Page 87 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes extent of the percentage specified in the relevant SEBI guidelines can be made only to
promoters, permanent employees of the issuer company and, in the case of a new company,
to the permanent employees of the promoting companies. It can also be made to the
shareholders of the promoting companies in the case of a new company and shareholders
of group companies in the case of an existing company, either on a competitive basis or on
a firm allotment basis.
The issuer company should appoint eligible merchant banker(s) as book runner(s) and their
names should be mentioned in the draft prospectus. The issuer company should enter into an
agreement with stock exchange(s) which have the requisite system of online offer of securities
specifying, inter alia their rights, duties, responsibilities, and obligations. It should also provide
for a dispute resolution mechanism between them. However, the company may apply for
listing of its securities on a stock exchange other than the one through which it offers its securities
to the public through the online system.

The lead merchant banker(s) should act as the lead book runner and the other eligible merchant
banker(s) are termed as co-book runners. In case the issuer company appoints more than one
book runner, the name of all such book runners who have submitted the due diligence certificate
to the SEBI may be mentioned on the front cover page of the prospectus. A disclosure to the effect
that "the investor may contact any of such book runners for any complaint pertaining to the
issue" should be made in the prospectus after the risk factors.
The primary responsibility of building the books is that of the lead book runner. The book
runners may appoint SEBI registered intermediaries who are permitted to carry on activity as
'underwriters' as syndicate member.

The book runner(s)/syndicate members should appoint SEBI-registered brokers of the stock
exchange who are financially capable of honoring their commitments arising out of defaults of
their clients/investors to accept bids, applications, application money and placing orders with
the company. However, in case of Application Supported by Blocked Amount (ASBA), Self
Certified Syndicate Banks (SCSBs) should accept and upload details of such applications in
electronic bidding system of the stock exchange. The ASBA means an application for subscribing
to an issue containing an authorization to block the application money in a bank account. ASCSB
is a SEBI-registered banker to an issue offering the services of banking an ASBA and recognized
by the SEBI. Such brokers and SCSBs would be considered as 'bidding/collection centres'. They
should collect the money from client(s) for every order(s) placed by them. On failure of the
investors to pay for the allotted shares, they would have to pay the amount. In case of ASBAs, the
SCSBs should follow the procedure specified but the SEBI in this regard. They would be paid a
commission/fee by the company for the services and the stock exchange(s) must ensure that the
broker(s) do not charge a service fee from their clients/investors.
The draft prospectus containing all the disclosures, as laid down by the SEBI in respect of
securities to be offered to the public, should be filed by the lead merchant banker with the SEBI.
The total size of the issue should, however, be mentioned in the draft prospectus. The red
herring prospectus should disclose either the floor price of the securities offered through it or a
price band along with the range within which the price can move. The issuer may, however, not
disclose the floor price/price band in red herring prospectus if the same is disclosed in case of (1)
initial public offer, (2) further public offer at least two and one working day(s) respectively
before the opening of the bid by way of an announcement in all newspapers in which the pre-
issue advertisement was released. The announcement should contain the relevant financial
ratios, computed for both upper and lower end of the price band and also a statement drawing
attention of investors to the section titled Basic of Issue Price in the offer document. However, if
the issuer opts not to make the disclosure of the price band/floor price, the following additional
disclosures should be made in the red-herring prospectus: (1) a statement that the floor price/

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