Listing requirement

This query is : Resolved

CS Sandip Rahane (Querist)
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19 August 2010 Dear Experts,

Let me know
Is there any requirements of turnover for going to listing?

Is there necessary to have last good track record of the company? ie. profit in Balance Sheet etc.

Ankur Garg

Ankur Garg (Expert)
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19 August 2010 Eligibility Criteria for Listing at NSE

IPOs by Companies

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

1. Paid up Capital

The paid up equity capital of the applicant shall not be less than Rs. 10 crores * and the capitalisation of the applicant’s equity shall not be less than Rs. 25 crores**

Provided however that where the market capitalisation (at issue price) of the applicant’s equity is not less than Rs.100 crores, the paid up capital of the applicant can be less than Rs. 10 crores but in any case it shall not be less Rs. 5 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.

2. 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, 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.

3. Atleast three years track record of either:

a. the applicant seeking listing; or
b. the promoters****/promoting company, incorporated in or outside India or
c. 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:

• 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 admitted by a court.

****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.

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

a) No disciplinary action by other stock exchanges and regulatory authorities in past three years

There shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company. In respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company, there shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year.

b) Redressal Mechanism of Investor grievance

The points of consideration are:

* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances
* The applicant’s arrangements envisaged are in place for servicing its investor.
* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) 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 by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) shall also be considered while evaluating a company’s application for listing. The auditor’s certificate shall also be obtained in this regard. In case of defaults in such payments 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.

c) Distribution of shareholding

The applicant’s/promoting company(ies) shareholding pattern on March 31 of last three calendar years separately showing promoters and other groups’ shareholding pattern should be as per the regulatory requirements.

d) Details of Litigation

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, status of litigation during the preceding three years period need to be clarified to the exchange.

e) 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 of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences etc.

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.

Ankur Garg

Ankur Garg (Expert)
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19 August 2010 Eligibility Criteria for Listing
Securities of Existing CompaniesChecklist for Eligibility

Existing Companies listed on other stock exchanges

1. Paid up Capital & Market Capitalisation

1. The 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**

Provided that the requirement of Rs. 25 crores market capitalisation under this clause 1(a) shall not be applicable to listing of securities issued by Government Companies, Public Sector Undertakings, Financial Institutions, Nationalised Banks, Statutory Corporations and Banking Companies who are otherwise bound to adhere to all the relevant statutes, guidelines, circulars, clarifications etc. that may be issued by various regulatory authorities from time to time.

or

2. The paid-up equity capital of the applicant shall not be less than Rs. 25 crores * (In case the market capitalisation is less than Rs. 25 crores, the securities of the company should be traded for at least 25% of the trading days during the last twelve months preceding the date of submission of application by the company on at least one of the stock exchanges where it is traded.)

or

3. The market capitalisation of the applicant’s equity shall not be less than Rs. 50 crores. **

or

4. The applicant Company shall have a net worth of not less than Rs.50 crores in each of the three preceeding financial years. The Company shall submit a certificate from the statutory auditors in respect of networth as stipulated above***.

* Explanation 1 For this purpose the existing paid up equity capital as well as the paid up equity capital after the proposed issue for which listing is sought shall be taken into account.

** Explanation 2 The market capitalisation shall be calculated by using a 12 month moving average of the market capitalisation over a period of six months immediately preceding the date of application. For the purpose of calculating the market capitalisation over a 12 month period, the average of the weekly high and low of the closing prices of the shares as quoted on the National Stock Exchange during the last twelve months and if the shares are not traded on the National Stock Exchange such average price on any of the recognised Stock Exchanges where those shares are frequently traded shall be taken into account while determining market capitalisation after making necessary adjustments for Corporate Action such as Rights / Bonus Issue/Split.

*** Explanation 3 Networth means Paid up equity capital + Free Reserves i.e. reserve, the utilization of which is not restricted in any manner may be taken into consideration excluding revaluation reserves – Miscellaneous Expenses not written off – Balance in profit and loss account to the extent not set off.

2. Conditions Precedent to Listing:

The applicant shall have adhered to conditions precedent to listing as emerging from inter-alia, Securities Contracts (Regulations) Act 1956, Companies Act 1956, 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.

3. Atleast three years track record of either:

a. the applicant seeking listing; or or
b. the promoters****/promoting company, incorporated in or outside India or

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 admitted by a court.

**** 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.

4. The applicant should have been listed on any other recognized Stock Exchange Listed for atleast last three years or listed on the exchange having nationwide trading terminals for at least one year.

5. The applicant has paid dividend in atleast 2 out of the last 3 financial years immediately preceding the year in which listing application has been made

or

The applicant has distributable profits ( as defined under section 205 of the Companies Act, 1956) in at least two out of the last three financial years (an auditors certificate must be provided in this regard).

or

The networth of the applicant is atleast Rs. 50 crores******

While considering the profitability / ability to distribute dividend, the non recurring income/extraordinary income shall be excluded from the total income. Further in case of companies where networth criteria is satisfied on account of shares being issued at a premium for consideration other than cash, such cases be referred to the Listing Advisory Committee (LAC) for consideration.

*** Explanation 4.

Networth means: Paid up equity capital plus Reserves excluding revaluation reserve minus Miscellaneous Expenses not written off minus balance in profit and loss account to the extent not set off

"Provided that Clause 4 and Clause 5 shall not be applicable for listing of:

a) Equity shares and securities convertible into equity issued by

i. a banking company including a local area bank (i.e. Private Sector Banks) set up under sub-clause (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 Undertakings) Act, 1970, Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, State Bank of India Act, 1955 and the State Bank of India (Subsidiary Banks) Act, 1959 (i.e. Public Sector Banks) or

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 Financial Services Limited (IL&FS) and (b) not less than 5% of the project cost is financed by any of the institutions referred to in clause (a) above, 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.

b) Securities other than equity shares or securities convertible into equity shares at a later date issued by Government Companies, Public Sector Undertakings, Financial Institutions, Nationalised Banks, Statutory Corporations, Banking Companies and subsidiaries of Scheduled Commercial Banks.”

6. The applicant desirous of listing its securities should also satisfy the Exchange on the following:

1. No Disciplinary action has been taken by other stock exchanges and regulatory authorities in the past three years

There shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company. In respect of promoters/promoting company (ies), group companies, companies promoted by the promoters/promoting company (ies) of the applicant company, there shall be no material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year.

2. Redressal mechanism of Investor grievance

The points of consideration are:

* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances

* The applicant’s arrangements envisaged are in place for servicing its investor

* The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) 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 by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) shall also be considered while evaluating a company’s application for listing. The auditor’s certificate shall also be obtained in this regard. In case of defaults in such payments, 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.

3. Distribution of shareholding

The applicant company/promoting company(ies) shareholding pattern on March 31 of preceding three years separately showing promoters and other groups’ shareholding pattern should be as per the regulatory requirements.

4. Details of Litigation

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, status of litigation during the preceding three years need to be clarified to the exchange.

5. 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 of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences etc.

6. Change in Control of a Company/Utilisation of funds raised from public

In the event of new promoters taking over listed companies which results in change in management and/or companies utilising the funds raised through public issue for the purposes other than those mentioned in the offer document, such companies shall make additional disclosures (as required by the Exchange) with regard to change in control of a company and utilisation of funds raised from public.

Note:

a) Where an unlisted company merges with a company listed on other stock exchanges and the merged entity seeks listing on the NSE, the Exchange may grant listing to the merged entity only if the listed company (prior to the merger with the unlisted company) meets all the criteria for listing on its own account or the unlisted company meets the requirements for listing on the Exchange, except for the market capitalisation condition, on its own account. In case either of the above conditions are not met then such company may be considered for listing after a minimum period of 18 months or after the publication of two annual reports whichever is later, provided it satisfies the criteria at that point of time.

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