Summary: The process of launching an Initial Public Offering (IPO) in India is governed by the Companies Act, 2013, SEBI regulations, and other relevant laws. Key steps include obtaining necessary approvals, drafting and filing the prospectus, determining the price band, and engaging intermediaries such as book runners, registrars, and merchant bankers. Compliance is crucial, including maintaining a minimum public shareholding of 25% or 10% for larger issues, ensuring promoters’ contributions, and fulfilling track record requirements. The prospectus must provide detailed disclosures about the company’s financials, business risks, and promoter details. Post-issue obligations include listing the shares on stock exchanges within specified timelines and unblocking funds from escrow accounts. Additionally, fast-track IPOs are available for companies meeting certain criteria, such as a market capitalization of at least ₹5000 crore, a good compliance record, and no pending regulatory actions. The streamlined fast-track process enables quicker public listings, ensuring efficient access to capital markets.
The process of IPO governed under the provisions specified relating to the Companies act, 2013 read with Securities Contract (Regulations) Act, 1956, Issue of Capital and Disclosure (Requirements) Regulations, 2009 and Securities Exchange Board of India covering of various aspects like approval requirements, filling of prospectus, draft papers, opening of escrow account, selection of price band and making public announcement in newspaper, on website and other requirements for selection of Book runner lead manager, Registrar to issue and merchant banker for going to public for the requirements of the funding for the working, expansion and other capital requirements.
Compliance requirement of Regulations: The proposed listed company required to comply with the specified provisions for the companies who get funded through going to public under the various regulations specified by the authorities and exchanges for the safeguard of the savings of the public and considering the interests of the stakeholders. These are:
1. The minimum threshold limit for the public holding will be 25% for all the listed companies. For new listing, if the post issue capital of the company calculated at offer price is more than Rs. 4000 crore, the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.
2. The issuer, its promoter group or its director or person in control not debarred from accessing the capital market by the SEBI or any stock exchanges,
3. The other conditions relating to its track record of net worth (Rs. 1 crore), net tangible assets (Rs. 3 crore (Not more than 50% of these to be held in the form of monetary assets)) and profits distributed as of full 3 years out of 5 and company earned at least 50% of revenue, if there has changed in the name of the company,
4. The next step is of determining the price band for the public issue. There are various factors considered while determining the price band like financials of the company, industry P/E ratio, future prospectus and background of the promoters etc.,
5. There is an provision regarding the minimum promoter’s contribution of 20% with the lock-in period of 3 years from the date of allotment, but there is an exemption for promoters whose shares are listed on stock exchange and having the good track record of payment of dividend for at least 3 years, in case promoters are non- identifiable and in case of right issue,
6. Now the role of Intermediaries performing an important and effective role for confirming the compliance and moving the process without any roadblocks and obstacles. The various intermediaries involved in the process of the public issue are Lead manager, Domestic and international legal counsels, Auditors, Registrar, IPO grading agencies, Depository (CDSL and NSDL), Advertisers, Bankers to the issue, Self-Certified Syndicate Bank etc. enters into the Engagements letter, MOU and other required agreements (Underwriting agreements and listing agreements) with the Issuer,
7. There is also an important aspect regarding the approval of the prospectus and offer document with the SEBI, Stock Exchanges where company get listed and RBI (If issuer is an banking company). The offer document of any public issue is an important tool to give the overview of the financial positions, future prospective and the motive of going to public. The various points defined and required to discloses are capital structure, Business, risk factor, merchant bankers, issue size, amount required for the public issue, price band, details of the promoter’s group, litigation and defaults, if any,
8. The another aspect is to get listed on the stock exchanges after the allotment done within the period of 30 days from the closure of subscription of shares (15 days in case of Book Building issue) and the excess amount refunded to the applicants. As per SEBI Guidelines, the issuer company should complete the formalities for trading at all the Stock Exchanges where the securities are to be listed within 7 working days of finalization of Basis of Allotment.
So here defines some requirements of fulfilling compliance and other obligation in the IPO process. Now there are some points describing the step by step process of the IPO. These points are hereby as follows:
1. Decision for going for an IPO,
2. Appointment of BRLM and legal counsel,
3. Due Diligence and meetings with the issuer,
4. Drafting of prospectus (Deemed Prospectus, Red Herring Prospectus, Shelf Prospectus and Abridged Prospectus),
5. Filling of offer document with the SEBI and Stock Exchanges,
6. SEBI giving the approval after checking all the matter and facts and can also ask documents and information for further clarification,
7. Public announcement and road shows, advertisement in newspaper and on website of company and stock exchange,
8. Book building as specified by stock exchanges,
9. Pricing and allocation of shares after closure of issue,
10. Filling of final prospectus with ROC, SEBI and Stock Exchanges,
11. Listing procedures
12. Unblocking of the funds under escrow account,
13. Post issue compliances and obligations.
There is a type of IPO for reducing the time period of thinking of going public to the listing on stock exchange. The aspects called as Fast Track Issue for which the issuer required to comply with the conditions and compliance requirement as specified under the Rules and Regulations defined. The aspects defining the conditions and compliances are:
1. The average market capitalization of public shareholding of the issuer is at least 5000 crore rupees,
2. The equity shares of the issuer have been listed on any recognized stock exchange having nationwide trading terminals for a period of at least three years immediately preceding the reference date,
3. The issuer has redressed at least 95% of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date,
4. The issuer has been in compliance with the equity listing agreement for a period of at least 3 years immediately preceding the reference date,
5. No show-cause notices have been issued or prosecution proceedings initiated or pending against the issuer or its promoters or whole time directors as on the reference date,
6. The entire shareholding of the promoter group of the issuer is held in dematerialized form on the reference date,
7. The impact of auditors’ qualifications, if any, on the audited accounts of the issuer in respect of those financial years for which such accounts are disclosed in the offer document does not exceed 5%. of the net profit or loss after tax of the issuer for the respective years,
8. The annualized trading turnover of the equity shares of the issuer during 6 calendar months immediately preceding the month of the reference date has been at least 2% of the weighted average number of equity shares listed during such 6 months’ period,
9. Any other requirement as specified under the upcoming amendments and circulars as defined.
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