IPOPlatform Blogs

Oversubscription occurs when demand for an IPO exceeds the shares offered, indicating strong investor interest and often leading to higher listing prices. Allotment in such cases is usually done through a lottery system. In contrast, undersubscription happens when the number of applications is lower than the shares available, reflecting weak demand and potentially leading to the IPO’s cancellation if minimum subscription levels (90%) aren’t met. Both scenarios offer key insights into market sentiment, investor confidence, and a company’s perceived value during the IPO process

An IPO subscription refers to the process where investors apply to buy shares of a company during its Initial Public Offering. Subscription levels indicate demand for the IPO, affecting the listing price and investor allocation chances. Platforms like NSE and BSE provide real-time subscription data, helping investors track interest and develop investment strategies for better decision-making during the IPO process.

The process following the approval of a Draft Red Herring Prospectus (DRHP) is vital for companies preparing for their Initial Public Offering (IPO). After securing DRHP approval, the issuer, along with its merchant bankers and intermediaries, must file the Red Herring Prospectus (RHP) and adhere to SEBI regulations, including publishing pre-issue advertisements and managing the subscription period. The timeline leading to the listing, known as the T+3 process, involves crucial steps such as fund transfers, allotment procedures, and post-issue communications. Successful navigation of these steps ensures compliance, builds investor confidence, and culminates in the smooth listing and trading of shares on the stock exchange.

This article breaks down the key elements of IPO pricing and listing in simple terms, focusing on both SME IPOs and mainboard IPOs. It explains how the IPO price and listing price are determined, the role of demand vs. supply in setting the listing price, and the difference between offer price and listing price. It also covers concepts like listing gains, flat listing, and listing losses, while highlighting the NSE’s new 90% price control cap for SME IPOs to reduce price volatility. This guide helps investors understand the IPO process, making informed investment decisions easier.

To list on the NSE SME Exchange, a company must comply with the Companies Act 1956/2013. The post-issue paid-up capital should not exceed ₹25 crore, and the company must have an operational history of at least three years. Promoters must hold at least 20% of post-issue share capital. Key financial requirements include positive net worth, operating profit for two out of three years, and a new Free Cash Flow to Equity (FCFE) criterion, introduced in 2024 for SME IPO applicants.

To list on the BSE SME Exchange, a company must meet stringent requirements under the Companies Act 1956/2013. These include maintaining a post-paid up capital not exceeding ₹25 crore, a net worth of at least ₹1 crore for the last two years, and net tangible assets of ₹3 crore in the previous financial year. Additionally, the company must have a track record of at least three years, or receive project funding from approved institutions. Compliance with listing norms is essential for a successful SME IPO listing.

Services provided by Merchant Bankers in India are fundraising through IPOs, portfolio management, mergers, acquisitions, and project finance. They act as intermediaries between issuers and investors, regulated by SEBI’s Merchant Bankers’ Act, 1992. Top merchant bankers play a crucial role in underwriting IPOs, securing anchor investors, and guiding companies post-listing. Choosing the right merchant banker depends on factors such as market share, listing gains, success ratios, and post-listing performance, ensuring companies achieve optimal value and long-term growth.

The Draft Red Herring Prospectus (DRHP) is a key document in the IPO process for SMEs, filed before the final Red Herring Prospectus (RHP). It contains crucial details about the company, including its business operations, financials, and risk factors. The DRHP must be approved by SEBI and relevant stock exchanges, making it essential for a successful IPO. Learn how DRHP supports IPO readiness for SMEs in India.

In a Draft Red Herring Prospectus (DRHP), the details regarding promoters and the promoter group are crucial for compliance with SEBI (ICDR) Regulations, 2018. This information helps investors assess the company’s leadership, credibility, and track record, which are vital for attracting investment. Merchant bankers in India play a significant role in effectively presenting this information, ensuring regulatory adherence while enhancing investor confidence. A clear understanding of promoters and their groups is essential for the success and valuation of SME IPOs. 

Capital structure plays a vital role in a company's financial health, impacting its IPO success. Proper disclosure of shareholding patterns, ESOPs, and restructuring is crucial for attracting investors. Understanding the balance of debt and equity enhances IPO valuation and financial flexibility, essential for SMEs navigating the IPO process. Regulation on issue of bonus shares for SME IPOs in India  

Grey Market Premium (GMP) Explained for IPOs. Discover what Grey Market Premium (GMP) means in IPOs. GMP is the extra amount investors are willing to pay over the IPO price before shares officially list on NSE SME or BSE SME. Learn how to check GMP, its impact on IPO pricing, and its high-risk nature. Understand SME IPO GMP and its significance.

IPO valuation plays an important role in the process of IPO. Financial Performance like Revenue, profit margins, earnings growth, and cash flow are critical metrics for valuation. Fair valuation provides a clearer and accurate picture of a company’s financials, assets and liabilities. Merchant Bankers in India handle the process of IPO Valuation.