IPOPlatform Blogs

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.

Investing in an IPO involves understanding the different investor categories such as QIBs, NIIs/HNIs, RIIs, and Anchor Investors, each with distinct quotas and criteria. Whether you’re a retail investor or an institutional player, choosing the right category based on eligibility and investment amount is key. Explore how these categories work, their quotas, and what makes each unique to assist in informed decision-making .

Oversubscription occurs when an IPO’s demand surpasses the available shares, signaling robust investor interest and often resulting in higher listing prices. Allotment is typically conducted via a lottery system. Conversely, undersubscription indicates weak demand, with applications falling short of available shares, which can lead to cancellation if the minimum subscription threshold (90%) isn’t reached. Both situations provide important insights into market sentiment, investor confidence, and the perceived value of the company during the IPO process.

An IPO subscription is the process where investors apply to purchase shares during a company’s Initial Public Offering. The subscription levels reflect the demand for the IPO, influencing the listing price and the allocation chances for investors. Platforms like NSE and BSE provide real-time subscription data, allowing investors to gauge interest and refine their investment strategies for informed decision-making throughout the IPO process.

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.

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 profits of Rs1 crore for any two out of three years, and Free Cash Flow to Equity (FCFE) shall be positive for any two out of three years.

To list on the BSE SME Exchange, a company must meet the eligibility norms and 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. Profitability criteria includes that a company must have operating profits of Rs 1 crore for any two out of last three financial years. 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