788 268 956 20 920 15 2,535 421,320 21,070 27,572 2,530 421,210 5,813,860 1097.60 973.55
-01 788 268 956 19 895 18 3,178 544,680 28,670 30,834 3,178 544,646 5,529,080 1132.65 1010.45
02 794 199 893 23 896 21 3,438 687,190 29,880 32,244 3,422 686,063 5,636,830 1121.75 1052.05
02 791 198 889 20 840 18 2,855 495,640 24,782 27,944 2,855 495,640 6,215,230 1205.95 1069.40
02 793 197 890 19 840 16 2,329 442,625 23,296 28,111 2,329 442,624 6,368,610 1201.10 1117.85
-02 793 197 890 247 1,019 175 27,841 5,131,674 20,776 29,270 27,772 5,128,660 6,368,610 1207.00 849.95
02 800 173 865 22 843 20 2,880 533,200 24,240 26,512 2,878 533,159 6,495,510 1153.30 1073.30
-02 798 172 863 22 821 22 3,530 549,791 24,990 25,384 3,530 549,791 6,316,092 1136.55 1020.10
02 799 170 848 20 825 19 3,852 442,411 22,120 23,378 3,852 442,411 6,599,910 1102.05 1029.25
02 799 163 841 23 820 21 3,682 513,984 22,350 24,311 3,682 513,984 6,086,430 1087.40 943.60
-02 799 161 839 21 806 19 2,600 461,131 21,960 24,090 2,600 461,131 6,326,180 1012.75 935.55
02 801 161 840 20 806 18 2,558 464,986 23,249 25,177 2,558 464,986 5,996,032 1024.65 960.20
02 803 119 803 21 770 20 2,646 519,022 24,715 25,806 2,646 519,022 6,067,880 983.60 920.10
-02 805 118 788 19 767 17 2,363 513,515 27,030 29,354 2,363 513,515 6,453,880 1057.40 946.40
SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND REGIONAL HARMONISATION PROJECT
Annex 2. 5: NSE – India 17
-02 809 116 788 21 762 22 3,302 619,733 29,510 28,236 3,302 619,733 6,728,620 1103.95 1034.10
03 814 112 789 23 763 24 3,634 647,622 28,158 27,054 3,634 647,622 5,722,766 1105.60 1026.20
03 818 107 788 19 760 19 2,868 482,892 25,420 25,273 2,868 482,892 5,819,850 1075.50 1034.10
03 818 107 788 20 762 18 2,492 431,599 21,580 24,378 2,492 431,599 5,371,332 1070.85 974.10
2002-03 818 107 788 271 899 240 36,407 6,179,886 22,804 25,776 36,405 6,179,845 5,371,332 1153.30 920.10
03 830 78 771 20 749 21 3,145 489,713 24,490 23,649 3,145 489,713 5,306,304 1033.45 920.00
-03 847 61 769 21 743 25 4,400 546,902 26,040 21,889 4,400 546,902 6,120,303 1013.85 930.80
-May 03 847 61 769 41 755 46 7,545 1,036,615 50,530 22,687 7,545 1,036,615 6,120,303 1033.45 920.00
* At the end of the period.
@ Excludes suspended companies.
# S&P CNX Nifty Index commenced from November 3, 1995.
## CNX Nifty Junior commenced from November 4, 1996.

SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
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Annex 2. 5: NSE – India
NSE companies which have issued ADRs/GDRs
Sr. No. Name of the Company
1 Bombay Dyeing & Mfg Co. Ltd
2 Ballarpur Industries Ltd
3 BSES Ltd
4 Crompton Greaves Ltd
5 Flex Industries Ltd.
6 ITC Ltd.
7 Kesoram Industries Ltd.
8 Ispat Industries Ltd.
9 Steel Authority of India Ltd.
10 Global Tele-Systems Ltd.
11 Indian Petrochemicals Corpn. Ltd.
12 Mahindra & Mahindra Ltd.
13 State Bank of India
14 Videsh Sanchar Nigam Ltd.
15 Mahanagar Telephone Nigam Ltd.
16 Pentafour Software Ltd
17 ICICI Limited
18 Gas Authority of India Limited
19 Aptech Limited
20 ICICI Bank Limited
21 Infosys Technologies Limited
22 SSI Limited
23 Tata Tea Limited
24 Usha Beltron Limited
25 Wipro Limited
26 HDFC Bank Ltd
27 Himachal Futuristic Communication Ltd
28 Pentasoft Technologies Limited
29 Satyam Computer Services Ltd

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Annex 2. 5: NSE – India 19
APPENDIX - The issue of securities to public is governed by the
guidelines issued by The Securities Exchange Board of India (SEBI)

I. ELIGIBILITY NORMS FOR COMPANIES ISSUING SECURITIES

A. Conditions for issue of securities

The companies issuing securities offered through an offer document, shall, satisfy the
following:

1. Filing of offer document

No company shall make any issue of a public of securities, unless a draft prospectus has
been filed with the Board, through an eligible Merchant Banker, at least 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) issuer or the Lead Merchant banker shall carry out such changes in
the draft prospectus before filing the prospectus with ROCs.

2. 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.

3. 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).

4. Issue of securities in dematerialised form

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.

B. Eligibility for Public Issue by Unlisted Companies

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

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Annex 2. 5: NSE – India 20
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.

2 An unlisted company which does not satisfy the requirement specified 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.

3 Exemption from Eligibility Norms

The above clauses 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) 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

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 -
“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).

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Annex 2. 5: NSE – India 21

4. Credit Rating for Debt Instruments

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.

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.

For a public and rights issue of debt-securities of issue size greater than or equal to
Rs.100 crores, two ratings from two different credit rating agencies shall be obtained.

5. Outstanding Warrants or Financial Instruments

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.

6. Partly Paid-up Shares

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.

C. PRICING BY COMPANIES ISSUING SECURITIES

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:

Public / Rights Issue by Listed Companies

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.

Public Issue by Unlisted Companies

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.

Infrastructure company

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.

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Annex 2. 5: NSE – India 22
Initial public Issue by Banks

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.

Differential Pricing

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.

D. PROMOTERS CONTRIBUTION AND LOCK-IN REQUIREMENTS

Promoters Contribution in a Public Issue by Unlisted Companies

In a public issue by an unlisted company, the promoters shall contribute not less than
20% of the post issue capital.

Promoters Shareholding in Case of Offers for Sale

The promoters shareholding after offer for sale shall not be less than 20% of the post
issue capital.

Promoters Contribution in Case of Public Issues by Listed Companies

In case of public issues by listed companies, the promoters shall participate either to
the extent of 20% of the proposed issue or ensure post-issue share holding to the
extent of 20% of the post-issue capital.

Promoters Contribution in Case of Composite Issues

In case of composite issues of a listed company, the promoters contribution shall at
the option of the promoter(s) be either 20% of the proposed public issue or 20% of the
post-issue capital.

Rights issue component of the composite issue shall be excluded while calculating the
post-issue capital.

Securities Ineligible for Computation of Promoters Contribution

Where the promoters of any company making an issue of securities have acquired
equity during the preceding three years, before filing the offer documents with the
Board, such equity shall not be considered for computation of promoters contribution
if it is;

i) acquired for consideration other than cash and revaluation of assets or capitalisation
of intangible assets is involved in such transaction(s); or
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Annex 2. 5: NSE – India 23

ii) resulting from a bonus issue, out of revaluation reserves or reserves without
accrual of cash resources;

In case of public issue by unlisted companies, securities which have been issued to the
promoters during the preceding one year, at a price lower than the price at which
equity is being offered to public shall not be eligible for computation of promoters
contribution.

Provided that the shares for which the difference between the offer price and the issue
price for these shares is brought in by the promoters shall be considered eligible
subject to issuer company complying with the applicable provisions of the Companies
Act, 1956 (such as passing of revised resolution by shareholders or issuer’s Board,
filing of revised return of allotment with ROC, etc.)

In respect of companies formed by conversion of partnership firms, where the
partners of the erstwhile partnership firm and the promoters of the converted company
are the same and there is no change in management, the shares allotted to the
promoters during previous one year out of the funds brought in during that period
shall not be considered eligible for computation of promoters contribution unless such
shares have been issued at the same price at which the public offer is made.

Provided that if the partners capital existed in the firm for a period of more than one
year on a continuous basis, the shares allotted to promoters against such capital shall
be considered eligible.

No securities forming part of promoters contribution shall consist of any private
placement made by solicitation of subscription from unrelated persons either directly
or through any intermediary.

The securities for which a specific written consent has not been obtained from the
respective shareholders for inclusion of their subscription in the minimum promoters
contribution subject to lock-in shall not be eligible for promoters contribution.

Promoters Participation in Excess of the Required Minimum Contribution to be
Treated as Preferential Allotment

Promoters Contribution to be brought in before Public Issue Opens

Promoters shall bring in the full amount of the promoters contribution including premium at
least one day prior to the issue opening date.

Provided that where the promoters minimum contribution exceeds Rs.100 crores, the
promoters shall bring in Rs.100 crores before the opening of the issue and the remaining
contribution shall be brought in by the promoters in advance on pro-rata before the calls are
made on public.
A copy of the resolution for allotment alongwith a Chartered Accountants’ Certificate
certifying that the promoters contribution has been brought in shall be filed with SEBI before
opening of the issue.

SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
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Annex 2. 5: NSE – India 24
Exemption from Requirement of Promoters Contribution

The requirement of promoters contribution shall not be applicable -

a) in case of public issue of securities by a company which has been listed on a stock
exchange for at least 3 years and has a track record of dividend payment for at least 3
immediately preceding years.

b) in case of companies where no identifiable promoter or promoter group exists.

c) in case of rights issues.

Provided, in case of (a) and (c) above, the promoters shall disclose their existing
shareholding and the extent to which they are participating in the proposed issue, in the offer
document.

Lock in of Minimum Specified Promoters Contribution in Public Issues

In case of any issue of capital to the public the minimum promoters contribution shall be
locked in for a period of 3 years from the date of commencement of commercial production
or the date of allotment in the public issue whichever is later.

Lock-in of Shares Ineligible for Promoters Contribution

Any security issued to promoters or other shareholders, out of revaluation of assets or
capitalisation of intangible assets, within a period of 3 preceding years from the date of filing
of offer documents with the Board, shall be locked-in for a period of 3 years from the date of
allotment of the proposed issue of capital.

Any security to promoters or other shareholders, issued by way of bonus out of revaluation
reserves, within a period of 3 preceding years, shall be locked-in for a period of 3 years from
the date of allotment of the proposed issue of capital.

In case of unlisted companies, any security issued to promoter or to any other shareholder,
during the preceding one year, at a price lower than the price at which equity is being offered
to public shall be locked-in for a period of 3 years from the date of allotment of the proposed
issue of capital.
SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
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Annex 2. 5: NSE – India 25
PRE- ISSUE OBLIGATIONS

The pre-issue obligations are detailed below:

The lead merchant banker shall exercise due diligence.

• The standard of due diligence shall be such that the merchant banker shall satisfy
himself about all the aspects of offering, veracity and adequacy of disclosure in the offer
documents.

• The liability of the merchant banker shall continue even after the completion of issue
process.

• The lead merchant banker, shall pay requisite fee in accordance with regulation 24A
of Securities and Exchange Board of India (Merchant Bankers) Rules and Regulations, 1992
along with draft offer document filed with the Board.

Documents to be Submitted alongwith the Offer Document by the Lead Manager

1 Memorandum of Understanding (MOU) between a lead merchant banker and the
issuer company specifying their mutual rights, liabilities and obligations relating to the issue.

2 Inter-se Allocation of Responsibilities- In case a public or rights issue is managed
by more than one merchant bankers the rights, obligations and responsibilities of each
merchant banker shall be demarcated.

3 In case of under subscription at an issue, the Lead Merchant Banker responsible for
underwriting arrangements shall invoke underwriting obligations and ensure that the
underwriters pay the amount of devolvement and the same shall be incorporated in the inter-
se allocation of responsibilities accompanying the due diligence certificate submitted by the
Lead Merchant Banker to SEBI.

4 Due Diligence Certificate

i) certify that all amendments suggestion or observations made by Board have been
incorporated in the offer document;

ii) furnish a fresh "due diligence" certificate at the time of filing the prospectus with
the Registrar of Companies as per the format specified by SEBI

iii) furnish a fresh certificate immediately before the opening of the issue that no
corrective action on its part is needed as per the format specified by SEBI

iv) furnish a fresh certificate after the issue has opened but before it closes for
subscription as per the format specified by SEBI

5. Certificates Signed by the Company Secretary or Chartered Accountant, in Case
of Listed Companies Making Further Issue of Capital
a) all refund orders of the previous issues were despatched within the prescribed time
and in the prescribed manner;
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Annex 2. 5: NSE – India 26

b) all security certificates were despatched to the allottees within the prescribed time and
in the prescribed manner; and

c) the securities were listed on the Stock Exchanges as specified in the offer documents.

6. Undertaking-The issuer shall submit an undertaking to SEBI to the effect that
transactions in securities by the `promoter' the 'promoter group' and the immediate
relatives of the `promoters during the period between the date of filing the offer
documents with the Registrar of Companies or Stock Exchange as the case may be
and the date of closure of the issue shall be reported to the Stock exchanges concerned
within 24 hours of the transaction(s).

7. List of Promoters’ Group and their individual shareholdings.

Appointment of Intermediaries i.e. Merchant Bankers, Co-managers and Other
Intermediaries.

Offer Document to be Made Public

The draft offer document filed with the Board shall be made public for a period of 21 days
from the date of filing the offer document with the Board.

Despatch of Issue Material

The lead merchant banker shall ensure that for public issues offer documents and other issue
materials are dispatched to the various stock exchanges, brokers, underwriters, bankers to the
issue, investors associations, etc. in advance as agreed upon.

In the case of rights issues, lead merchant banker shall ensure that the letters of offer are
dispatched to all shareholders at least one week before the date of opening of the issue.

After the prospectus or letter of offer has been filed with the Registrar of Companies or stock
exchange, the printed prospectus or letter of offer shall be forwarded to Board at least 10
days prior to the issue opening date.

No Complaints Certificate

After a period of 21 days from the date the draft offer document was made public, the Lead
Merchant Banker shall file a statement with the Board :

i) giving a list of complaints received by it,
ii) a statement by it whether it is proposed to amend the draft offer document or not, and;
iii) highlight those amendments.

Mandatory Collection Centres

The minimum number of collection centres for an issue of capital shall be-
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Annex 2. 5: NSE – India 27

a) the four metropolitan centres situated at Mumbai, Delhi, Calcutta and Chennai
b) all such centres where the stock exchanges are located in the region in which the
registered office of the company is situated.
c) the regional division of collection centres is indicated by SEBI.

The issuer company shall be free to appoint as many collection centres as it may deem fit in
addition to the above minimum requirement.

Authorised Collection Agents

The issuer company can also appoint authorised collection agents in consultation with the
Lead Merchant Banker subject to necessary disclosures including the names and addresses of
such agents made in the offer document.

Appointment of Compliance Officer

An issuer company shall appoint a compliance officer who shall directly liaise with the Board
with regard to compliance with various laws, rules, regulations and other directives issued by
the Board and investors complaints related matter.

The name of the compliance officer so appointed shall be intimated to the Board.

Rule 19(2) (b) of SC (R) Rules, 1957

In case of a public issue by an unlisted company, the net offer to public shall be at least 10%
or 25% of the post-issue capital as the case may be.

In case of a public issue by a listed company, the net offer to public shall be at least 10% or
25% of the issue size.

An infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II,
inviting subscription from public may shall not attract the above clauses

At least 10% of each class or kind of securities issued by a company was offered to the public
for subscription through advertisement in newspapers for a period not less than two days and
that applications received in pursuance of such offer were allotted subject to the following
conditions:

(i) minimum twenty lacs securities are offered to the public (excluding reservation, firm
allotment and promoter's contribution); and
(ii) the size of the offer to the public i.e. the offer price multiplied by the number of securities
offered to the public at point (i) above, is minimum Rs.100 crores.
(iii) the issue was made only through book building method with allocation of 60% of the
issue size to the qualified institutional buyers as specified by SEBI.

Terms of the Issue

Minimum Number of Share Applications and Application Money in public issue

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Annex 2. 5: NSE – India 28
i) In case of public issue at par, the minimum number of shares for which an application is to
be made, shall be fixed at 200 shares of face value of Rs.10/- each.

ii) Where the public issue is at a premium or comprises security, whether convertible or non-
convertible, or the public issue is of more than one security, the minimum application moneys
payable in respect of each security by each applicant, shall not be less than Rs 2000/-
irrespective of the size of premium subject to applications being for a multiple of tradeable
lots;

iii) The successful applicants shall be issued by the issuer company share certificates/
instruments for eligible number of shares in tradeable lots.

iv) The minimum tradeable lot, in case of shares of face value of Rs.10/- each, shall at the
option of the issuer/offeror, be fixed on the basis of offer price as given below:

Provided that the maximum tradeable lot in any case shall not exceed 100 shares.

Offer price per share Minimum Tradeable lot

Up to Rs 100 100 Shares
Rs 101- Rs 400 50 Shares
More than Rs. 400 10 Shares

v) The minimum application moneys to be paid by an applicant along with the application
money shall not be less than 25% of the issue price.

vi) The minimum number of instruments for which an application has to be made shall be
not less than the tradeable lot.

vii) In case of an offer for sale, the entire amount payable on each instrument shall be
brought in at the time of application.

Securities Issued to be Made Fully Paid Up

a) If the subscription money is proposed to be received in calls, the calls shall be
structured in such a manner that the entire subscription money is called within 12 months
from the date of allotment.

b) If the investor fails to pay call money within 12 months the subscription money
already paid may be forfeited.

c) If the issue size is above Rs.500 crores and is subject to monitoring requirement as per
Clause 8.17.1 of SEBI DIP guidelines, it shall not be necessary to call the entire subscription
money within 12 months.

Restriction on further Capital Issues

No company shall make any further issue of capital in any manner whether by way of issue
of bonus shares, preferential allotment, rights issue or public issue or otherwise, during the
period commencing from the submission of offer document to the Board on behalf of the
SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
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company for public or rights issues, till the securities referred to in the said offer document
have been listed or application moneys refunded on account of non-listing or
undersubscription, etc.

(a) No company shall, pending conversion of Fully Convertible Debentures (FCDs) or Partly
Convertible Debentures (PCDs), issue any shares by way of bonus or rights unless similar
benefit is extended to the holders of such FCDs or PCDs, through reservation of shares in
proportion to such convertible part of FCDs/PCDs.
(b) The share so reserved may be issued at the time of conversion(s) of such debentures on
the same terms on which the bonus or rights issue was made.

(a) An issuer company shall not withdraw rights issue after announcement of record date in
relation to such issue.
(b) In cases where the issuer has withdrawn the rights issue after announcing the record date,
the issuer company shall not make an application for listing of any securities of the company
for a minimum period of 12 months from the record date.

Provided that shares resulting from the conversion of PCDs/FCDs/Warrants issued prior to
the announcing of the record date in relation to rights issue may be granted listing by the
concerned Stock exchange(s).

Period of Subscription

Public Issues

(a) Subscription list for public issues shall be kept open for at least 3 working days and not
more than 10 working days.

(b) The public issue made by an infrastructure company, satisfying the requirements in
Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days.

(c) The period of operation of subscription list of public issue shall be disclosed in the
prospectus.

Rights Issues

Rights issues shall be kept open for at least 30 days and not more than 60 days.

The Lead Merchant Banker shall ensure that the particulars as per audited statements
contained in the offer document are not more than 6 months old from issue opening date.

In respect of a Government company making a public issue, the auditors report in the
prospectus shall not be more than six months old as on the date of filing of the prospectus
with the Registrar of Companies or the Stock Exchange as the case may be.

Compliance Officer to be Appointed by Lead Merchant Banker

The merchant bankers shall appoint a senior officer as Compliance Officer to ensure that all
Rules, Regulations, Guidelines, Notifications etc. issued by the Board, the Government of
India, and other regulatory organizations are complied with.
SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
REGIONAL HARMONISATION PROJECT
Annex 2. 5: NSE – India 30

The Compliance Officer shall co-ordinate with regulatory authorities in various matters and
provide necessary guidance as also ensure compliance internally.

The Compliance Officer shall also ensure that observations made/ deficiencies pointed out by
the Board do not recur.

8.14 Incentives to Prospective Shareholders

8.14.1 The issuer shall not offer any incentives to the prospective investors by way of
medical insurance scheme, lucky draw, prizes, etc.

Issue of Debentures Bearing Interest Less Than Bank Rate

Whenever FCDs are issued bearing interest at a rate less than the Bank Rate, the offer
document shall contain disclosures about the price that would work out to the investor, taking
into account the notional interest loss on the investment from the date of allotment of FCDs
to the date(s) of conversions).
Requirement of Monitoring Agency
In case of issues exceeding Rs.500 crores, the issuer shall make arrangements for the use of
proceeds of the issue to be monitored by one of the financial institutions.

A copy of the monitoring report as per the format specified at Schedule-XIX, shall be filed
with the Board by the said monitoring agency, on a half yearly basis, till the completion of
project, for the purposes of record.

Safety Net or Buy Back Arrangement

Any safety net scheme or buy-back arrangements of the shares proposed in any public issue
shall be finalised by issuer company with the lead merchant banker in advance and disclosed
in the prospectus.

Such buy back or safety net arrangements shall be made available only to all original resident
individual allottees.

Such buy back or safety net facility shall be limited upto a maximum of 1000 shares per
allottee and the offer shall be valid at least for a period of 6 months from the last date of
despatch of securities.

The financial capacity of the person making available buy back or safety net facility shall be
disclosed in the draft prospectus.

Utilisation of funds in case of Rights Issues

The issuer company may utilise funds collected against rights issues after satisfying regional
stock exchange that minimum 90% subscription has been received.

Issue Opening Date
SAFE: STRENGTHENING STOCK EXCHANGE LISTING REGIMES AND
REGIONAL HARMONISATION PROJECT
Annex 2. 5: NSE – India 31

An issue shall open within 365 days from the date of issuance of the observation letter by
SEBI if any or 365 days from the 22nd day from the date of filing of the draft offer document
with SEBI, if no observation letter is issued.

Validity of in-principle approval from NSE

The in-principle approval obtained from NSE is valid for a period of 6 months from the issue
of the letter.

National Stock Exchange Blog

Thursday, July 14, 2005

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