ICDR Amendments

1. Increased holding period for promoters & major shareholders

Minimum promoter contribution:

The promoters of the issuer shall hold at least 20% of the post-issue capital. Provided that in case the post-issue shareholding of the promoters is less
than 20%, alternative investment funds or foreign venture capital investors or scheduled commercial banks or public financial institutions or insurance
companies registered with Insurance Regulatory and Development Authority of India may contribute to meet the shortfall in minimum contribution as
specified for the promoters, subject to a maximum of ten percentage of the post-issue capital without being identified as promoters.

ICDR Amendment:

Inclusion of repayment of loan used in relation capital expenditure for incremental lock-in period in addition to the existing capital expenditure clause.

More than 33% of the total primary issue proceeds (INR 64,307 crores) in the year 2024 was used towards repayment of loan of the listed entity or its
subsidiaries. Considering that majority of such loans are obtained for capital expenditure in the form of purchase of land, building, plant and machinery,
adding the incremental lock-in period condition for repayment of loan together with the capital expenditure condition aligns with the purpose of the
existing regulation.

ICDR Amendment:

IAny secondary sale transaction made prior to the issue from the date of filing draft offer document should also be considered in the computation of maximum OFS that can be made by shareholder.

Existing regulation for OFS (Regulation 8A) is explained in the PDF

The computation of 50% and 10% should be applied cumulatively to the total number of shares offered for sale to the public and any secondary sale transactions prior to the issue from the date of filing draft offer document. This amendment is added to remove ambiguity on the period to be considered for computation of dilution percentage by the major shareholders.

2. Strengthening the compliance framework

(a). Litigations involving Key Managerial Personnel (KMP) & Senior Management Personnel (SMP)

All criminal proceedings involving KMP and SMP of the Company and also the actions by regulatory authorities and statutory authorities against KMP and SMP shall be disclosed. Prior to the amendment, only the criminal proceedings against the Company, its promoters, directors and subsidiaries were required to be disclosed. Considering that the draft offer document briefly describes the KMP and SMP profile, disclosure of criminal proceedings and other statutory authorities aligns with the intent of this regulation and provides better insights to the stakeholders to make informed decisions.

(b). Litigation threshold for reporting in DRHP

All litigation involving the company, its directors, promoters and subsidiaries should be disclosed if it exceeds lower of the following:

a) Litigation where the value exceeds lower of the following based on latest restated consolidated financial statements:

b) As per the policy of materiality defined by the board of directors of the issuer and disclosed in the offer document.

Proforma financial statement for material subsidiary:

Company shall provide Proforma financial statements, as certified by the statutory auditor or chartered accountants, who hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India (ICAI), of all the subsidiaries or businesses material to the consolidated financial statements where the Company or its subsidiaries have made an acquisition or divestment including deemed disposal after the latest period for which financial information is disclosed in the offer document but before the date of filing of the offer document. For this purpose, the acquisition/divestment would be considered as material if acquired/ divested business or subsidiary in aggregate contributes 20% or more to the turnover, net worth or profit before tax in the latest annual CFS of the issuer. The Proforma financial statements shall be prepared for at least the last completed financial year and the stub period (if any). The Proforma financial statements shall be prepared in accordance with any guidance note, standard on assurance engagement or guideline issued by the ICAI from time to time and certified by the statutory auditor or chartered accountants, who holds a valid certificate issued by the Peer Review Board of the ICAI.

Proforma financial statement for non-material subsidiary

Company may voluntarily choose to provide proforma financial statements of acquisitions or divestments

• even when they are below the above materiality threshold, or
• if the acquisitions or divestments have been completed prior to the latest period for which financial information is disclosed in the draft offer
  document or the offer document.

Furthermore, the Proforma financial statements may be disclosed for such financial periods as determined by the company. Company may also voluntarily include financial statements of the business or subsidiary acquired or divested, provided that such financial statements are certified by the auditor (of the business or subsidiary acquired or divested) or chartered accountants, who hold a valid certificate issued by the Peer Review Board of the ICAI. In case of one or more acquisitions or divestments, one combined set of Proforma financial statements should be presented.

Other acquisitions

Where the businesses acquired/ divested does not represent a separate entity, general purpose financial statement may not be available for such business. In such cases, combined/ carved-out financial statements for such businesses shall be prepared in accordance with any guidance note, standard on assurance engagement or guidelines issued by the ICAI from time to time. Further, in case of non-material acquisitions/divestments disclosures in relation to the fact of the acquisition/divestment, consideration paid/received, and mode of financing shall be certified by the statutory auditor of the issuer company or chartered accountants, who hold a valid certificate issued by the Peer Review Board of the ICAI appointed by the
issuer company. The amendment has been introduced to mandate all financial statements (mandatory proforma financials or voluntary proforma financials or
combined / carved-out financials) to be prepared in accordance with the guidelines prescribed by ICAI and certified by the statutory auditor or chartered accountants, who hold a valid certificate issued by the Peer Review Board of the ICAI.

Company proposing to get listed shall also disclose to stock exchange all the agreements entered into by the shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employees of the listed entity or of its holding, subsidiary or associate company which impact the management or control of the listed entity or impose any restriction or create any liability upon the listed entity, including disclosure of any rescission, amendment or alteration of such agreements thereto, whether or not the listed entity is a party to such agreements. This amendment is
introduced to harmonize the requirements of SEBI Listing Obligation and Disclosure Requirement (LODR) with the ICDR.

3. Enhancing disclosures on the shareholding pattern

Currently, Regulation 54 prescribes disclosing all transactions in securities by the promoters and promoter group between the date of filing of the draft offer document and the date of closure of the issue to the stock exchange within twenty-four hours of such transactions. Additionally, any proposed pre-IPO transaction disclosed in the draft offer document should also be reported to the stock exchange within 24 hours of such pre-IPO transactions

Offer document summary currently requires disclosures in relation to pre-issue shareholding of the promoter and promoter group, selling shareholder as a percentage of paid-up share capital of the issuer. Additionally, pre-issue and post issue shareholding pattern of the top 10 shareholders together with promoter and promoter group is required to be disclosed in the summary.

4. Improved clarity on the conditions stipulated for objects of the issue

Conditions currently stipulated in the ICDR when the object of the issue is utilization of the issue proceeds for long-term working capital:

• Basis of estimation of working capital requirement along with the relevant assumptions.
• Reasons for raising additional working capital substantiating the same with relevant facts and figures.
• Details of the projected working capital requirement, including detailed assessment of working capital after implementation of the project or
  achievement of objects of the issue, as the case may be, capacity utilisation assumptions, break up of expected current assets into raw materials,
  finished goods, work in progress, sundry debtors etc., with assumption about the holding norms for each type of current asset, total current liabilities, net current assets and envisaged sources of finance for net current assets, i.e., bank finance, institutional finance, own funds, etc.
• Total envisaged working capital requirement in a tabular form, the margin money thereof and the portion to be financed by any banks or otherwise.
• Details of the existing working capital available to the issuer with a break-up for total current assets into raw materials, finished goods, work in
  progress, sundry debtors, etc., total current liabilities, net current assets and sources of finance for net current assets i.e. bank finance, institutional
  finance, own funds etc.
• If no working capital is shown as a part of project for which the issue is being made, the reasons for the same.

ICDR Amendment:

When the objects of the issue include funding long-term working capital of
the Company, the computation for such working capital should be based on
the audited standalone financial statements after incorporating the
restatements / adjustments, if any, identified in the preparation of restated
consolidated financial statements.

As a result of this amendment, Companies may be required to obtain a
separate audit opinion on the restated standalone financial statements of the
Company in addition to the restated consolidated financial statements which
is part of draft offer document

The current regulation stipulates certification from the statutory auditor for utilization of the loan amount for the purpose for which it was availed when one of the objects of the IPO proceeds is repayment of loan. In order to provide more flexibility to the company for such certification, amendment states that the said certification can also be obtained from any Chartered Accountant, holding a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India (ICAI) when:

• Such periods when the loan was utilized was not audited by the current statutory auditor
• the loan which is proposed to be repaid was availed by a subsidiary and the current statutory auditor of the issuer is not the statutory auditor of
  the subsidiary

Earlier, Companies faced challenges to obtain the repayment of loan certification from the statutory auditor in case of appointment of new auditor or where the subsidiaries of the Company proposed to get listed were audited by other auditors. In order to simplify the certification process, the amendment specifies that such certification can be obtained from any peer reviewed auditor.

5. Relaxation on stock appreciation rights granted to employees

Existing regulation prevents a Company from having any outstanding convertible securities or rights that would entitle any person with option to receive the equity shares of the Company except for:

• the outstanding options granted to employees pursuant to an employee stock option scheme (ESOP) in compliance with the Companies Act, 2013 and
• fully paid-up outstanding convertible securities which are required to be converted before the date of filing offer document

ICDR Amendment:

Outstanding stock appreciation rights granted to employees pursuant to a stock
appreciation right scheme has also been added to the exemption list, which can be
continued as outstanding till the date of filing offer document by including a disclosure in the draft offer document.

Out of the 90 companies that got listed in the year 2024, more than 25% of the
companies filed draft offer document for the second time to get listed after an
unsuccessful attempt in the earlier filed draft offer document. However, these
companies would have paid the outstanding stock appreciation rights before filing the
first draft offer document resulting in outflow for the company despite the company
not getting listed. The amendment has extended the period to settle such stock
appreciation rights till the time of filing offer document and thereby companies may
continue with the stock appreciation rights till the actual time of listing.