Securities and Exchange Board of India

CIRCULAR

SEBI/HO/CFD/DIL2/CIR/P/2018/138

November 1, 2018

To

Recognized Stock Exchanges
Depositories
Registered Stock Brokers
Registered Merchant Bankers
Registered Registrars to an Issue and Share Transfer Agents
Registered Depository Participants
Registered Bankers to an Issue
National Payments Corporation of India

Dear Sir / Madam,

Sub: Streamlining the Process of Public Issue of Equity Shares and convertibles

1. SEBI, in its endeavor to provide an efficient mechanism for raising funds, has been continuously striving to streamline the process and methodologies associated with public issue fund raising process. Towards this end, the time duration from issue closure to listing was shortened from 12 working days to 6 working days with effect from January 01, 2016, making Application Supported by Blocked Amount (ASBA) mechanism as the sole payment mechanism in public issues.

2. As a part of the continuing efforts to further streamline the process, it has been decided, in consultation with the stake holders to introduce the use of Unified Payments Interface (UPI) as a payment mechanism with Application Supported by Block Amount (ASBA) for applications in public issues by retail individual investors through intermediaries (Syndicate members, Registered Stock Brokers, Registrar and Transfer agent and Depository Participants). The proposed process would increase efficiency, eliminate the need for manual intervention at various stages, and will reduce the time duration from issue closure to listing by upto 3 working days.

3. Considering the time required for making necessary changes to the systems and to ensure complete and smooth transition to UPI payment mechanism, the proposed alternate payment mechanism and consequent reduction in timelines is proposed to be introduced in a phased manner as under:

3.1 Phase I: From January 01, 2019, the UPI mechanism for retail individual investors through intermediaries will be made effective along with the existing process and existing timeline of T+6 days. The same will continue, for a period of 3 months or floating of 5 main board public issues, whichever is later.

3.2 Phase II: Thereafter, for applications by retail individual investors through intermediaries, the existing process of physical movement of forms from intermediaries to Self-Certified Syndicate Banks (SCSBs) for blocking of funds will be discontinued and only the UPI mechanism with existing timeline of T+6 days will continue, for a period of 3 months or floating of 5 main board public issues, whichever is later.

3.3 Phase III: Subsequently, final reduced timeline will be made effective using the UPI mechanism.

4. New entities / mechanisms part of the public issue process using UPI with ASBA

National Payments Corporation of India (NPCI): NPCI, a Reserve Bank of India (RBI) initiative, is an umbrella organization for all retail payments in India. It has been set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks Association (IBA);

Unified Payments Interface (UPI): UPI is an instant payment system developed by the NPCI. It enables merging several banking features, seamless fund routing & merchant payments into one hood. UPI allows instant transfer of money between any two persons’ bank accounts using a payment address which uniquely identifies a person’s bank a/c.

Sponsor Bank: Sponsor Bank means a Banker to the Issue registered with SEBI which is appointed by the Issuer to act as a conduit between the Stock Exchanges and NPCI in order to push the mandate collect requests and / or payment instructions of the retail investors into the UPI;

5. Channels for making application

5.1 For the purpose of public issues, UPI would allow facility to block the funds at the time of application. With the introduction of UPI as a payment mechanism, various channels for making application in public issue by various categories of investors, in Phase I would be as below:

Category of Investor Channels for making application
Channel I Channel II Channel III Channel IV
Retail Individual Investor (RII) Investor may submit the bid- cum-application form, with ASBA as the sole mechanism for making payment, physically at the branch of a SCSB, i.e. investor’s bank, or online, if such facility is provided by the SCSB.

For such applications, the existing process of uploading of bid and blocking of funds in investors account by the SCSB would continue.

Investor may submit the bid- cum- application form online using the facility of linked online trading, demat and bank account (3- in-1 type accounts), provided by some of the brokers. Investor may submit bid-cum- application form with any of the intermediary, along with details of his/her bank account for
blocking of
funds.For such applications, the intermediary would upload the bid in stock exchange bidding platformand forward theapplication formto a branch of SCSB for blocking of funds.*
A RII would also have the option to submit bid-cum-application form with any of the intermediary and use his / her UPI ID for the purpose of blocking of funds.
Qualified Institutional Buyer

(QIB)

Not applicable
Non Institutional Investor (NII) Not applicable

5.2 *For Phase II and Phase III, the RIIs will have the option to use only Channel I, II and IV for making application in a public issue.

6. Timelines

6.1 An indicative process flow for applications in public issue submitted by retail individual investor is placed at Annexure I.

6.2 The revised indicative timelines for various activities in Phase I & II are specified at Annexure II and Annexure III, respectively, to this circular. The timelines for Phase III will be notified subsequently.

7. Process of becoming a Sponsor Bank

7.1 Banks desirous of becoming Sponsor Bank and to be eligible to be appointed as a Sponsor Bank by the Issuer shall complete the following formalities:

7.1.1 Register with SEBI as Bankers to an Issue in terms of SEBI (Bankers to an Issue) Regulations, 1994;

7.1.2 UPI certification as specified, with NPCI;

7.1.3 Mock trial run of the systems with stock exchange and RTAs, and

7.1.4 Certify to SEBI about readiness to act as a Sponsor Bank and for inclusion of their name in SEBI’s list of Sponsor Bank, as per the format specified in Annexure IV.

7.2 Such Banks shall submit the aforesaid certification to SEBI, latest by December 15, 2018, for uploading the names of such Sponsor Banks on SEBI website.

8. Process of UPI 2.0 Certification by Self Certified Syndicate Banks (SCSBs)

8.1 All SCSBs offering facility of making application in public issues shall also provide facility to make application using UPI.

8.2 For this purpose, all SCSBs shall undertake necessary certification with NPCI.

8.3 Certify to SEBI about readiness to provide facility to investor to make application using UPI as an alternate payment mechanism, as per the format specified in Annexure V.

8.4 All SCSBs shall submit the aforesaid certification to SEBI, latest by December 15, 2018, for uploading the names of such SCSBs on SEBI website.

9. Validation by Depositories

9.1 The details of investor viz. PAN, DP ID / Client ID, entered in the Stock Exchange platform at the time of bidding, shall be validated by the Stock Exchange/s with the Depositories on real time basis.

9.2 Stock Exchanges and Depositories shall put in place necessary infrastructure for this purpose.

10. Number of applications per bank account

10.1 In order to ensure parity across the various channels for submitted applications, it has been decided that an investor making application using any of the aforesaid channel, shall use only his / her own bank account or only his / her own bank account linked UPI ID to make an application in public issues.

10.2 Applications made using third party bank account or using third party linked bank account UPI ID are liable for rejection.

10.3 Sponsor Bank shall provide the investors UPI linked bank account details to RTA for purpose of reconciliation.

10.4 RTA shall undertake technical rejection of all applications to reject applications made using third party bank account.

11. Obligations of the Issuer

11.1 The issuer shall appoint one of the SCSBs as Sponsor Bank to act as a conduit between the Stock Exchanges and NPCI in order to push the mandate collect requests and / or payment instructions of the retail investors into the UPI;

11.2 The Sponsor Bank appointed by the issuer may be the same as the bank with whom the public issue account has been opened.

12. Other requirements

12.1 The details of commission and processing fees payable to each intermediary and the timelines for payment shall be disclosed in the offer document.

12.2 The intermediaries shall provide necessary guidance to their investors in use of UPI while making applications in public issues.

12.3 All entities involved in the process shall co-ordinate with one another to ensure completion of listing of shares and commencement of trading in Phase I by T+6.

12.4 In Phase II, such entities shall aim to expeditiously complete the process of listing of shares and commencement of trading, in any case, not later than T+6.

12.5 The text of data fields required in the Application-cum-bidding-form relating to UPI and an illustrative Application-cum-bidding-form is placed at Annexure VI to this Circular.

12.6 Merchant bankers shall ensure that appropriate disclosures with respect to UPI are made in offer documents and advertisements in accordance with this circular. Format for the advertisement will be issued separately.

12.7 All entities involved in the process are advised to take necessary steps to ensure compliance with this circular.

13. The various provisions and indicative timelines, prescribed vide the following circulars, shall stand modified to the extent stated under this circular:

13.1 SEBI/CFD/DIL/ASBA/1/2009/30/12 dated December 30, 2009;

13.2 CIR/CFD/DIL/2/2010 dated April 06, 2010;

13.3 CIR/CFD/DIL/3/2010 dated April 22, 2010;

13.4 CIR/CFD/DIL/7/2010 dated July 13, 2010;

13.5 CIR/CFD/DIL/8/2010 dated October 12, 2010;

13.6 CIR/CFD/DIL/1/2011 dated April 29, 2011;

13.7 CIR/CFD/DIL/2/2011 dated May 16, 2011;

13.8 CIR/CFD/DIL/12/2012 dated September 13, 2012;

13.9 CIR/CFD/DIL/13/2012 dated September 25, 2012;

13.10 CIR/CFD/14/2012 dated October 04, 2012;

13.11 CIR/CFD/DIL/1/2013 dated January 02, 2013;

13.12 CIR/CFD/DIL/4/2013 dated January 23, 2013;

13.13 CIR/CFD/POLICYCELL/11/2015 dated November 10, 2015

13.14 CIR/CFD/DIL/1/2016 dated January 01, 2016;

13.15 SEBI/HO/CFD/DIL/CIR/P/2016/26 dated January 21, 2016

14. This circular shall be applicable for all Red Herring Prospectus filed for public issues opening on or after January 01, 2019.

15. This circular is being issued in exercise of the powers under section 11 read with section 11A of the Securities and Exchange Board of India Act, 1992.

16. This circular is available on SEBI website atsebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.

Yours faithfully,

Narendra Rawat

Deputy General Manager

+91-22-26449383

narendrar@sebi.gov.in

Annexure 

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