Listing of Securities 3
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Listing of Securities 3 The stocks, bonds and other securities issued by issuers require listing for providing liquidity to investors. Listing means formal admission of a security to the trading platform of the Exchange. It provides liquidity to investors without compromising the need of the issuer for capital and ensures effective monitoring of conduct of the issuer and trading of the securities in the interest of investors. The issuer wishing to have trading privileges for its securities satisfies listing requirements prescribed in the relevant statutes and in the listing regulations of the Exchange. It also agrees to pay the listing fees and comply with listing requirements on a continuous basis. All the issuers who list their securities have to satisfy the corporate governance requirement framed by regulators. Benefits of Listing on NSE The benefits of listing on NSE are as enumerated below: NSE provides a trading platform that extends across the length and breadth of the country. Listing on NSE thus, enables issuers to reach and service investors across the country. NSE being the largest stock exchange in terms of trading volumes, the securities trade at low impact cost and are highly liquid. This in turn reduces the cost of trading to the investor. The trading system of NSE provides unparallel level of trade and post-trade information. The best 5 buy and sell orders are displayed on the trading system and the total number of securities available for buying and selling is also displayed. This helps the investor to know the depth of the market. Further, corporate announcements, results, corporate actions etc are also available on the trading system, thus reducing scope for price manipulation or misuse. The facility of making initial public offers (IPOs), using NSE's network and software, results in significant reduction in cost and time of issues. NSE's web-site www.nseindia.com provides a link to the web-sites of the companies that are listed on NSE, so that visitors interested in any company can visit that company's web-site from the NSE site. Listed companies are provided with monthly trade statistics for the securities of the company listed on the Exchange. The listing fee is nominal. CM Segment At the end of March 2007,the number of listed companies were 1,228 and companies available for trading were 1,084. These securities had a market capitalisation of Rs. 3,367,350 crore. The growth of securities available for trading on the CM segment is presented in Table 3-1. 25
Listing Criteria The Exchange has laid down criteria for listing of new issues by companies, IPOs by knowledgebased issuers, companies listed on other exchanges, and companies formed by amalgamation/ restructuring, etc. in conformity with the Securities Contracts (Regulation) Rules, 1957 and directions of the Central Government and the Securities and Exchange Board of India (SEBI). The criteria include minimum paid-up capital and market capitalisation, project appraisal, company/ promoter's track record, etc. The listing criteria for companies in the CM Segment are presented in Table 3-2. The issuers of securities are required to adhere to provisions of the Securities Contracts (Regulation) Act, 1956, the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992, and the rules, circulars, notifications, guidelines, etc. prescribed there under.. Listing Agreement All companies seeking listing of their securities on the Exchange are required to enter into a formal listing agreement with the Exchange. The agreement specifies all the quantitative and qualitative requirements to be continuously complied with by the issuer for continued listing. The Exchange monitors such compliance. Failure to comply with the requirements invites suspension of trading, or withdrawal/delisting, in addition to penalty under the Securities Contracts (Regulation) Act, 1956. The agreement is being increasingly used as a means to improve corporate governance. Shareholding Pattern In the interest of transparency, the issuers are required to disclose shareholding pattern on a quarterly basis. Table 3-3 presents the sector-wise shareholding pattern at end-december 2006 of 1,158 companies listed on NSE. On an average, the promoters hold more than 54.23% of the total shares. Though non-promoter holding is nearly 43.56 %, Individuals held only 14.41% and the institutional holdings ( FIIs,MFs, VCF's- Indian and Foreign) accounted for 20.77 %. Listing Fees The listing fees charged by the Exchange are presented in the following table: Listing Fees Listing Fees in the CM Segment Amount (Rs.) Initial Fees 7,500 Annual Fees Companies with Paid-up Share and/or Debenture Capital (Rs. crore): Of 1 4,200 > 1 to = 5 8,400 > 5 to = 10 14,000 > 10 to = 20 28,000 > 20 to = 50 42,000 > 50 70,000 plus Rs. 1,400 for every additional Rs. 5 crore or part thereof 26
Compliance by Listed Companies NSE has institutionalised a process of verifying compliance of various conditions of the listing agreement. It conducts a periodic review for compliance on account of announcement of book closure/record date, announcement of quarterly results, submission of distribution schedule and annual reports, appointment of compliance officer, investor grievances, various disclosures, etc. Disclosures by Listed Companies It is essential that all critical price sensitive/material information relating to securities is made available to the market participants and the investors immediately to enable them to take informed decisions in respect of their investments in securities. The Exchange therefore ensures certain important timely disclosures by listed companies and disseminates them to market through the NEAT terminals and through its website. The disclosures include corporate actions, quarterly/half yearly results, decisions at board meeting, compliance with corporate governance norms, non-promoters' holding, verification of media reports etc. Keeping in mind the investor community and the importance of the information about companies, NSE has also put a system in place where in all corporate announcements including that of Board meetings that a company discloses to the market is handled in a straight through and hands free manner. As and when the company submits information the same will be seamlessly broadcast to the market. De-listing The securities listed on NSE can be de-listed from the Exchange as per the SEBI (Delisting of Securities) Guidelines, 2003 in the following manner: Voluntary De-listing of Companies Any promoter or acquirer desirous of delisting securities of the company under the provisions of these guidelines shall obtain the prior approval of shareholders of the company by a special resolution passed at its general meeting, make a public announcement in the manner provided in these guidelines, make an application to the delisting exchange in the form specified by the exchange and comply with such other additional conditions as may be specified by the concerned stock exchanges from where securities are to be de-listed. Any promoter of a company which desires to de-list from the stock exchange shall also determine an exit price for delisting of securities in accordance with the book building process as stated in the guidelines. The stock exchanges shall provide the infrastructure facility for display of the price at the terminal of the trading members to enable the investors to access the price on the screen to bring transparency to the delisting process. Compulsory De-listing of Companies The stock exchanges may de-list companies which have been suspended for a minimum period of six months for non-compliance with the listing agreement. The stock exchanges have to give adequate and wide public notice through newspapers and also give a show cause 27
notice to a company. The exchange shall provide a time period of 15 days within which representation may be made to the exchange by any person who may be aggrieved by the proposed delisting. Where the securities of the company are de-listed by an exchange, the promoter of the company shall be liable to compensate the security holders of the company by paying them the fair value of the securities held by them and acquiring their securities, subject to their option to remain security-holders with the company. WDM Segment In the WDM segment, all government securities, state development loans and treasury bills are 'deemed' listed as and when they are issued. All eligible securities whether publicly issued or privately placed can be made available for trading in the WDM segment. Amongst other requirements, privately placed debt paper of banks, institutions and corporates require an investment grade credit rating to be eligible for listing. The listing requirements for securities on the WDM segment are presented in Table 3-4. The growth of securities available for trading on the WDM segment is presented in Table 3-5. As at end March 2007, 3,252 securities with issued capital of Rs. 1,753,771 crore and a market capitalisation of Rs. 1,784,801 crore were available for trading on the WDM segment. 28
Table 3-1: Companies Listed/Permitted to Trade/Available for Trading on the CM Segment Month/Year No. of Companies No. of Companies No. of Companies Market (end of period) Listed Permitted to Trade Available for Capitalisation Trading* (Rs. crore) Nov-94 0 300 300 292,637 Mar-95 135 543 678 363,350 Mar-96 422 847 1,269 401,459 Mar-97 550 934 1,484 419,367 Mar-98 612 745 1,357 481,503 Mar-99 648 609 1,254 491,175 Mar-00 720 479 1,152 1,020,426 Apr-00 725 473 1,145 846,391 May-00 733 431 1,109 790,478 Jun-00 741 423 1,109 852,554 Jul-00 747 410 1,094 746,402 Aug-00 751 410 1,089 794,516 Sep-00 758 379 1,070 730,350 Oct-00 764 377 1,067 707,121 Nov-00 767 376 1,070 764,177 Dec-00 775 350 1,050 760,391 Jan-01 778 348 1,050 807,641 Feb-01 782 320 1,026 789,600 Mar-01 785 320 1,029 657,847 Apr-01 790 319 1,031 653,720 May-01 789 318 1,030 592,437 Jun-01 790 292 1,001 569,797 Jul-01 785 294 994 574,260 Aug-01 786 293 994 575,242 Sep-01 788 293 987 509,105 Oct-01 789 292 986 535,846 Nov-01 788 268 956 581,386 Dec-01 788 268 956 552,908 Jan-02 794 199 893 563,683 Feb-02 791 198 889 621,523 Mar-02 793 197 890 636,861 Apr-02 800 173 865 649,551 May-02 798 172 863 631,609 Jun-02 799 170 848 659,991 Jul-02 799 163 841 608,643 Aug-02 799 161 839 632,618 Sep-02 801 161 840 599,603 Oct-02 803 119 803 606,788 Nov-02 805 118 788 645,388 Dec-02 809 116 788 672,862 Jan-03 814 112 789 572,277 Feb-03 818 107 788 581,985 Mar-03 818 107 788 537,133 Apr-03 830 78 771 530,630 May-03 847 61 769 612,030 Jun-03 853 52 769 678,550 Contd... 29
Contd... Table 3-1: Companies Listed/Permitted to Trade/Available for Trading on the CM Segment Month/Year No. of Companies No. of Companies No. of Companies Market (end of period) Listed Permitted to Trade Available for Capitalisation Trading* (Rs. crore) Jul-03 865 44 774 719,144 Aug-03 873 35 775 836,650 Sep-03 883 27 774 863,480 Oct-03 887 26 776 926,747 Nov-03 891 23 777 979,541 Dec-03 897 23 779 1,167,028 Jan-04 904 22 786 1,116,150 Feb-04 907 21 788 1,110,954 Mar-04 909 18 787 1,120,976 Apr-04 918 18 795 1,171,828 May-04 928 16 804 950,494 Jun-04 940 12 813 979,700 Jul-04 929 12 815 1,066,087 Aug-04 936 9 820 1,143,075 Sep-04 945 7 824 1,227,550 Oct-04 950 6 828 1,253,825 Nov-04 954 6 831 1,446,292 Dec-04 957 6 832 1,579,161 Jan-05 958 5 833 1,557,444 Feb-05 964 4 837 1,614,597 Mar-05 970 1 839 1,585,585 Apr-05 973 1 836 1,517,908 May-05 977 1 842 1,654,995 Jun-05 987 1 854 1,727,502 Jul-05 999 1 868 1,848,740 Aug-05 1,006 1 875 1,957,491 Sep-05 1,016 1 883 2,098,263 Oct-05 1,019 1 881 1,927,645 Nov-05 1,025 --- 886 2,166,823 Dec-05 1,036 --- 896 2,322,392 Jan-06 1,043 --- 903 2,434,395 Feb-06 1,051 --- 911 2,512,083 Mar-06 1,069 --- 929 2,813,201 Apr-06 1,089 --- 944 2,990,200 May-06 1,093 --- 952 2,612,639 Jun-06 1,099 --- 962 2,524,659 Jul-06 1,095 --- 956 2,514,261 Aug-06 1,099 --- 958 2,777,401 Sep-06 1,116 --- 969 2,994,132 Oct-06 1,127 --- 981 3,138,319 Nov-06 1,137 --- 991 3,373,652 Dec-06 1,158 --- 1,016 3,426,236 Jan-07 1,185 --- 1,040 3,571,487 Feb-07 1,208 --- 1,063 3,296,931 Mar-07 1,228 --- 1,084 3,367,350 * Excluding suspended companies. 30
Table 3-2: Listing Criteria for Companies on the CM Segment of NSE Criteria Initial Public Offerings (IPOs) Companies listed on other exchanges Paid-up Equity Capital (PUEC)/ PUEC Rs. 10 cr. and MC Rs. 25 cr. PUEC Rs. 10 cr. and MC Rs. 25 cr. OR Market Capitalisation (MC) PUEC Rs. 25 cr. OR MC Rs. 50 cr. Company/Promoter's Track Record 3 years of existence of applicant/promoting company. 3 years of existence of applicant/promoting company. Dividend Record or Net worth -- Dividend paid in at least 2 out of the last 3 years OR Net worth Rs. 50 cr. Project Appraisal / Listing Project appraisal by specified agencies Listed on any other stock exchange for at least last three years OR Project appraisal by specified agencies Other Requirements (a) No disciplinary action by other stock exchanges/regulatory authority in past 3 yrs. (a) Same as for IPOs. (b) Satisfactory redressal mechanism for investor grievances, distribution of shareholding and litigation record of the promoting company, if any. (b) No negative net worth, No winding-up petition, and No reference to BIFR. Note: 1. The criteria for IPOs shall also be applicable to companies which have come out with IPOs, but are not listed on NSE, provided they make an application for listing within 6 months of the date of closure of public issue. 2. Knowledge-based companies are companies in the field of information technology, internet commerce, telecommunications, pharmaceuticals, etc. and the revenue from knowledge-based activity is more than 75% of income for last 2 years. 3. Dividend track record / networth / project appraisal / listing are not applicable to Government Companies, PSUs, FIs, Nationalised Banks, Statutory Corporations, Banking Companies etc.who are otherwise governed by a regulatory framework. Explanations : 1. Paid up Equity Capital means post issue paid up equity capital. 2. In case of IPOs, market capitalisation is the product of the issue price and the post-issue number of equity shares. In case of listed companies it is the product of post issue number of equity shares and average of the weekly high and low of the closing prices during last 12 months is used to calculate market capitalisation. 3. Net worth means paid-up equity capital + reserves excluding revaluation reserve - miscellaneous expenses not written off - negative balance in profit and loss account to the extent not set off. 31
Table 3-3 : Shareholding pattern at the end of December 2006 of companies Listed on NSE Category Promoters Non-Promoters Institutional Non - Institutional Indian Foreign Financial Foreign Mutual Venture Others Bodies Individuals others Promoters Promoters Institutions/ Institutional Funds Capital Funds Corporate Banks/Central Investors including Government/ Foreign State Venture Government(s)/ Capital Insurance Funds Companies (In per cent) Shares held by Custodians and against which Depository Receipts have been issued Banks 43.11 1.07 4.71 18.93 4.06 0.00 0.77 8.22 13.37 0.73 5.02 Engineering 22.03 3.11 12.38 10.87 11.07 0.00 0.39 6.07 24.09 8.61 1.38 Finance 25.32 1.31 13.32 20.40 1.45 0.00 4.07 8.47 21.52 3.51 0.64 FMCG 18.43 4.72 14.65 11.59 10.82 0.01 0.00 4.15 13.91 20.69 1.02 Information Technology 43.59 3.93 2.08 14.48 2.77 0.31 0.27 6.74 18.25 3.22 4.36 Infrastructure 81.31 1.18 3.03 6.54 1.13 0.17 0.37 1.65 4.26 0.30 0.06 Manufacturing 41.79 12.19 7.41 9.62 3.91 0.18 0.13 5.62 15.80 1.83 1.53 Media & Entertainment 34.99 7.82 2.26 15.79 5.31 0.00 0.54 7.74 22.02 3.37 0.16 Petrochemicals 63.14 2.51 5.11 5.27 1.48 0.00 0.02 5.81 11.45 0.62 4.58 Pharmaceuticals 40.56 7.35 4.81 11.46 3.35 0.25 0.57 6.67 20.79 2.46 1.72 Services 45.00 4.45 7.71 11.79 4.54 0.09 0.11 6.95 16.05 3.07 0.25 Telecommunications 55.60 4.30 4.15 12.71 1.81 0.02 0.00 4.21 12.36 3.51 1.32 Miscellaneous 45.36 2.99 2.62 7.65 3.28 0.02 1.64 8.41 23.46 3.02 1.56 Number of Shares 62745941812 8117912577 8058172580 13998642379 4408080948 147203077 523443482 7446881569 18835207703 3502876350 2884007127 % To total number of shares 48.02 6.21 6.17 10.71 3.37 0.11 0.40 5.70 14.41 2.68 2.21 32
Table 3-4: Eligibility Criteria for Securities on WDM Segment Issuer Listing Criteria Public Issue Private Placement a. Public Sector Undertakings / Statutory Corporations Minimum 51% holding by Govt. As applicable to corporates Less than 51% holding by Govt. As applicable to corporates b. Statutory Corporation/Local Bodies/Authorities Minimum 51% holding by Govt. As applicable to PSUs As applicable to Corporates Less than 51% shareholding As applicable to corporates c. Financial Institutions (SLR Bonds & Non-SLR Bonds) Eligible Credit Rating d. Scheduled Commercial Banks (SCBs) Net worth of Rs. 50 crore or above Net worth of Rs. 50 crore or above Credit Rating e. Infrastructure Companies Investment Grade Credit Rating (Tax Exemption and recognition as infrastructure company under related statutes/regulations) f. Corporates Minimum Paid-up capital of Rs. 10 crore, OR Minimum Paid-up capital of Rs. 10 crore, OR Market Capitalisation of Rs. 25 crore Market Capitalisation of Rs. 25 crore (Net worth in case of unlisted companies) (Net worth in case of unlisted companies) Credit Rating g. Mutual Funds SEBI registered Mutual Fund/Scheme having an investment objective to invest predominantly in debt instruments. h. Securitised Debt Minimum tranche of Rs. 20 crore Investment Grade Credit Rating 33
Table 3-5: Securities Available for Trading on WDM Segment (as of end of March) (Amount in Rs. crore) As on March 31 Securities 2002 2003 2004 2005 2006 2007 Number Amount Number Amount Number Amount Number Amount Number Amount Number Amount Government Securities 560 512,279 719 605,459 920 846,532 1,204 1,119,224 1259 1,227,608 1,276 1,396,365 T-Bills 39 24,489 39 35,753 39 33,274 39 74,919 51 71,471 52 117,950 PSU Bonds 401 38,755 457 37,101 707 55,231 743 67,037 791 88,690 796 90,374 Institutional. Bonds 338 25,366 353 21,475 360 27,684 411 27,795 369 26,738 271 28,136 Bank Bonds 58 6,506 73 7,056 110 14,160 121 18,885 184 33,942 268 66,137 Corporate Bonds 337 17,656 306 16,269 455 30,591 563 39,360 512 43,863 584 54,087 Others 57 31,187 43 13,388 30 9,451 16 2,598 11 1,794 5 723 Total 1,790 656,238 1,990 736,502 2,621 1,016,923 3,097 1,349,817 3,177 1494106.23 3,252 1,753,771 34