Eligibility Ceriteria For Listing A Company in Stock Exchange

As seen on NSE Website: https://www.nseindia.com/getting_listed/content/eligibility_criteria.htm

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 10 crores * and the capitalization of the applicant's equity shall not be less than 25 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 capitalization, 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:
   • the applicant seeking listing; or
   • the promoters****/promoting company, incorporated in or outside India or
   • 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:
   • 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.
   • Redressal Mechanism of Investor grievance
     
     The points of consideration are:
     
     1. The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) track record in redressal of investor grievances
     2. The applicant's arrangements envisaged are in place for servicing its investor.
     3. 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
     4. 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.
   • 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.
   • 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.
   • 
     
   • 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.

Sample Copy: Promissory Note

India Vs. The Developed 'Others'...Bank Prime Lending Rates

In recent years, here are the trends in Commercial Bank Prime Lending Rates:

What do you notice in the graph? What might be the factors that keep India's interest rates at a level where it becomes noncompetitive? Whys is it that all developed countries have low interest rates whereas the underdeveloped countries have high interest rates?

Participate in the discussion and know more...

Note on Capital

Capital has a variety of meanings, but it generally refers to financial resources.

Capital includes financial assets, as well as the machinery and equipment businesses use in production. Investors use capital to buy stocks or mutual funds. Companies raise capital by selling bonds or stocks to finance their operations.

While capital can be currency or cash, it’s not the same thing as money. People use money to buy goods and services for consumption. Capital is more durable, and it creates wealth through investment. Land, cars, patents, software and brand names are all capital. They can be rented out or used to make products, all in an effort to create wealth. Investing capital instead of spending it as money often builds more capital.

Property rights give capital its value, allowing its owners to use it as they want. Since capital generates income, those investors, companies and societies who have the most capital are better off. How a person, firm or country chooses to allocate their capital goes a long way toward determining their level of prosperity.

Why Do We Need Reforms in Money Market?

The following are the major defects of the Indian Money market:

1. Major portion of money market held by unorganized players and incoherence between organized and unorganized money market

2. RBI's monetary policy becomes ineffective because of lack of integration between various sub-markets as well as various institutions and agencies.

3.    Diversity In Interest Rates. In the rural and urben segments, there are different rates of interest which create differences in costs of operation.

4.    Seasonality Of Money Market. Agriculture turnover happens twice in a year and hence there are seasonal fluctuations in rate of interest, liquidity and investment cycles. 

5.    Shortage Of Funds. Inadequate banking facilities, low savings, lack of banking habits, existence of parallel economy are a few reasons for shortage of funds and mobilization of funds.

6.    Absence Of Organised Bill Market. The bill market in India is not popular due to overdependence of cash transactions, high discounting rates, problem of dishonour of bills etc.

7.    Inadequate Banking Facilities. The reach of banking system is low and uneven across the country.

8.    Inefficient And Corrupt Management. Lack of professionalization and deficient service are the most important factors in inefficiency.


Comment further by researching more on this topic...

Festivities and Federal Reserve

"For only the second time in a decade, the U.S. Federal Reserve (Fed) raised U.S. interest rates by 0.25%. The move had been widely expected following firm evidence the U.S. economy is on the road to recovery.

This was the Fed’s final meeting before President-elect Donald Trump’s inauguration. Following his numerous campaign-trail promises of tax cuts and infrastructure spending, members of the Fed’s interest-rate setting committee may have been wary of the potential for such policies to further fan the flames of inflation.

Bond investors clearly expect interest rates to continue on an upward trajectory next year. The yield on two-year Treasuries, which are particularly sensitive to changes in interest rates, jumped to its highest level since 2009 as investors sold bonds." - Blog - Thinking Aloud Aberdeen Asset Management

Questions:

Q:1 Why would the Federal Reserve's action of raising interest rate coincide with recovery in US?

Q:2 How is a rising interest rate related to inflation?

Q:3 What is the benefit to Bond investors in this new scenario?

Q:4 If you had purchased bonds this Christmas, what would be your expectation in future?

Semester II students, show me what you know about these issues by posting answers a your reactions and view...

How Do Banks Operate?

Excerpt Taken from: 
Blog: Pragmatic Capitalism, Authored by Cullen Roche
 

The following is a general overview of the purpose of modern banks and how they operate in a simplistic sense.  This passage is an excerpt from Cullen Roche’s book “Pragmatic Capitalism: What Every Investor Needs to Know About Money and Finance”

The monetary system is designed to cater to the creation of the public’s money supply, primarily by private banks by establishing a money supply that is elastic. That is, it can expand and contract as the demand for money expands and contracts. Most modern money takes the form of bank deposits, and most market exchanges involving private agents are transacted in private bank money. As I have discussed, inside money governs the day-to-day functioning of modern fiat monetary systems. The role of outside money, which is created by the public sector, is comparatively minor and plays a mostly facilitating role.

Like the government, banks are also money issuers but not issuers of private sector net financial assets. That is, banking transactions always involve the creation of a private sector asset and a liability. Banks create loans independent of government constraint (aside from the regulatory framework). As I will explain, banks make loans independent of their reserve position with the government, rendering the traditional money multiplier deeply flawed.

The monetary system in the developed world is designed specifically around a competitive private banking system. The banking system is not a public-private partnership serving public purpose, as the central bank essentially is. The banking system is a privately owned component of the system run for private profit. The thinking behind this design was to disperse the power of money creation away from a centralized government and put it into the hands of non-government entities. The government’s relationship with the private banking system is more a support mechanism than anything else. In this regard I like to think of the government as being a facilitator in helping to sustain a viable credit-based money system.

It’s important to understand that banks are not constrained by the government (outside the regulatory framework) in terms of how they create money. Business schools teach that banks obtain deposits and then leverage those deposits ten times or so. This is why we call the modern banking system a fractional reserve banking system. Banks supposedly lend a portion of their reserves. There’s just one problem here: banks are never reserve constrained. Banks are always capital constrained. This can best be seen in countries such as Canada, which has no reserve requirements. Reserves are used for two purposes—to settle payments in the inter-bank market and to meet the Fed’s reserve requirements. Aside from this, reserves have little impact on the day-to-day lending operations of banks in the United States. This was recently confirmed in a paper from the Federal Reserve:

Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected.