October 16, 2006

To All Registered Merchant Bankers / Stock Exchanges

Dear Sirs,

Sub.: Amendments to SEBI (Disclosure and Investor Protection) {DIP} Guidelines, 2000.

1. In order to make Indian primary market more efficient and transparent, it has been decided to adopt the following policy:

(a) Lock-in on pre-IPO shares before Initial Public Offering (IPO) held by Venture Capital Funds and Foreign Venture Capital Investors

Presently, as per SEBI (DIP) Guidelines, 2000, pre-issue shares of an unlisted company making an Initial Public Offering (IPO) are not required to be locked in, if the same are held by Venture Capital Funds (VCFs) or Foreign Venture Capital Investors (FVCIs) registered with SEBI. It has now been decided to restrict the benefit of this exemption from lock-in to the following:

(i) shares held by VCFs or FVCIs registered with SEBI, for a period of at least one year as on the date of filing draft prospectus with SEBI;

(ii) shares issued to SEBI registered VCFs/ FVCIs upon conversion of convertible instruments during the period of one year prior to the date of filing draft prospectus with SEBI, provided that the period of holding such convertible instruments as fully paid up, together with the period of holding shares resulting from conversion, by the VCFs and FVCIs, is at least one year as on the date of filing the draft prospectus with SEBI.

2. The SEBI (DIP) Guidelines, 2000 are being amended to give effect to the above policy. A copy of the amendment is enclosed at Annexure I.

3. Applicability

The amendment regarding lock-in made vide this circular shall be applicable to all offer documents, which are yet to be registered with the Registrar of Companies.

4. This circular is being issued in exercise of the powers conferred under sub-section (1) of Section 11 of the Securities and Exchange Board of India Act, 1992.

5. This circular, along with the annexure, is available on SEBI website at The entire text of SEBI (DIP) Guidelines, 2000, including the amendment issued vide this circular, is also available on SEBI website under the category “Issues and Listing”.

Yours faithfully,’

Parag Basu

Encl.: a/a





1. In clause 4.14.1, the words “in the proposed public issue.” shall be inserted after the words ‘date of allotment’.

2. Sub-clause (i) of clause 4.14.2 shall be substituted by the following sub-clause and Explanation:

“(i) pre-issue shares held by a Venture Capital Fund or a Foreign Venture Capital Investor, subject to the following conditions:

(a)    the shares have been held by the Venture Capital Fund or the Foreign Venture Capital Investor, as the case may be, for a period of at least one year as on the date of filing draft prospectus with the Board;


(I) If the shares being held by the Venture Capital Fund or Foreign Venture Capital Investor have been acquired on conversion of convertible instruments at any time before the date of filing draft prospectus with the Board, then the period during which the convertible instruments were held by the Venture Capital Fund or the Foreign Venture Capital Investor as fully paid up, shall be included for purpose of calculation of the period mentioned in item (a).

(II) Convertible Instruments shall be deemed to be fully paid up for the purpose of clause (I), if the entire amount payable thereon has been paid and no further payment is envisaged to be made at the time of their conversion.

(b) shares shall be locked in as per the provisions, if any, in SEBI (Venture Capital Funds) Regulations, 1996 or SEBI (Foreign Venture Capital Investors) Regulations, 2000, as the case may be.



2. In sub-clause (a) of clause 13.3.1, the words, brackets and figures “Clause [6.4.2(m)]” shall be substituted by the words and figures “Explanation I, II and III to clause”.

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