The Securities and Exchange Commission of Pakistan (SECP) has placed new general conditions for public offer of securities and revised the procedure for public offer of shares through book building. Through SRO 7(I)/2018 issued here, the SECP has amended Public Offering Regulations, 2017.
Under the new regulations, the general conditions for public offer of securities revealed that an issuer shall make a public offer of securities, subject to the following general conditions. Firstly, the issuer shall have been in operation for at least 3 financial years. Secondly, the issuer has profitable track record for at least 2 preceding financial years from its core business activities. Thirdly, not less than 51% of the shares of the issuer are held by same persons for at least 2 preceding financial years. Fourthly, its book value per share is not less than its face value per share. Fifthly, the securities shall be issued in book-entry form only.
Under the new procedure for public offer of shares through book building, the SECP said that the procedure shall be adopted for book building process. The issuer shall decide the floor price [and the price band] in consultation with the consultant to the issue. Provided that the upper limit of the price band should not be more than 40% of the floor price.
Floor price and its determination shall be disclosed under a separate section titled as "Valuation Section" in the prospectus containing the justifications given by the consultant to the issue in support of the floor price set by the issuer along with post issue free float disclosure, the SECP said.
The new regulations said that any change in the prospectus subsequent to its approval by the Commission and prior to its publication, may be made only with prior written approval of the securities exchange and the Commission. Any change in the prospectus subsequent to its publication, may be made only with the prior written approval of the securities exchange and the Commission and such change shall be disseminated to the public through publication of addendum to the Prospectus in at least all those newspapers, websites in which the prospectus has been published earlier.
The SECP has also amended responsibilities of designated institution in case of book building.
Following is the text of the notification issued here on Saturday: SRO-7(I)/2018:- In exercise of the powers conferred under section 169 of the Securities Act, 2015 (III of 2015), the Securities and Exchange Commission of Pakistan is pleased to make the following amendments in the Public Offering Regulations, 2017 notified vide SRO 296(I)/2017, the same having been previously published in the official gazette vide notification No SRO 1174 (I)/2017 dated November 9, 2017, as required under sub-section (4) of section 169 of the Securities Act, 2015 for eliciting public opinion, namely:-
AMENDMENTS
In the aforesaid Regulations,-
(1) In regulation 2, in sub-regulation (1),-
(i) after clause (xxiii), following new clause shall be inserted, namely;- "(xxiiia) "Green Field Project" includes a project that is being newly built by the issuer and has not commenced commercial production/operation;";
(ii) in clause (xxxiii), for the word "one" the word "two" shall be substituted;
(iii) after clause (xxxv), following new clause shall be inserted namely;- "(xxxva) "offer price" means the price per share at which shares are offered to the general public in case of fixed price method and the retail investors in case of the book building and set by the issuer in consultation with the consultant to the issue;
(iv) after clause (xxxvi), following new clause (xxxvii) shall be inserted namely:-
"(xxxvii) "price band" in case of book building means floor price with an upper limit of 40% above the floor price, allowing bidder to make bid at floor price or within the price band; and
(v) in clause (lvii), at the end, the words "and disclosure of post issue free float as number of shares as well as in percentage" shall be inserted.
(2) In regulation 3,-
(a) after sub-regulation (1),- following clauses shall be inserted namely:-
"(i) the issuer shall have been in operations for at least 3 financial years;
(ii) the issuer has profitable track record for at least 2 preceding financial years from its core business activities;
(iii) not less than 51% of the shares of the issuer are held by same persons for at least 2 preceding financial years;
(iv) its book value per share is not less than its face value per share;
Provided that clause (iii) above shall not apply in case of new issuance of shares;
Provided further that the above clauses (i) to (iv) shall not apply in case of Green Field Project; and
(v) the securities shall be issued in book-entry form only;"
(b) in sub-regulation (4),-
(i) for the words "to", appearing for the third time, the word "till" shall be substituted; and
(ii) for the semi colon, colon shall be substituted and thereafter the following new proviso shall be inserted namely:-
"Provided that information memorandum and other marketing material may be prepared and shared with the prospective investors through private arrangement."
(c) in sub-regulation (5),-
(i) after the words "with other underwriters" the words "duly licensed by the Commission" shall be inserted; and
(ii) after the words "consent of the issuer" the words "and any such arrangement shall be disclosed in the prospectus in case of fixed price method and in supplement to the prospectus in case of book building method" shall be inserted.
(d) after sub-regulation (15), following new sub-regulations shall be added, namely:-
"(15a) Any change in the Prospectus subsequent to its approval by the Commission and prior to its publication, may be made only with prior written approval of the securities exchange and the Commission.
(15b) Any change in the Prospectus subsequent to its publication, may be made only with the prior written approval of the securities exchange and the Commission and such change shall be disseminated to the public through publication of addendum to the Prospectus in at least all those newspapers, websites in which the Prospectus has been published earlier."
(e) after sub-regulation (18), following new sub-regulations shall be added namely:-
"(19) The securities subscription form on the format provided in Seventh Schedule shall be made part of the Prospectus.
(20) The percentage utilization of the excess IPO proceeds, in case the Strike Price is determined above the Floor Price.
(21) The offer size and allocation of capital to the general public shall be as per the requirements of the relevant regulations of the securities exchange."
(3) In regulation 4,-
(a) in sub-regulation (2),-
(i) for the words "bidders who make bids not below the Floor Price" the words "Bidders who make Bids at Floor Price or within the Price Band" shall be substituted; and
(ii) for the words "at or above the Floor Price" the words "at Floor Price or within the Price Band" shall be substituted.
(4) In regulation 6, -
(a) in sub-regulation (10), for the figure "7" the expression "10 working" shall be substituted.
(5) In regulation 7,-
(a) in sub-regulation (3), the first proviso as well as the table shall be deleted.
(b) sub-regulation (5) shall be deleted.
(c) for sub-regulation (8), the following shall be substituted namely:-
"(8) The associates of the Issuer as disclosed in the Prospectus shall not in aggregate make bids in excess of ten percent of the shares offered though Book Building.
(d) for sub-regulation (9), the following shall be substituted namely:-
"(9) The associates of the Consultant to the Issue and Book Runner shall not in aggregate make bids in excess of five percent of the shares offered through Book Building:
Provided that sub-regulation (9) shall not apply to such associates of the Consultant to the Issue and the Book Runner that are Financial Institutions and Mutual Funds."
(6) In regulation 8, -
(a) in sub-regulation (1):-
(i) after the words "Floor Price", appearing for the first time, the words "and the Price Band" shall be inserted;
(ii) after the words "Consultant to the Issue.", following proviso shall be inserted namely:-
"Provided that the upper limit of the Price Band should not be more than 40% of the Floor Price."; and
(iii) for the full stop at the end, the expression "along with post issue Free Float disclosure." shall be inserted.
(b) after sub-regulation (6), following new sub-regulation shall be inserted namely:-
"6(a) The Issuer shall publish the Prospectus at least one day before the commencement of registration of bidders by the Book Runner."
(c) for sub-regulation (8), the following shall be substituted namely:-
"(8) Save as provided in regulation 3(15)(a) and (b), Floor Price shall not be revised once the Prospectus has been approved by the Commission."
(d) in sub-regulation (17), for the word "forty" the word "one hundred" shall be substituted.
(e) in sub-regulation (18), in clause (i), the words "or dispatch" shall be deleted.
(7) In regulation 9,-
(a) for sub-regulation (12), the following shall be substituted, namely:-
"(12) In case all the bids made above the Strike Price are accommodated and shares are still available for allotment, such available shares shall be allotted against the bids made at the Strike Price on proportionate basis."
(8) In regulation 10, -
(a) in sub-regulation (2), the word "make" shall be deleted:
(i) in clause (i), the word "make" shall be inserted before the word "bid" and after the words "Floor Price" the words "and above the upper limit of the Price Band" shall be inserted;
(ii) in clause (ii),- (a) for the word "a" the word "make" shall be substituted; (b) for the expression "10%" the expression "5%" shall be substituted; and
(c) after the words "Book Building Portion" the words "except for institutional investors who may make bid up to 10% of the shares allocated under the Book Building Portion" shall be inserted;
(iii) in clause (iii),-
(a) for the word "a" appearing after the word "above", the word "make" shall be substituted;
(iv) in clause (iv), for the word "a", the word "make" shall be substituted;
(v) in clause (v), for the word "more", the words "make more" shall be substituted and the word "or" appearing at the end shall be omitted;
(vi) for clause (vi), the following clause (vi) and proviso shall be substituted namely:- "(vi) make downward revision both in terms of Bid Price and Bid Volume; Provided that in case of upward revision of the Bid Price, the number of shares Bid for ie Bid Volume may be adjusted ensuring that the bid amount or bid money remains the same; or" and
(vii) after the clause (vi), amended as aforesaid, the following new clause shall be added namely:- "(vii) withdraw the Bid."
(9) In regulation 11,-
(a) in sub-regulation (4), after the digit "10" the word "working" shall be inserted.
(10) In regulation 12, -
(a) in sub-regulation (1), in the Explanation, after the words "product of the offer price" the words "or Floor Price" shall be inserted.
(b) after sub-regulation (2) following proviso shall be inserted: "Provided that offer for sale of shares by the existing shareholders of a company is not allowed in case of Green Field Project."
(11) In regulation 19,-
(a) in sub-regulation (1), in clause (vi), after the words "its completion ie" the words "dispatch and" shall be deleted.
(12) In regulation 22, -
(a) in sub-regulation (2), in proviso to clause (x), after the words "issue with other underwriters" the words "duly licensed by the Commission" shall be inserted.
(13) In regulation 24, -
(a) in sub-regulation (1), -
(i) in clause (vi),-
a) for the word "not" the words "neither allow withdrawal of bid, nor" shall be substituted;
b) after the words "Floor Price" the words "or above the upper limit of the Price Band" shall be inserted.; and
(ii) in clause (vii), after the words "Floor Price," the words "Price Band," shall be inserted.
(14) In First Schedule, -
(a) Under heading "1. Cover Page", -
(i) in clause (vi), after the word "Floor Price" the words "the Price Band" shall be inserted.
(b) Under heading "2.Inside Cover Page:"
(i) in clause (ii), under the sub-heading "Name of the Issuer" after the bullet point "Floor Price", the following new bullet point shall be inserted, namely:- "Price Band"
(c) Under heading "6. Part II-A: Valuation Section", the existing text shall be numbered as "(i)" and thereafter following new clauses shall be inserted namely:-
"(ii) Disclosure of Post issue Free Float both in terms of the number of shares and percentage.
(iii)Disclosure of Peer group comparison with respect to the following:
a. Earning per share;
b. Book value per share;
c. Market value per share;
d. P/E multiple;
e. P/B multiple;
f. Return on Equity;
g. Return on Assets; and
h. Free Float as number of shares as well as in percentage"
(d) Under heading "7. Part II-B: Book Building Procedure", -
(i) for clause (i), the following shall be substituted namely:-
"(i) In case of issue through book building, information needed to be disclosed ie number of shares allocated under the book building portion and retail portion, Floor Price and the Price Band,"
(ii) in clause (xix), in sub clause (b), -
a) for the word "will" the word "shall" shall be substituted;
b) for the words "strictly on time priority basis" the words "on proportionate basis" shall be substituted.
(e) Under heading "8.Part II-C: Share Capital and Related Matters"
(i) in clause (x), the word "dispatch" shall be deleted;
(ii) in clause (xiii), for the word "thereof" the words "at Floor Price" shall be substituted;
(iii) after clause (xiii), amended as aforesaid, following new clause shall be inserted namely:-
"(xiii a) Percentage utilization of excess IPO funds, in case the strike price is determined above the floor price."
(f) Under heading "8. Part II-D: In case of issue of debt securities (Islamic and conventional):", -
(i) in clause (ii), after the words "applications; issue, credit" the words "and dispatch" shall be deleted.
(g) Under heading "17. Part XI: Signatories to the Prospectus:", -
(i) in clause (ii),-
a) the word "prospectus" shall be initial capped.
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