• PLI
    Production Linked Incentives Schemes in India
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  • What is the limit specified under AIF regulations for number of investors?

    No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than two hundred angel investors. However, an AIF cannot make invitation to the public at large to subscribe its units and can raise funds from the sophisticated investors only through private placement.

    Please refer to section 4(b), 10(f) and 19E(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information

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  • What is the enrolment charge to be paid by an Alternative Investment Fund?

    Registration fee to be paid by an AIF is as under:
    Category I Alternative Investment Funds - INR 5,00,000
    Category II Alternative Investment Funds - INR 10,00,000
    Category III Alternative Investment Funds - INR 15,00,000
    Angel Funds - INR 2,00,000

    For more information, click here.

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  • What is included in fund of funds?

    Fund of Funds, in general, is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of Alternative Investment Funds (AIF), a Fund of Fund is an AIF which invest in another AIF.

    For more information, click here

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  • Is an AIF allowed to make a solicitation to general society to buy in to its securities?

    No, AIFs are privately pooled investment vehicles. AIFs shall raise funds through private placement by issue of information memorandum or placement memorandum, by whatever name called. As an eligibility criterion for registration as an AIF, the applicant is required to be prohibited by its memorandum and articles of association/ trust deed/ partnership deed from making an invitation or solicitation to the public to subscribe to its securities.

    For more information, click here.

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  • What does debt fund mean?

    Debt fund is an Alternative Investment Fund (AIF) which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund. These funds are registered under Category II.

    For more information, click here.

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  • Could an Alternative investments funds dispatch a reserve/plan of any size?

    No, each scheme of the Alternative Investment Fund (other than angel fund) shall have corpus of at least INR twenty crore. In case of an angel fund, it shall have a corpus of at least INR ten crore.

    For more information, click here.

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  • What is the meaning of Angel Fund?

    "Angel Fund” is a sub-category of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of AIF Regulations.

    For more information, click here.

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  • What are the reporting requirements to SEBI for Alternate Investment Funds registered with SEBI?

    As per circular No.CIR/IMD/DF/10/2013 dated 29th July, 2013, Category I and II AIFs and the Category III AIFs which do not undertake leverage are required to submit report to SEBI on a quarterly basis while Category III AIFs which undertake leverage are required to submit the reports on a monthly basis. The formats for such reports are provided as a part of the said circular. All AIFs shall submit the report irrespective of whether or not the AIF has started activity.  

    Currently, all AIFs shall send reports to SEBI by email to aifreporting@sebi.gov.in. No physical reports are required to be filed with SEBI.

    For more information, click here.

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  • What are Category III AIFs?

    Alternate Investment Funds (AIFs), which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

    For more information, click here

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  • In what classifications can a candidate look for enrolment as an AIF?

    Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable

    • Category I AIF: 
      • Venture capital funds (Including Angel Funds) 
      • SME Funds
      • Social Venture Funds
      • Infrastructure funds
    • Category II AIF 
    • Category III AIF

    For more information, click here.

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  • What are the Reporting prerequisites for converting External commercial borrowing into equity?

    In case of partial or full conversion of ECB into equity, the reporting to the RBI will be as under:

    • For partial conversion, the converted portion is to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR prescribed for reporting of FDI flows, while monthly reporting to DSIM in ECB 2 Return will be with suitable remarks "ECB partially converted to equity".
    • For full conversion, the entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return should be done with remarks ECB fully converted to equity. Subsequent filing of ECB 2 Return is not required.
    • For conversion of ECB into equity in phases, reporting through ECB 2 Return will also be in phases.

    For more information, click here

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  • Can External Commercial Borrowing be used for funding real estate?

    No, no activity under real estate is permitted as eligible end use for raising ECB.

    For more information, click here.

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  • What are the routes ECB can be raised in?

    Under the (External Commercial borrowing) ECB/Trade Credit (TC) framework, ECB/TC can be raised either under the automatic route or under the approval route. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their banks for examination. 

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  • Who are the eligible borrowers under ECB framework?

    All entities except a Limited Liability Partnership are allowed to obtain ECB as per the prescribed guidelines.

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  • What is the earliest when an External Commercial Borrowing can be matured?

    Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

    For more information, click here

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  • What is the procedure of raising ECB?

    Entities looking to raise ECB may approach the RBI with an ECB application form in prescribed format for examination through their AD Category I bank. Cases shall be considered keeping in view the overall guidelines, macroeconomic situation and merits of the specific proposals.

    ECB proposals received by the RBI above certain threshold limit (re-fixed from time to time) would be placed before the Empowered Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take the decision based on the recommendation of the Empowered Committee.

    Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled Form 83. Formats of ECB Form and Form 83 are available at Annex I and II respectively of Part V of the Master Directions Reporting under Foreign Exchange Management Act, 1999.

    For more information, click here

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  • What are the reporting requirements under ECB?

    Borrowings under ECB Framework are subject to following reporting requirements apart from any other specific reporting required under the framework:

    • Loan Registration Number (LRN): Any draw-down in respect of an ECB should happen only after obtaining the LRN from the RBI. To obtain the LRN, borrowers are required to submit duly certified Form ECB, which also contains terms and conditions of the ECB, in duplicate to the bank
    • Changes in terms and conditions of ECB: Changes in ECB parameters in consonance with the ECB norms, including reduced repayment by mutual agreement between the lender and borrower, should be reported to the DSIM through revised Form ECB at the earliest, in any case not later than seven days from the changes effected. While submitting revised Form ECB the changes should be specifically mentioned in the communication 
    • Monthly reporting of actual transactions: The borrowers are required to report actual ECB transactions through Form ECB 2 Return (Annex II) through the AD Bank on monthly basis so as to reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 Return

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  • Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

    Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

    For more information, click here

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  • Who are eligible lenders under ECB framework?

    Lender for ECB purposes should be:

    • A resident of Financial Action Task Force (FATF) [or International organization of Securities commissions (IOSC) compliant country
    • Multilateral and regional financial institution where India is a member country
    • Individuals, if they are foreign equity holders or for subscription to bond/debentures listed abroad
    • Foreign branches / subsidiaries of Indian Banks – only for FCY ECB except FCCBs and FCEBs

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  • What does External Commercial Borrowing (ECB) denote?

    ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

    For more information, click here.

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  • Who is a Foreign Venture Capital Investor (FVCI)?

    FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI (FVCI) Regulations} and proposes to make investments in accordance with FDI Regulations.

    For more information, click here.

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  • Are foreigners allowed to invest in India?

    A non-resident entity can invest in India, subject to the prevailing FDI Policy, except in those sectors which are prohibited. Foreign Institutional Investor (FII) and Foreign Portfolio Investors (FPI) may invest in the capital of an Indian Company under the Portfolio Investment Scheme, subject to FEMA provisions.

    For more information, click here.

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  • What documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift?

    Documents to be submitted by a resident person for transfer of shares to a person resident outside India by way of gift:

    i) Name and address of the transferor (donor) and the transferee (donee).

    ii) Relationship between the transferor and the transferee.

    iii) Reasons for making the gift.

    iv) In case of Government dated securities and treasury bills and bonds, a certificate issued by a CA on market value of such security.

    v) In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.

    vi) In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or as per any internationally accepted pricing methodology on arm’s length basis for listed companies and unlisted companies, respectively.

    vii) Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.

    viii) An undertaking from resident transferor that value of security to be transferred together with any security already transferred by transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of $ 50,000during a financial year*.

    ix) A declaration from donee accepting partly paid shares or warrants that donee is aware of the liability as regards calls in arrear and consequences thereof.

    Please refer to 'section 2' of Annexure-3 Consolidated FDI Policy at link for more information.

    *RBI’s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

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  • What is a ‘Foreign Institutional Investor’ ?

    An entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the Securities and Exchange Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

    For more information, click here.

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  • Is transfer of shares to non-residents/ NRIs permitted as per the FDI policy?

    General permission is granted to non-residents/ NRIs for acquisition of shares by way of transfer in the following situations:

    1) Transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route. Government approval is required for transfer of stake from one non-resident to another non-resident in sectors which are under Government approval route

    2) NRIs may transfer by way of sale or gift shares or convertible debentures to another NRI

    3) Person resident outside India can transfer any security to a person resident in India by way of gift

    4) A person resident outside India can sell shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registered stock broker or a registered merchant banker

    5) A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber’s shares), of an Indian company under private arrangement to a person resident outside India, subject to the FDI Policy guidelines

    6) Transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the FDI guidelines

    7) The above mentioned situations also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.

    Please refer to section 4 of Annexure-3 of Consolidated FDI Policy at link for more information.

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  • What are the project funding options available in India?

    Projects in India can be financed through sources such as Bank loans, Private equity, Public subscriptions, Debt instruments and Government bonds.
    If you are a start-up or a SME, then you can register on Startup India. You can also register on India Investment Grid, which is our repository of investible projects.
     

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  • What is Sponsored American Depository System/ Global Depository System issue?

    An Indian company can sponsor an issue of ADR/ GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs/ GDRs can be issued abroad. The proceeds of the ADR/ GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion.

    For more information, click here.

     

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  • Are NRIs(Non-Resident Indians) allowed to invest in sole proprietorship in India?

    NRI or a person of Indian origin (PIO) can invest in sole proprietorship / partnership firm on non-repatriable basis, except those in agricultural or plantation or real estate business, or in the print media sector. NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option.

    For more information, click here.

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  • Are Non-Resident Indians allowed to make investments in India?

    An NRI can invest in capital of Indian companies on non-repatriation basis provided:

    • The amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks. 
    • The entity is not engaged in agricultural/plantation or real estate business or construction of farmhouses or dealing in Transfer of Development Rights.
    • Amount invested not eligible for repatriation outside India. For investments on a repatriable basis, provisions of FDI policy apply.

    For more information, click here.

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  • What documents are required for sale of shares by a person resident in India?

    The following documents are required for sale of shares by a person resident in India:

    (i) Consent letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.

    (ii) Where consent letter has been signed by their duly appointed agent, the Power of Attorney Document executed by the seller/buyer authorizing the agent to purchase/sell shares.

    (iii) The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non-resident entities/FIIs, FPIs) and its percentage of paid up capital obtained by the seller/buyer or their duly appointed agent from the company, where the sectoral cap/limits have been prescribed.

    (iv) Certificate indicating fair value of shares from a Chartered Accountant.

    (v) Copy of Broker’s note if sale is made on Stock Exchange.

    (vi) Undertaking from the buyer to the effect that he is eligible to acquire shares/convertible debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

    (vii) Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached, till it gets registered as FPI.

    Please refer to subsection 5.1 of 'section 1' of Annexure-3 of Consolidated FDI Policy at link for more information.

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  • Can Micro Units Development and Refinance Agency provide loans for running a franchise?

    MUDRA Scheme operates a special refinance scheme for traders and shopkeepers. You can avail the facilities under the Scheme as per your requirements from any bank/ micro finance institute/ non-banking financial company in your area.

    For more information, click here.

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  • What is the usage of the Micro Units Development and Refinance Agency Card?

    MUDRA Card is an innovative credit product wherein the borrower can avail of credit in a hassle free and flexible manner. It will provide a facility of working capital arrangement in the form of CC/OD to the borrower. Since MUDRA Card will be RuPay debit card, it can be used for drawing cash from ATM or Business Correspondent or make purchase using Point of Sale (POS) machine. Facility is also there to repay the amount, as and when, surplus cash is available, thereby reducing the interest cost.

    For more information, click here

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  • Which banks are eligible to provide Micro Units Development and Refinance Agency loans?

    All public-sector banks (PSB), regional rural banks (RRB) and scheduled cooperative banks are allowed to cover all loans up to INR 10 lakhs, sanctioned on or after 8 April 2015, under Pradhan Mantri Mudra Yojana (PMMY).

    For more information, click here

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  • What is the list of documents needed for availing MUDRA loans?

    List of documents required for availing MUDRA loans are Application form, Address Proof, ID proof, Bank Statement of defined period, Statutory return and others as may be required. This is just an indicative list.

    For more information, click here.

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  • What is the grievance component accessible against bank authorities, in case of non-endorse of advance?

    Any grievance against non-consideration of MUDRA loan can be registered with the higher authorities in the respective Bank like Regional Manager/Zonal Manager of the Bank, provided there is any lapse from the bank officials in sanctioning the loan.

    For more information, click here.

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  • What is the grievance mechanism available against bank officials, in the event of non sanction of loan?

    Any grievance against non consideration of MUDRA loan can be registered with the higher authorities in the respective Bank like Regional Manager/Zonal Manager of the Bank, provided there is any lapse from the bank officials in sanctioning the loan.

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  • Is there any standard format of application to avail MUDRA loans?

    Yes. In respect of Shishu category, an one page application format has been designed which has been posted in MUDRA website. In respect of Kishor and Tarun category, a 3 page indicative application format has been designed and the same is also posted in MUDRA website.

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  • What does the MUDRA scheme entail?

    MUDRA, which stands for Micro Units Development & Refinance Agency Ltd, is a financial institution being set up by the Government of India under Pradhan Mantri Mudra Yojana (PMMY) for development and refinancing micro unit enterprises. It was announced by the Hon’ble Finance Minister while presenting the Union Budget for 2015-16. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various last-mile financial institutions like banks, non-banking financial institutions (NBFC) and micro finance institutions (MFI).

    For more information, click here.

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  • Is there any requirement for a life insurance for MUDRA scheme?

    Life insurance is not required for loans under PMMY.

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  • Who are the objective customers of MUDRA/ What sort of borrowers are qualified for help from MUDRA?

    Non–Corporate Small Business Segment (NCSB) comprising of millions of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits/ vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas.

    For more information, click here.

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  • What happens if a shareholder does not receive the letter of offer in time?

    The Public Announcement contains procedure for such cases i.e. where the shareholders do not receive the letter of offer or do not receive the letter of offer in time. The shareholders are usually advised to send their consent to Registrar to offer, if any or to MB on plain paper stating the name, address, number of shares held, Distinctive Folio No, number of shares offered and bank details along with the documents mentioned in the Public Announcement, before closure of the offer.

    The public announcement and the letter of offer along with the form of acceptance is available on the SEBI website.

    For more information, click here.

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  • What is a Draft Offer Document, Red Herring Prospectus, Prospectus and Letter of Offer? How are they different from one another?

    Draft Offer Document, Red Herring Prospectus, Prospectus and Letter of Offer are all types of offer documents. Since 1992, entire IPO/ FPO of companies is driven by disclosures, i.e., informing the investors as much as possible to enable them to take informed decision. The offer documents contain all the relevant information about the company, promoters, projects, financial details, objects of raising money, forms of the issue, etc.

    For more information, click here.

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  • What is SEBI takeover code?

    SEBI has notified the Takeover Regulations namely SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as “SEBI (SAST) Regulations, 2011”). Acquisition or sale of shares of Listed Company shall be governed by provisions of SEBI (SAST) Regulations, 2011.

    For more information, click here.

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  • Is a listed company making a rights issue required to satisfy any entry norm?

    No, there is no entry norm for a listed company making a Rights Issue.

    For more information, click here

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  • Are there any mandatory provisions which an issuer is expected to comply before making an issue?

    Yes, there are mandatory provisions which an issuer is expected to comply before making an issue w.r.t. Minimum Promoter’s contribution and lock‐in period:

    • Public issue by an Unlisted Issuer: Promoters shall contribute not less than 20% of the post-issue capital which should be locked in for a period of 3 years. The remaining pre-issue capital of the promoters should also be locked in for a period of 1 year from the date of listing.
    • Public issue by a Listed Issuer: Promoters shall contribute not less than 20% of the post-issue capital or 20% of the issue size.

    For more information, click here.

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  • Which are the intermediaries involved in an issue?

    The intermediaries (registered with SEBI) involved in an issue, are Merchant Bankers to the issue (known as Book Running Lead Managers (BRLM) in case of book built public issues), Registrars to the issue, and Bankers to the issue & Underwriters to the issue who are associated with the issue for different activities. Their addresses, telephone/fax numbers, registration number, and contact person and email addresses are disclosed in the offer documents.
    i) Merchant Banker: Merchant banker does the due diligence to prepare the offer document which contains all the details about the company. They are also responsible for ensuring compliance with the legal formalities in the entire issue process and for marketing of the issue.
    ii) Registrars to the Issue: They are involved in finalizing the basis of allotment in an issue and for sending refunds, allotment details, etc.
    iii) Bankers to the Issue: The Bankers to the Issue enable the movement of funds in the issue process and therefore enable the registrars to finalize the basis of allotment by making clear funds status available to the Registrars.
    iv) Underwriters: Underwriters are intermediaries who undertake to subscribe to the securities offered by the company in case these are not fully subscribed by the public, in case of an underwritten issue.

    Please refer to page 22 of link for more information.

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  • Once the shares are issued, how can one report it?

    An Indian company should file Form , not later than 30 days from the date of issue of shares. The Form should be duly filled and signed by the Managing Director/Director/ Secretary of the company and submitted to the Authorised Dealer of the company who will forward it to the RBI.

    For detailed list of documents, refer to Sub-section 2.2 of Annexure 6 of the FDI policy.

    For more information, click here

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  • In case, the company has not issued shares to the public and it is not listed on the stock exchange, can an application be made for convertible securities in the company?

    Yes, an application can be made for public issue of convertible securities even if the company has not issued shares to the public and is not listed on the stock exchange.

    Please refer to page 9 of link for more information

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  • What does Depository Receipts mean?

    DRs refer to negotiable securities representing INR denominated equity shares of a company and issued outside of India by a Depository bank on behalf of the company. The DRs listed and traded in US markets are known as American Depository Receipts (ADRs). The DRs listed and traded except in the US markets are known as the Global Depository receipts (GDRs).

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