In India, companies need to comply with certain eligibility norms to make capital issues in the primary market. These norms are designed to ensure that companies have a minimum level of financial stability and transparency to protect the interests of investors. Here are some of the eligibility norms for making capital issues in India:
- Minimum Net Worth: Companies are required to have a minimum net worth to make a capital issue. The minimum net worth requirement varies depending on the type of issue and the size of the company. For example, the minimum net worth requirement for an IPO is Rs. 15 crore, while the minimum net worth requirement for an FPO is Rs. 5 crore.
- Track Record: Companies are required to have a track record of profitability and dividend payment to make a capital issue. The track record requirement varies depending on the type of issue and the size of the company. For example, companies making an IPO are required to have a track record of at least three years of profitability, while companies making an FPO are required to have a track record of at least one year of profitability.
- Promoter Contribution: Companies are required to have a minimum promoter contribution to make a capital issue. The promoter contribution requirement varies depending on the type of issue and the size of the company. For example, the promoter contribution requirement for an IPO is 20% of the issue size, while the promoter contribution requirement for an FPO is 10% of the issue size.
- Issue Size: Companies are required to have a minimum and maximum issue size to make a capital issue. The minimum issue size requirement varies depending on the type of issue and the size of the company. For example, the minimum issue size requirement for an IPO is Rs. 10 crore, while the minimum issue size requirement for an FPO is Rs. 1 crore. The maximum issue size is determined by market demand and the regulatory approval process.
- Disclosure Requirements: Companies are required to meet certain disclosure requirements to make a capital issue. These requirements include providing information about the company’s financial performance, management structure, and risks. The disclosure requirements are designed to ensure that investors have access to accurate and timely information to make informed investment decisions.
In conclusion, companies need to comply with certain eligibility norms to make capital issues in India. These norms include minimum net worth, track record, promoter contribution, issue size, and disclosure requirements. Companies that meet these eligibility norms can make capital issues in the primary market to raise funds for growth and expansion.