IPOPlatform Blogs

A company aiming to go public has to fulfil the listing criteria and eligibility criteria of SEBI in the case of Mainboard IPO and relevant stock exchanges for SME IPO in India. Various listing requirements as laid down in SEBI ICDR Regulations are to be met for maintaining compliances and transparency in the IPO process. Promoter and Promoter Group information is one of the requisite information for IPOs.

To be eligible for an Initial Public Offer (IPO) under NSE and BSE, companies must comply with SEBI ICDR Regulations (2018). This includes a minimum paid-up capital of Rs. 10 crores, average operating profits of Rs. 15 crores over three years, and net tangible assets of Rs. 3 crores. Additional conditions cover track record, investor grievance redressal, financial obligations, and offer for sale regulations. Companies must meet all criteria before applying for listing.

SEBI’s Regulation 6(2) offers an alternative QIB Route for companies unable to meet mainboard profitability criteria. Under this, 75% of shares must be allocated to Qualified Institutional Buyers (QIBs) through a book-building process. Companies failing to qualify can explore SME exchanges like BSE SME or NSE Emerge, with guidance from IPO advisors and merchant bankers. This route enables emerging companies to raise capital, enhance visibility, and eventually transition to the mainboard.

Due diligence is a critical step for IPO preparation, ensuring compliance, financial stability, and transparency. It evaluates legal, financial, and operational aspects to mitigate risks and build investor confidence. Key stakeholders like merchant bankers, legal advisors, and auditors verify disclosures and regulatory compliance. The process identifies hidden liabilities, ensures accurate valuation, and aligns with IPO listing requirements—establishing a solid foundation for a successful public offering.

An IPO involves listing a company on stock exchanges like NSE Emerge or BSE SME by adhering to SEBI’s regulatory process. IPO pricing is done through the Book Building Method, which determines the price based on investor demand, or the Fixed Price Method, where the price is pre-set. Book building offers dynamic pricing, market-driven valuation, and transparency, while the fixed price method is simpler but lacks flexibility. Both methods impact investor confidence, share allocation, and post-IPO performance.

The Objects of the Issue section in an IPO’s DRHP/RHP outlines how raised funds will be used, such as for loan repayment, working capital, or project funding. Companies must provide detailed disclosures, including loan details, investment forms, and project cost breakdowns, to comply with SEBI regulations. This transparency builds investor trust and ensures funds are allocated for sustainable growth while avoiding regulatory scrutiny.

Pre-IPO investments let investors purchase shares in a company before it goes public, offering an early entry point with potential for high returns. However, these opportunities carry risks, including market volatility, illiquidity, and potential changes in IPO timing.

Private placement lets companies raise funds through the sale of shares to pre-selected investors. Often a step before going public, it involves a detailed procedure, including board resolutions, shareholder approvals, and issuing a PAS-4 letter. This approach helps companies attract high-net-worth investors and strengthen financial health. Unlike public offerings, it’s regulated under SEBI rules, allowing companies to maintain control and focus on their growth trajectory.

After the Draft Red Herring Prospectus (DRHP) is approved, companies preparing for their IPO must file the Red Herring Prospectus (RHP) and comply with SEBI regulations. This includes issuing pre-issue advertisements and managing the subscription period. The T+3 timeline involves essential steps like fund transfers, allotments, and post-issue communications. Successfully navigating these processes ensures compliance, instills investor confidence, and facilitates a smooth listing and trading of shares on the stock exchange.

This article simplifies the essentials of IPO pricing and listing, covering both SME and mainboard IPOs. It explains how IPO and listing prices are set, the impact of demand and supply, and the distinction between offer and listing prices. Key concepts like listing gains, flat listing, and listing losses are discussed, along with the NSE’s new 90% price cap for SME IPOs to control volatility, helping investors make informed decisions.

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.

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