Overview of Initial Public Offering And its Process in India
What is an IPO?
The company will become a publicly traded corporation with its shares sold on stock exchanges after an initial public offering (IPO). The Company will be able to list its shares on the relevant stock markets following the success of the IPO. Firms often use initial public offerings (IPOs) to obtain capital and gain liquidity by selling their stocks or shares to the general public. Companies must follow the IPO process as set forth by stock exchanges before their shares can be traded publicly in India. This is a time-consuming and tough technique.
How To Launch IPO in India?
IPO Process Steps:
Step 1: Hire an underwriter or an investment bank.
To commence the initial public offering procedure, the company will recruit the help of financial specialists such as investment banks. The underwriters give the company certainty about the funds raised and act as a link between the company’s growth and the cash raised. The experts will also look through the company’s key financial KPIs and sign an insurance contract. The following components are usually included in an underwriting agreement:
- The specifics of the deal the amount that will be hiked
- Information on the securities that are being offered for sale
Step 2: Registration For IPO
Drafting a registration statement and a drafted prospectus, sometimes known as the Red Herring Prospectus, are both part of the IPO process (RHP). The Companies Act stipulates that a RHP be submitted. All obligatory disclosures required by the SEBI and the Companies Act are included in this document.
Step 3: Verification by SEBI
The market regulator, SEBI, verifies the company’s declaration of facts. The company will be able to declare an IPO date if the paperwork is approved.
Step 4: Submitting a Stock Exchange Application
The company must now submit an application to the stock exchange in order for its initial public offering to be listed.
Step 5: Creating a Buzz By Roadshows
Before an IPO goes public, the firm holds roadshows to generate interest in the market. For the next two weeks, the company’s executives and staff will promote the upcoming IPO across the country. This is a method for attracting possible investors through marketing and advertising. A range of stakeholders, including marketing professionals and investment managers, are informed about the company’s major achievements. The executives use question sessions, video lectures, forums, interactive online roadshows, and other consumer tactics.
Step 6: The business can now begin pricing its IPO either through a Set Price IPO or a Book Contractual Offering. The cost of the company’s stock is made official in the particular instance of a Fixed Price Offering. In the case of a Book Binding Offering, a pricing strategy of 20% is declared, after which shareholders can place bid price inside the price range. Shareholders must place bids based on the company’s cited Lot price, which is also the minimum number of units to be purchased, during the bidding process. In addition, the company specifies an IPO Base Price, which is the lowest bid price, and an IPO Cap Price, which is also the top bid price.
The booking period is usually three to five business days, and investors have the option of modifying their bids within that time frame. The business can determine the Discounted price, which would be the final figure at which the problem will be sold, after the bidding process is completed.
Step 7: Allotment of Shares
The firm and the buyers will select how many units each investor will receive once the IPO pricing has been fixed. Reduced assignments will be made if there is an oversupply. The IPO equity are generally allocated to bidders within 10 working days of the end of the bidding period.
The above are points to understand how to launch a new IPO in India, once all these points are practically covered a new IPO initially launches. Continue reading further to understand the eligibility criteria for launching an IPO.
Eligibility To Bring IPO in India:
- Ensure that neither the company nor any of its partners are blocked from obtaining the financial market by SEBI or any other authority, and that none of the company’s promoters, filmmakers, or persons in control were or are organisers, directors, or persons in control of any other company barred from trying to access the financial market by SEBI or any other authority.
- Ensure that at least one recognised stock exchange with countrywide trading terminals accepts applications for registration of the specified securities.
- Ensure that one or more commercial bankers are appointed, at least one of whom is a lead merchant banker, and that other intermediates are appointed in agreement with the lead merchant banker to carry out the issue’s duties.
- Ensure that if the number of potential allottees is fewer than 1000, it will not make an appointment under a public issue.
- Ascertain that a depository has agreed to dematerialize specific securities that have already been issued or are about to be issued.
- Ensure that all of the company’s partially paid-up equity shares have been either completely paid up or forfeited.
- Ensure there are no outstanding convertible securities or other rights that would give anyone the option to receive equity shares, excluding convertible corporate bonds issued through an earlier initial public offering, ESOPs, and or fully paid-up excellent convertible securities that will be converted on or before the red herring prospectus is filed.
- Ensure that the sellers have held the equity shares offered for sale to the public for at least one year prior to filing the draught offer document with the Board, subject to the exclusions set out in Regulation 26 (6) of the ICDR Regulations, 2009.
Once all the above points are followed for eligibility to bring IPO in India, a company must then look for specialist/experts in the fields, who can help in launching a successful IPO while ensuring a smooth process of IPO in India.
The following are the requirements for listing Initial Public Offerings (IPOs):
- Funded Capital:
The applicant’s paid-up equity capital must be at least 10 crores*, and the capitalization of the applicant’s equity must be at least 25 crores**.
- Conditions that must be met before a listing can be made:
The Issuer must have complied with the conditions precedent to listing set forth in the Securities Contracts (Regulations) Act 1956, the Companies Act 1956/2013, the Securities and Exchange Board of India Act 1992, any rules and/or regulations enacted under the foregoing statutes, as well as any circulars, clarifications, or guidelines issued by the appropriate authority under the foregoing statutes.
- At least three years of experience in one of the following:
the person who wants to be listed; or The promoters****/promoting company, incorporated in or outside India, or a Partnership firm that was later converted into a Company (after three years of not being a Company), petitions the Exchange for listing. The newly established company would only be considered for listing if it met all of SEBI’s requirements in this regard.
Process of IPO in India:
There are two types IPO processes.
- Issue with a fixed price
Investors are advised in advance of the price at which their shares will be sold and assigned in a fixed-price offering.
- The problem of book creation
The issuer, on the other hand, gives a 20% range in which investors can bid for the shares in a book building offering.
Who can Help in Launching an IPO?
To understand the launching process of IPO in India is not a child’s play. One must be very sure of what is to be done and why. There are many industry experts and professionals who a comes with years of experience and knowledge.
There are multiple ways of becoming public: IPO, SPAC, direct posting, etc. A gifted Financial Advising group can assist you with situating yourself for progress. To examine your IPO posting (Initial Public Offering) necessities and to understand the IPO listing strategy contact the Best IPO Advisory Company in India; Inspirigence Advisors NOW!