Qualifications and Process of Listing Shares in a Stock Exchange

The procedure through which an unlisted company, a start-up or an early stage corporation can be listed on the stock exchange for trade or sale of its securities to the general public in the primary market is known as Initial Public Offering(IPO).

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

1. Company must be registered as a Public Company under Companies Act 1956 or Companies Act 2013

2. Paid up Capital

The paid-up equity capital of the applicant shall not be less than 10 crores * and the capitalization of the applicant's equity shall not be less than 25 crores**

* Explanation 1

For this purpose, the post issue paid up equity capital for which listing is sought shall be taken into account.

** Explanation 2

For this purpose, capitalisation will be the product of the issue price and the post issue number of equity shares. In respect of the requirement of paid-up capital and market capitalisation, the issuers shall be required to include, in the disclaimer clause of the Exchange required to put in the offer document, that in the event of the market capitalisation (Product of issue price and the post issue number of shares) requirement of the Exchange not being met, the securities would not be listed on the Exchange.

3. Conditions Precedent to Listing:

The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956/2013, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

4. At Least three years track record of either:

• The applicant seeking listing; or
• The promoters****/promoting company, incorporated in or outside India or
• Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing. The Company subsequently formed would be considered for listing only on fulfillment of conditions stipulated by SEBI in this regard.

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:

• That the company has not referred to the Board of Industrial & Financial Reconstruction (BIFR) &/OR No proceedings have been admitted under Insolvency and Bankruptcy Code against the issuer and Promoting companies.
• The company has not received any winding up petition admitted by a NCLT
• The net worth of the company should be positive. (Provided this criteria shall not be applicable to companies whose proposed issue size is more than Rs.500 crores)
  [*Net Worth – as defined under SEBI (Issue of Capital and Disclosure Requirements) Regulations , 2018.

****Promoters mean one or more persons with minimum 3 years of experience of each of them in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally.

5. The applicant desirous of listing its securities should satisfy the exchange on the following:

Redressal Mechanism of Investor grievance

The points of consideration are:

1. Details of pending investor grievances against Issuer, listed subsidiaries and top 5 listed group companies by Market Cap.
2. Arrangements or mechanism evolved for redressal of  investor grievances including through SEBI Complaints Redress System.

Defaults in payment

Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant, promoters/promoting company(ies), group companies, Subsidiary Companies shall also be considered while evaluating a company's application for listing. The securities of the applicant company may not be listed till such time it has cleared all pending obligations relating to the payment of interest and/or principal.

Note:

a) In case a company approaches the Exchange for listing within six months of an IPO, the securities may be considered as eligible for listing if they were otherwise eligible for listing at the time of the IPO. If the company approaches the Exchange for listing after six months of an IPO, the norms for existing listed companies may be applied and market capitalisation be computed based on the period from the IPO to the time of listing.

Process for Company to list its shares

1. Company files DRHP/DP with Stock Exchange
2. Exchange uploads the DRHP/DP on the Website of the Exchange
3. Company has to file an application on NEAPS and attach the relevant documents as per the Checklist specified by the Exchange
4. Exchange does preliminary check & verifies the application and seeks replies to queries ( if any)
5. Exchange issues in-principle approval to the Company
6. Company has an intention to open the Issue, within 12 months, post the SEBI approval in case of Main Board & post Exchange approval in case of SME Issue
7. One day prior, to the issue open, the company has to submit the 1% security deposit to Designated Stock Exchange (DSE)
8. One day prior, to the issue open, the company allocates the shares to the Anchor investor (if any)
9. Issue can be open for minimum of 3 days and maximum of 10 days
10. Issue Close (T Day – Working day)
11. On T+2 working day the Company submits the documents as per the checklist of the Exchange
12. On T+3 working day basis of allotment is carried out at DSE
13. On T+4 working day the company submits the Listing Documents to the Exchange.
14. On T+5 working day company submit Credit Confirmation from the Depository i.e. dematerialised shares to the allottee’s account & Exchange will issue a circular to the Market for listing of shares with effect from T+6 working day
15. On T+6 working day Company gets listed on the Exchange