Page 83 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes 5.3.6 Initial Public Offer through Stock Exchange Online System (E-IPO)

In addition to other requirements for public issues as given in the SEBI guidelines wherever
applicable, a company proposing to issue capital to public, through the online system of the
stock exchange for offer of securities, has to comply with the requirements discussed below.
They are applicable to the fixed price issue as well as for the fixed price portion of book-built
issues. The issuing companies would have the option to issue securities to the public either
through the online system of the stock exchange or through the existing banking channel.

Agreement with Stock Exchange

The company should enter into an agreement with the stock exchange(s), specifying, inter alia,
their mutual rights/duties/responsibilities and obligations inter se. It may also provide for a
dispute resolution mechanism between them.

Appointment of Brokers

The stock exchange(s) would appoint the SEBI registered stockbrokers of the exchange to accept
applications and place orders with the company, considering them as collection centres. They
would collect the money from the clients for orders placed and in case clients fail to pay for
shares allocated, the brokers would have to pay the amount. The company/lead manager should
ensure that the appointed brokers are financially capable of honouring their commitments if
their clients default. The company would pay the brokers a commission/fee for their services
and the stock exchange should ensure that they do not levy a service fee on their clients in lieu
of their services.

Appointment of Registrar to Issue

The company should appoint a registrar to the issue with electronic connectivity with the stock
exchange(s) through which the securities are offered under the system.

Listing: The company may list its securities on an exchange other than the one through which it
offers its securities to the public via the online system.

Responsibility of Lead Manager

The lead manager would be responsible for coordination of all the activities among various
intermediaries connected on the issue system. The names of the appointed brokers, along with
other intermediaries (i.e. lead manager, registrar to issue), should be disclosed in the prospectus
and the application form.
Mode of Operation

The company should, after filing the offer document with the ROCs and before opening of the
issue, publish an advertisement each in an English and Hindi daily with nationwide circulation
and also in a regional daily with circulation at the place where its registered office is situated.
The advertisement should contain the salient features of the offer document as specified in form
2A of the Companies (Central Government's) General Rules and Forms, 1956. In addition to
other required information, it should contain (1) the date of opening/closing of issue, (2) the
method and process of application allotment and (3) the names/addresses/telephone numbers
of the brokers/centers for accepting applications.

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