SECURITIES AND EXCHANGE BOARD OF INDIA

PRIMARY MARKET DEPARTMENT

Mittal Court, ‘A’ Wing, Ground Floor

Nariman Point, MUMBAI – 400 021.

TEL NO. : 22850451- 56/22880962-70 FAX NO. :2204 5633

RMB (Compendium) Series Circular No. 9
May 2, 2003

To All Registered Merchant Bankers

Dear Sirs,

Sub: Amendments to the SEBI (Disclosure and Investor Protection) Guidelines,2000

The Joint Parliamentary Committee (JPC) in its report dated December 19, 2002 of “Joint Committee on Stock Market Scam and matters relating thereto”, has made certain recommendations for strengthening the quality and authenticity of the disclosures in the offer document. Also, the Committee set up by SEBI under the chairmanship of Shri. Y.H. Malegam ( Malegam Committee) to consider the disclosure norms in respect of the issues has recommended modifications to the lock-in requirements specified in SEBI (DIP) Guidelines 2000.

The SEBI Board, after considering the recommendations made by JPC and by the Malegam committee, has approved certain modifications to the captioned Guidelines. Accordingly, the amendments to the guidelines have been made under Section 11(1) of the SEBI Act, 1992. The amendments are enclosed.

The amendments pertaining to Chapter IV and Chapter XIII of the guidelines shall come into force with immediate effect and the amendments pertaining to Chapter VI, shall be applicable to all draft offer documents filed with SEBI on and after the date of this circular.

The amended guidelines are also available in SEBI website at www.sebi.gov.in. All concerned are advised to ensure compliance of these requirements.

Yours faithfully,

NEELAM BHARDWAJ

AMENDMENTS TO SEBI (DIP) GUIDELINES, 2000

Chapter IV-Promoters Contribution and Lock-in Requirements

1. The existing Clause 4.16.1 shall be substituted by the following:

“4.16.1 Inter-se Transfer of Locked- in Securities

1. Shares held by the person other than the promoters, prior to Initial Public Offering(IPO), which are locked in as per Clause 4.14 of these Guidelines, may be transferred to any other person holding shares which are locked in as per clause 4.14 of these Guidelines subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable.

b) Shares held by promoter(s) which are locked in as per the relevant provisions of this chapter, may be transferred to and amongst promoter/promoter group or to a new promoter or persons in control of the company, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable.’

Chapter VI – Contents of Offer Document

1. In Clause 6.1, a new sub-clause 6.1.2 shall be inserted as following:

“6.1.2 The draft offer document and final offer document shall be approved by the Board of Directors of the issuer company and signed by all the Directors (including the Managing Director), Chief Executive Officer and Chief Financial Officer of the issuer company . They shall also certify that all the disclosures made in the offer document are true and correct. ”

2 The existing Clause 6.13.1 shall be substituted by the following:

“6.13.1 Following information shall be disclosed for all issues irrespective of the issue price.

1. Earnings per share i.e. EPS pre-issue for the last three years (as adjusted for changes in capital);

2. P/E pre-issue

3. average return on net worth in the last three years

4. minimum return on increased net worth required to maintain pre-issue EPS;

5. Net Asset Value per share based on last balance sheet;

6. Net Asset Value per share after issue and comparison thereof with the issue price.

g. An illustrative format of disclosure in respect of basis for issue price is given in Schedule XV.

h. Comparison of all the accounting ratios of the issuer company as mentioned above with the industry average and with the accounting ratios of the peer group ( i.e companies of comparable size in the same industry.( Indicate the source from which industry average and accounting ratios of the peer group has been taken)

Provided that the projected earnings shall not be used as a justification for the issue price in the offer document.

Provided further that the accounting ratios disclosed in the offer documents in support of basis of the issue price shall be calculated after giving effect to the consequent increase in capital on account of compulsory conversions outstanding, as well as on the assumption that the options outstanding, if any, to subscribe for additional capital will be exercised.”

3. The existing Clause 6.27(i) shall be substituted by the followings:

“6.27(i) Following information shall be disclosed for all issues irrespective of the issue price.

1. Earnings per share i.e. EPS pre-issue for the last three years (as adjusted for changes in capital);

2. P/E pre-issue

3. average return on net worth in the last three years

4. minimum return on increased net worth required to maintain pre-issue EPS;

5. Net Asset Value per share based on last balance sheet;

6. Net Asset Value per share after issue and comparison thereof with the issue price.

7. Comparison of all the accounting ratios of the issuer company as mentioned above with the industry average and with the accounting ratios of the peer group ( i.e companies of comparable size in the same industry.( Indicate the source from which industry average and accounting ratios of the peer group has been taken)

Provided that the projected earnings shall not be used as a justification for the issue price in the offer document.

Provided further that the accounting ratios disclosed in the offer documents in support of basis of the issue price shall be calculated after giving effect to the consequent increase in capital on account of compulsory conversions outstanding, as well as on the assumption that the options outstanding, if any, to subscribe for additional capital will be exercised.”

Chapter XIII – Guidelines for Preferential Issues

1. The existing clause 13.3.2 shall be substituted by the following:

‘13.3.2 These locked in shares/instruments may be transferred to and amongst promoter/promoter group or to a new promoter(s) or person(s) in control of the company, subject to continuation of lock-in in the hands of transferee(s) for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable.’

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