CAPITAL MARKETS AND REGULATION Group3 What are Financial

  • Slides: 67
Download presentation
CAPITAL MARKETS AND REGULATION Group-3

CAPITAL MARKETS AND REGULATION Group-3

What are Financial markets are marketplace where buyers and sellers participate in the trade

What are Financial markets are marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade.

Financial Market consists of the following markets <Capital Market/ Securities Market Primary capital market

Financial Market consists of the following markets <Capital Market/ Securities Market Primary capital market Secondary capital market <Money Market

MONEY MARKET According to the RBI, "The money market is the centre for dealing

MONEY MARKET According to the RBI, "The money market is the centre for dealing mainly of short character, in monetary assets; it meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is a place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers, again comprising institutions and individuals and also by the government. “

CAPITAL MARKET < Capital market is a market for long-term debt and equity shares.

CAPITAL MARKET < Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market includes financial instruments with more than one year maturity.

FUNCTIONS OF CAPITAL MARKET § To mobilize resources for investments. § To facilitate buying

FUNCTIONS OF CAPITAL MARKET § To mobilize resources for investments. § To facilitate buying and selling of securities. § To facilitate the process of efficient price discovery. § To facilitate settlement of transactions in accordance with the predetermined time schedules.

Capital market can be divided into two segments 1. Primary market: The primary market

Capital market can be divided into two segments 1. Primary market: The primary market is mainly used by issuers for raising fresh capital from the investors by making initial public offers or rights issues or offers for sale of equity or debt.

Activities in the Primary Market < 1. Appointment of merchant bankers < 2. Pricing

Activities in the Primary Market < 1. Appointment of merchant bankers < 2. Pricing of securities being issued < 3. Communication/ Marketing of the issue < 4. Information on credit risk < 5. Making public issues < 6. Collection of money < 7. Minimum subscription < 8. Listing on the stock exchange(s) < 9. Allotment of securities in demat / physical mode < 10. Record keeping

Secondary Market In the secondary market the investors buy / sell securities through stock

Secondary Market In the secondary market the investors buy / sell securities through stock exchanges. Trading of securities on stock exchange results in exchange of money and securities between the investors.

Activities in the Secondary Market 1. Trading of securities 2. Risk management 3. Clearing

Activities in the Secondary Market 1. Trading of securities 2. Risk management 3. Clearing and settlement of trades 4. Delivery of securities and funds

Major entities involved in the capital market: < SEBI (REGULATOR) < STOCK EXCHANGES <

Major entities involved in the capital market: < SEBI (REGULATOR) < STOCK EXCHANGES < CLEARING CORPORATIONS (CC)/ CLEARING HOUSES (CH) < DEPOSITORIES AND DEPOSITORY PARTICIPANTS < CUSTODIANS < STOCK-BROKERS AND THEIR SUB-BROKERS < MUTUAL FUNDS

Major entities involved in the capital market Cont. <MERCHANT BANKERS <CREDIT RATING AGENCIES <FINANCIAL

Major entities involved in the capital market Cont. <MERCHANT BANKERS <CREDIT RATING AGENCIES <FINANCIAL INSTITUTUIONS <FOREIGN INSTITUTIONAL INVESTORS <NON-BANKING INSTITUTIONS <ISSUERS/ REGISTRAR AND TRANSFER AGENTS <INVESTORS

REGULATION OF THE CAPITAL MARKET The securities market is regulated by various agencies, such

REGULATION OF THE CAPITAL MARKET The securities market is regulated by various agencies, such as the Department of Economics Affairs (DEA), the Department of Company Affairs (DCA), the Reserve Bank of India (RBI) and the SEBI. The Activities of these agencies are coordinated by a high level committee on capital and financial markets.

CAPITAL MARKET INSTRUMENTS <The capital market is characterized by a large variety of financial

CAPITAL MARKET INSTRUMENTS <The capital market is characterized by a large variety of financial instruments: equity and preference shares, fully convertible debentures (FCDs), non-convertible debentures (NCDs) and partly convertible debentures (PCDs) currently dominate the capital market, however new instruments are being introduced such as:

CAPITAL MARKET INSTRUMENTS conti. < SECURED PREMIUM NOTES < DEEP DISCOUNT BONDS < EQUITY

CAPITAL MARKET INSTRUMENTS conti. < SECURED PREMIUM NOTES < DEEP DISCOUNT BONDS < EQUITY SHARES WITH DETACHABLE WARRANTS < FULLY CONVERTIBLE DEBENTURES WITH INTEREST < EQUIPREF < TRACKING STOCKS < DISASTER BONDS < MORTGAGE BACKED SECURITIES(MBS)

CAPITAL MARKET INSTRUMENTS conti. < GLOBAL DEPOSITORY RECEIPTS/ AMERICAN DEPOSITORY RECEIPTS < FOREIGN CURRENCY

CAPITAL MARKET INSTRUMENTS conti. < GLOBAL DEPOSITORY RECEIPTS/ AMERICAN DEPOSITORY RECEIPTS < FOREIGN CURRENCY CONVERTIBLE BONDS(FCCBs) < DERIVATIVES < PARTICIPATORY NOTES < HEDGE FUND < FUND OF FUNDS < EXCHANGE TRADED FUNDS < GOLD ETF

< SECURED PREMIUM NOTES SPN is a secured debenture redeemable at premium issued along

< SECURED PREMIUM NOTES SPN is a secured debenture redeemable at premium issued along with a detachable warrant, redeemable after a notice period, say four to seven years. The warrants attached to SPN gives the holder the right to apply and get allotted equity shares; provided the SPN is fully paid.

DEEP DISCOUNT BONDS: A bond that sells at a significant discount from par value

DEEP DISCOUNT BONDS: A bond that sells at a significant discount from par value and has no coupon rate or lower coupon rate than the prevailing rates of fixed-income securities with a similar risk profile. They are designed to meet the long term funds requirements of the issuer and investors who are not looking for immediate return and can be sold with a long maturity of 25 -30 years at a deep discount on the face value of debentures.

EQUITY SHARES WITH DETACHABLE WARRANTS: A warrant is a security issued by company entitling

EQUITY SHARES WITH DETACHABLE WARRANTS: A warrant is a security issued by company entitling the holder to buy a given number of shares of stock at a stipulated price during a specified period. These warrants are separately registered with the stock exchanges and traded separately. Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends.

FULLY CONVERTIBLE DEBENTURES WITH INTEREST: This is a debt instrument that is fully converted

FULLY CONVERTIBLE DEBENTURES WITH INTEREST: This is a debt instrument that is fully converted over a specified period into equity shares. The conversion can be in one or several phases. When the instrument is a pure debt instrument, interest is paid to the investor. After conversion, interest payments cease on the portion that is converted. If project finance is raised through an FCD issue, the investor can earn interest even when the project is under implementation. Once the project is operational, the investor can participate in the profits through share price appreciation and dividend payments.

EQUIPREF: They are fully convertible cumulative preference shares. This instrument is divided into 2

EQUIPREF: They are fully convertible cumulative preference shares. This instrument is divided into 2 parts namely Part A & Part B. Part A is convertible into equity shares automatically/compulsorily on date of allotment without any application by the allottee. Part B is redeemed at par or converted into equity after a lock in period at the option of the investor, at a price 30% lower than the average market price.

TRACKING STOCKS: A tracking stock is a security issued by a parent company to

TRACKING STOCKS: A tracking stock is a security issued by a parent company to track the results of one of its subsidiaries or lines of business; without having claim on the assets of the division or the parent company. It is also known as "designer stock". When a parent company issues a tracking stock, all revenues and expenses of the applicable division are separated from the parent company's financial statements and bound to the tracking stock. Oftentimes, this is done to separate a subsidiary's high-growth division from a larger parent company that is presenting losses. The parent company and its shareholders, however, still control the operations of the subsidiary.

DISASTER BONDS: Also known as Catastrophe or CAT Bonds, Disaster Bond is a high-yield

DISASTER BONDS: Also known as Catastrophe or CAT Bonds, Disaster Bond is a high-yield debt instrument that is usually insurance linked and meant to raise money in case of a catastrophe. It has a special condition that states that if the issuer (insurance or Reinsurance Company) suffers a loss from a particular predefined catastrophe, then the issuer's obligation to pay interest and/or repay the principal is either deferred or completely forgiven.

MORTGAGE BACKED SECURITIES(MBS): MBS is a type of asset-backed security, basically a debt obligation

MORTGAGE BACKED SECURITIES(MBS): MBS is a type of asset-backed security, basically a debt obligation that represents a claim on the cash flows from mortgage loans, most commonly on residential property. Mortgage backed securities represent claims and derive their ultimate values from the principal and payments on the loans in the pool. These payments can be further broken down into different classes of securities, depending on the riskiness of different mortgages as they are classified under the MBS.

GLOBAL DEPOSITORY RECEIPTS/ AMERICAN DEPOSITORY RECEIPTS: A negotiable certificate held in the bank of

GLOBAL DEPOSITORY RECEIPTS/ AMERICAN DEPOSITORY RECEIPTS: A negotiable certificate held in the bank of one country (depository) representing a specific number of shares of a stock traded on an exchange of another country. GDR facilitate trade of shares, and are commonly used to invest in companies from developing or emerging markets. GDR prices are often close to values of related shares, but they are traded and settled independently of the underlying share.

FOREIGN CURRENCY CONVERTIBLE BONDS(FCCBs): A convertible bond is a mix between a debt and

FOREIGN CURRENCY CONVERTIBLE BONDS(FCCBs): A convertible bond is a mix between a debt and equity instrument. It is a bond having regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. FCCB is issued in a currency different than the issuer's domestic currency.

DERIVATIVES: A derivative is a financial instrument whose characteristics and value depend upon the

DERIVATIVES: A derivative is a financial instrument whose characteristics and value depend upon the characteristics and value of some underlying asset typically commodity, bond, equity, currency, index, event etc. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. Derivatives are often leveraged, such that a small movement in the underlying value can cause a large difference in the value of the derivative.

PARTICIPATORY NOTES: Also referred to as "P-Notes" Financial instruments used by investors or hedge

PARTICIPATORY NOTES: Also referred to as "P-Notes" Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. These are issued by FIIs to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI. RBI, which had sought a ban on PNs, believes that it is tough to establish the beneficial ownership or the identity of ultimate investors.

HEDGE FUND: A hedge fund is an investment fund open to a limited range

HEDGE FUND: A hedge fund is an investment fund open to a limited range of investors that undertakes a wider range of investment and trading activities in both domestic and international markets, and that, in general, pays a performance fee to its investment manager. Every hedge fund has its own investment strategy that determines the type of investments and the methods of investment it undertakes. Hedge funds, as a class, invest in a broad range of investments including shares, debt and commodities. As the name implies, hedge funds often seek to hedge some of the risks inherent in their investments using a variety of methods, with a goal to generate high returns through aggressive investment strategies, most notably short selling, leverage, program trading, swaps, arbitrage and derivatives. Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.

FUND OF FUNDS: A "fund of funds" (Fo. F) is an investment strategy of

FUND OF FUNDS: A "fund of funds" (Fo. F) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment. A fund of funds allows investors to achieve a broad diversification and an appropriate asset allocation with investments in a variety of fund categories that are all wrapped up into one fund.

EXCHANGE TRADED FUNDS: An exchange-traded fund (or ETF) is an investment vehicle traded on

EXCHANGE TRADED FUNDS: An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features, and single security can track the performance of a growing number of different index funds (currently the NSE Nifty).

GOLD ETF: A gold Exchange Traded Fund (ETF) is a financial instrument like a

GOLD ETF: A gold Exchange Traded Fund (ETF) is a financial instrument like a mutual fund whose value depends on the price of gold. In most cases, the price of one unit of a gold ETF approximately reflects the price of 1 gram of gold. As the price of gold rises, the price of the ETF is also expected to rise by the same amount. Gold exchange-traded funds are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York There also closed-end funds (CEF's) and exchange-traded notes (ETN's) that aim to track the gold price.

kinds of issues Issues Public Issue IPO Rights Issue Bonus Issue FPO Fresh Issue

kinds of issues Issues Public Issue IPO Rights Issue Bonus Issue FPO Fresh Issue Offer for sale Private Placement Preferentia l Issue Fresh Issue Offer for Sale Qualified Institutional Placement

PUBLIC OFFER- offering shares to public for subscription by issue of “prospectus” Sec. 67

PUBLIC OFFER- offering shares to public for subscription by issue of “prospectus” Sec. 67 (3) of the Companies Act, 1956 states what is not a “public offer”. Offer not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or otherwise as being a domestic concern of the persons making and receiving the offer or invitation: § Offer made is made to less than 50 persons. § Each offer is made to a particular addressee and may only be accepted by the addressee.

< Each addressee who takes up an offer warrants that he is acquiring the

< Each addressee who takes up an offer warrants that he is acquiring the securities for his own account for long-term investment purposes and not with a view to resale. < The offer is not associated (either immediately or fairly soon after the issue) with an application for listing on the Stock Exchange or for some other facility for trading the securities offered.

Public Issue < Public Issue: When the issue is for the general public and

Public Issue < Public Issue: When the issue is for the general public and anyone interested in to invest in the company can buy the shares. It can be further of two types as follows: < Initial Public Offer (IPO): When an unlisted company wants to go public for the first time, it can be done through Initial Public Offer. Here, the investors bid for the company within a band (generally given by the company). The bidding value depends upon the valuation of the company. IPO helps the company to get listed and generate funds from public. Sometimes, IPO is riskier than other stocks investment as the small investors are not able to evaluate the correct bid rate. So, the stock price decline (may also appreciate) just after the final issue. < Further Public Offer (FPO): Here the already listed company generate the funds from the public (anyone interested) for few projects, expansion etc.

< Rights Issue: The listed company issues the securities only to the existing shareholders

< Rights Issue: The listed company issues the securities only to the existing shareholders of its company. It is based on the ratio in which the shareholders are holding number of shares on any fixed date. Generally, the rights issue are on the discounted rate and are beneficial for the shareholders, So, they prefer to invest. < Bonus Issue: The shares given to the existing shareholders only without any consideration from them. These are issued on a fixed date based on the ratio to the number on shares held by the shareholder.

Private Placement < Private Placement: Here the company issues the securities to the selected

Private Placement < Private Placement: Here the company issues the securities to the selected group of investors not exceeding more than 49. It can be done in two ways as follows: < Preferential Issue: The listed company issues the equity shares which have some more benefits over the normal equity shares like in terms of dividends etc. These benefits are mentioned at the time of issue. These are done as per Chapter XIII of SEBI (DIP) guidelines. < Qualified Institutional Placement (QIP): Here, the listed company issues equity shares or shares convertible into equity shares to Qualified Institutional Buyers only as per Chapter XIIIA of SEBI (DIP) guidelines.

About IPO < Initial Public Offering (IPO) is when an unlisted company makes either

About IPO < Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. < This paves way for listing and trading of the issuer’s securities. < The main objectives are to use the proceeds from the issue to fund the company's plans for the expansion of operations and to meet the expenses of the issue. < IPO in India is done through different methods like fixed price method, book building method, or a mixture of both.

IPO Procedure Company Investment Bankers (Underwriters) Negotiate the deal Draft Offer document filed with

IPO Procedure Company Investment Bankers (Underwriters) Negotiate the deal Draft Offer document filed with SEBI Approval by SEBI Stock offered to public

IPO Filings with SEBI IPO Filings DIP Guidelines 2000 (Disclosure and Investor Protection) SEBI

IPO Filings with SEBI IPO Filings DIP Guidelines 2000 (Disclosure and Investor Protection) SEBI

SEBI (DIP) Guidelines Covers… < < < Eligibility Norms of the Issuer Size of

SEBI (DIP) Guidelines Covers… < < < Eligibility Norms of the Issuer Size of the Public Issue Promoter Contribution Prospectus IPO Grading Collection centres for receiving applications Regarding allotment of shares Timeframes for the Issue and Post- Issue formalities Dispatch of Refund Orders Other regulations pertaining to IPO Restrictions on other allotments

SEBI (DIP) Guidelines 1) Eligibility Norms of the Issuer: The company shall meet the

SEBI (DIP) Guidelines 1) Eligibility Norms of the Issuer: The company shall meet the following requirements – –Net Tangible Assets ≥ ` 3 crores (for 3 full years) –Should have track record of profitability in 3 out of previous years –Net worth ≥ ` 1 crore in three years –If change in name, at least 50% revenue for preceding 1 year should be from the activity under new name

SEBI Guidelines…. (contd. ) 2) Size of the Public Issue: i) Issue of shares

SEBI Guidelines…. (contd. ) 2) Size of the Public Issue: i) Issue of shares to public ≥ 25% of the total issue, ii) The issue size should not be more that five times the pre-issue net worth. 3) Promoter Contribution: i) Minimum Promoters contribution is 20 -25% of the public issue. ii) Minimum Lock in period for promoters contribution is 5 years. 4) Prospectus: Abridged prospectus must be attached with every application form. i) Risk factors must be highlighted ii) Objectives of the issue and the cost of the project should be disclosed

iii) Company’s management, past history and present business of the firm should be disclosed

iii) Company’s management, past history and present business of the firm should be disclosed iv) Particulars of the company and other listed companies under the same management who have made public issues during the past 3 years are to be disclosed

SEBI Guidelines…. (contd. ) 5) IPO Grading: A company which has filed the draft

SEBI Guidelines…. (contd. ) 5) IPO Grading: A company which has filed the draft offer document for its IPO with SEBI is required to obtain a grade from at least one CRA registered with SEBI like - CARE - ICRA - CRISIL - FITCH Ratings

SEBI Guidelines…. (contd. ) 6) Collection centers for receiving applications: There should be at

SEBI Guidelines…. (contd. ) 6) Collection centers for receiving applications: There should be at least 30 mandatory collection centers For issues ≤ ` 10 crores, the collection centres shall be situated at: The 4 metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; At all such centres where stock exchanges are located in the region in which the registered office of the company is situated.

SEBI Guidelines…. (contd. ) 7) Regarding allotment of shares: < In an Issue of

SEBI Guidelines…. (contd. ) 7) Regarding allotment of shares: < In an Issue of more than ` 25 crores the issuer is allowed to place the whole issue by Book-building < Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares. < There should be atleast 5 investors for every 1 lakh of equity offered

SEBI Guidelines…. (contd. ) 8) Timeframes for the Issue and Post- Issue formalities: <

SEBI Guidelines…. (contd. ) 8) Timeframes for the Issue and Post- Issue formalities: < The min. period = 3 working days and the max. = 10 working days. < A public issue is effected if the issue is able to procure 90% of the Total issue size within 60 days from the date of earliest closure of the Public Issue. < In case of over-subscription the company may have the right to retain the excess application money and allot shares more than the proposed issue, which is referred to as the ‘green-shoe’ option. < Allotment has to be made within 30 days of the closure of the Public Issue. < All the listing formalities for a public Issue has to be completed within 70 days from the date of closure of the subscription list.

SEBI Guidelines…. (contd. ) 9) Dispatch of Refund Orders: < Refund orders have to

SEBI Guidelines…. (contd. ) 9) Dispatch of Refund Orders: < Refund orders have to be dispatched within 30 days of the closure of the Public Issue. < Refunds of excess application money i. e. for un-allotted shares have to be made within 30 days of the closure of the Public Issue.

SEBI Guidelines…. (contd. ) 10) Other regulations pertaining to IPO: < Underwriting is not

SEBI Guidelines…. (contd. ) 10) Other regulations pertaining to IPO: < Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public except in disinvestment. < If the issue is undersubscribed then the collected amount should be returned back (not valid for disinvestment issues). < If the issue size is more than ` 500 Crores , voluntary disclosures should be made regarding the deployment of the funds and an adequate monitoring mechanism to be put in place to ensure compliance. < Code of advertisement specified by SEBI should be adhered to.

SEBI Guidelines…. (contd. ) 11)Restrictions on other allotments: < Firm allotments to mutual funds,

SEBI Guidelines…. (contd. ) 11)Restrictions on other allotments: < Firm allotments to mutual funds, FIIs and employees not subject to any lock-in period. < Within 12 months of the public no bonus issue should be made. < For Employees: i) Maximum % of shares = 5% and ii) Maximum shares = 200 nos.

BONUS ISSUE The term ‘bonus’ in relation to share capital refers to an extra

BONUS ISSUE The term ‘bonus’ in relation to share capital refers to an extra dividend to the shareholders from surplus profits. When a company has accumulated profits which are in excess of its need then the excess amount can be distributed by way of bonus share among existing shareholders.

MODES OF USING PROFITS 1. By converting the existing partly paid shares into fully

MODES OF USING PROFITS 1. By converting the existing partly paid shares into fully paid shares without requiring the shareholders to pay the uncalled amount. OR 2. By issuing new un issued shares to the existing shareholders without requiring them to pay the cash for the same.

GUIDELINES BY SEBI REGARDING ISSUE OF BONUS SHARES < These guidelines are applicable to

GUIDELINES BY SEBI REGARDING ISSUE OF BONUS SHARES < These guidelines are applicable to existing companies because new companies cannot have huge profits and therefore cannot issue bonus shares. < Bonus shares can be issued from the free reserves. < Company cannot pay bonus shares in lieu of dividend

< After getting the approval of board of directors the company must issue bonus

< After getting the approval of board of directors the company must issue bonus shares with six months of that approval.

RIGHT ISSUE A company always needs funds for its operations and for the fulfillment

RIGHT ISSUE A company always needs funds for its operations and for the fulfillment of its this need securities are issued. And whenever company needs further capital then it has to further issue those securities to its existing shareholders first then it can issue them to general public. This right to existing shareholders is known as RIGHT ISSUE. These new shares are issued to the existing shareholders as the matter of their pre-emptive right. Shares issued by the company under such right is known as Right shares.

GUIDELINES BY SEBI REGARDING RIGHT ISSUE < Once a company has announced the right

GUIDELINES BY SEBI REGARDING RIGHT ISSUE < Once a company has announced the right issue then it cannot withdraw its proposal. It has to issue the securities as per the announcement. < Underwriting of right issue is optional. Underwriting can be done on the discretion of the company. < Before right issue company has to take prior approval of the registrar of the companies (ROC ‘s).

< Rights offer shall be made by Notice specifying the number of shares offered

< Rights offer shall be made by Notice specifying the number of shares offered and limiting a time not being less than 15 days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined {Section 81(1)(b)}. < The amount of securities offered should not exceed the amount specified in the prospectus or letter of offer.

< If a company does not receive minimum subscription of 90% of the issue

< If a company does not receive minimum subscription of 90% of the issue then entire subscription will be refunded within 42 days. < If a company delay the refund of over subscription for more then 8 days after the period of 42 days then it will be liable to pay interest @ 15% p. a. < Partly paid up shares must be made fully paid up.

ESOP is an Employee benefit Plan which makes the employees of a company owners

ESOP is an Employee benefit Plan which makes the employees of a company owners of stock in that Company. ESOP is one of the way by which a Company may reward its employees by granting them an option or choice to buy the shares of the Company in the future date at the predetermined price which is generally lower than the market price.

ESOP PROCEDURE • Hold a Board Meeting to consider ESOP & Formation of Compensation

ESOP PROCEDURE • Hold a Board Meeting to consider ESOP & Formation of Compensation Committee. Step 1 Step 2 • Compensation Committee shall plan & draft the scheme of ESOP. • Hold a Board Meeting to adopt the final scheme, appoint the Merchant Banker and approve the notice of the General meeting for shareholders approval. Step 3 Step 4 • Hold General meeting for approval of shareholders. • Make an application to the Stock Exchange for obtaining in-principal approval of the stock exchange. Step 5

ESOP PROCEDURE CONTINUED…… Step 6 • Issue of letter of grant of option to

ESOP PROCEDURE CONTINUED…… Step 6 • Issue of letter of grant of option to the eligible employees along with the letter of acceptance of option. Step 7 • On receipt of letter of acceptance of option along with upfront payment(if any), from the employee, issue the option certificates. Step 8 • After expiry of vesting period, not less than one year, the options shall vest in the Employee. At that time, the Company shall issue a letter of vesting along with the letter of exercise of options. Step 9 • Receipt of letter of exercise from the Employee. Step 10 • Hold a Board Meeting at the suitable interval during the Exercise Period for allotment of shares on options exercised by the optionees.

ESOP PROCEDURE CONTINUED…… Step 11 Step 12 Step 13 • Dispatch of letter of

ESOP PROCEDURE CONTINUED…… Step 11 Step 12 Step 13 • Dispatch of letter of allotment along with the share certificates or credit the shares so allotted with the Depositories. • Make an application to the Stock Exchange for listing of shares so allotted. • Receipt of Listing of the Shares from the Stock Exchange.

Dividend Payment Procedures 1. Declaration Date : Declaration date is the announcement that the

Dividend Payment Procedures 1. Declaration Date : Declaration date is the announcement that the company's board of directors approved the payment of the dividend. 2. Ex-Dividend Date : The ex-dividend date is the date on which investors are cut off from receiving a dividend. If for example, an investor purchases a stock on the ex-dividend date, that investor will not receive the dividend. This date is two business days before the holder-of-record date.

3. Holder-of-Record Date The holder-of-record (owner-of-record) date is the date on which the stockholders

3. Holder-of-Record Date The holder-of-record (owner-of-record) date is the date on which the stockholders who are to receive the dividend are recognized. 4. Payment date Last is the payment date, the date on which the actual dividend is paid out to the stockholders of record.

THANK YOU

THANK YOU