Study of the dynamics of the

IPO (initial public offering) markets in India.

Submitted by
Vaishnavi Mourya
PRN NO: 2021018100121452
Under the guidance of
Prof. Kavita Kushwaha

Submitted to
Department of BBA
(Bachelor's in business administration)
Of
Bakliwal Foundation College of Arts, Commerce & Science,
Vashi
KKS UNIVERSITY
For Partial Fulfillment
Degree of
Bachelor of Business Administration

1
 DECLARATION

I Vaishnavi Mourya declare that the thesis entitled ,

Study of the Dynamics of the IPO markets in India

submitted by me for the partial fulfillment of degree of BBA
is the record of project work carried out by me during the
period from 2023 to 2024 under the supervision of Prof.
Kavita Kushwaha Bakliwal Foundation College of Arts,
Commerce and Science, Vashi. I further declare that the
material obtained from other sources has been duly
acknowledged in the project / thesis. I shall be solely
responsible for any plagiarism or other irregularities, if
noticed in the thesis.

Signature of the Research Scholar :

Name of Research Scholar :

Date: 15/03/2024

Place: Vashi (Navi Mumbai)

2
 CERTIFICATE

I certify that the work incorporated in the thesis “Study of the dynamics
of the IPO markets in India” submitted by Vaishnavi Mourya was
carried out by the candidate under my supervision/guidance. To the best
of my knowledge: (i) the candidate has not submitted the same research
work to any other institution for any degree/diploma, (ii) the project
submitted is a record of original project work done by the student during
the period of study under my supervision, and (iii) the project represents
independent work on the part of the Student.

Signature of Principal:

Name of Principal: Dr. Sharadhkumar Shah

Signature of Supervisor:

Name of Supervisor: Prof. Kavita Kushwaha

Date: 15/03/2024

Place: Vashi (Navi Mumbai)

3
 Acknowledgement

At the outset I would like to express my humble gratitude to

Dr. Sharadhkumar Shah for guiding me through the
expedition of my project work. It was my honor to be
associated with Dr. Sharadhkumar Shah, a man of
tremendous knowledge and true values. I appreciate his
contributions to my research be it in form of time, valuable
research inputs, guidance for approaching the respondents,
ideas for nurturing chapter writing skills are few to highlight.
He allowed me to grow as a researcher and shaped and
encouraged my ideas in a constructive sense. Your guidance
on research or on choosing the career path has always been
and will always be invaluable for me.

Vaishnavi Mourya
Student's Signature & Name

Date: 15/03/2024

Place: Vashi (Navi Mumbai)

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SR.NO. TABLE OF CONTENTS PG.NO.
1. Introduction 12-14
1.1 Overview of IPO. 12-13

1.2 Importance of IPO markets in India. 13-14

2. Historical Background 15-20

2.1 Evolution of IPO markets in India. 15-18

2.2 India’s IPO Boom: A sign of vibrant markets and growing 18-20
investor confidence.
2.3 Indian IPO landscape in 2023 review and Future outlook. 20-23

3. Regulatory Framework and Role of SEBI. 24-29

3.1 SEBI guidelines and regulations. 24-25

3.2 Recent Developments in SEBI’s Regulatory framework. 25-29

4. Types of IPOs 30-36

4.1 Book-Building vs. Fixed Price. 32-33

4.2 Offer for Sale (OFS) vs. Fresh Issue 33-36

5. Process of IPO 37-41

5.1 IPO pricing mechanisms 39

5.2 Underwriting process 40-41

6. Preparation and Planning for IPO 42-51

6.1 Due Diligence Process 44-45

6.2 Engagement of IPO Intermediaries 46-51

7. Documentation in IPO 52-57

7.1 Draft Red Herring Prospectus (DRHP) 55-56

7.2 Role of Underwriters and Lead Managers 56-57

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8. Price Discovery in IPO 58-65
8.1 Book-Building Process 61-64

8.2 Determining the Offer Price 64-65

9. Allotment and Listing Process 66-79

9.1 Criteria for Allotment 70-78

9.2 Listing on Stock Exchanges 78-79

10. Post-IPO Activities 80-83

10.1 Market Performance Analysis 80-83

10.2 Utilization of Raised Capital 83

11. Factors Influencing IPO 84-87

12. Case Studies 88-90

12.1 Successful IPOs 88

12.2 Failed IPOs 89-90

14. Conclusion 91-92

15. Bibliography 93

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SR.NO. LIST OF TABLES PG.NO.

1. BOOK BUILDING VS FIXED PRICE IPO 36

2. IPO VS OFS 38

3. DIFFERENCE BETWEEN BOOK BUILDING PROCESS 78-79

AND IPO

4. IPO PROCESS TIMELINE BY IPO PLATFORM 89

(TENTATIVE)

5. IPO PROCESS TIMELINE BY STAGES (TENTATIVE) 89

6. IPO RETAIL CATEGORY BASIS OF ALLOTMENT 92

7. NII IPO INVESTOR CATEGORY 92

8. ANCHOR RESERVATION CRITERIA 94

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 LIST OF ABBREVATIONS

1. IPO: INITIAL PUBLIC OFFERINS

2. SEC: SECURITIES AND EXCHANGE COMMISSION
3. BSE: BOMBAY STOCK EXCHANGE
4. SEBI: SECURITIES AND EXCHANGE BOARD OF INDIA
5. ITP: INSTITUTIONAL TRADING PLATFORM
6. IT: INFORMATION AND TECHNOLOGY
7. HNIS: HIGH NETWORTH INDIVIDUALS
8. NII: NON-INSTITUTIONAL INVESTORS
9. SMES: SMALL AND MEDIUM ENTERPRISES
10. LIC: LIFE INSURANCE CORPORATION
11. IREDA: INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY
12. PSU: PUBLIC SECTOR UNDERTAKINGS
13. IRCTC: INDIAN RAILWAY CATERING AND TOURISM
14. Q3: THIRD QUATERLY RESULTS
15. PE: PRIVATE EQUITY FRIMS
16. YOY: YEAR OVER YEAR
17. U.S: UNITED STATES
18. UP: UTTAR PRADESH
19. MP: MADHYA PRADESH
20. DRHP - DRAFT RED HERRING PROSPECTUS
21. E-IPO - ELECTRONIC INITIAL PUBLIC OFFERING
22. AIF - ALTERNATIVE INVESTMENT FUND
23. IOSCO - INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS
24. REITS - REAL ESTATE INVESTMENT TRUSTS
25. SM REITS - SMALL & MEDIUM REITS
26. SPV - SPECIAL PURPOSE VEHICLE
27. SSE - SOCIAL STOCK EXCHANGE
28. NPO - NOT-FOR-PROFIT ORGANIZATION
29. ZCZP - ZERO COUPON ZERO PRINCIPAL INSTRUMENT
30. OFS - OFFER FOR SALE

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31. ROC - REGISTRAR OF COMPANIES
32. QIB - QUALIFIED INSTITUTIONAL BUYER
33. NSE - NATIONAL STOCK EXCHANGE
34. ASBA - APPLICATION SUPPORTED BY BLOCKED AMOUNT

35. RHP - RED HERRING PROSPECTUS

36. EPS: EARNINGS PER SHARE

37. ROE: RETURN ON EQUITY
38. EBITDA: EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND
AMORTIZATION
39. M&A: MERGERS AND ACQUISITIONS
40. SCSB: SELF-CERTIFIED SYNDICATE BANKS
41. RTI: REGISTRAR TO THE ISSUE
42. NSDL: NATIONAL SECURITIES DEPOSITORY LIMITED
43. CDSL: CENTRAL DEPOSITORY SERVICES LIMITED
44. S-1 - FORM S-1 REGISTRATION STATEMENT
45. NDR - NON-DEAL ROADSHOW
46. CEO - CHIEF EXECUTIVE OFFICER
47. CFO - CHIEF FINANCIAL OFFICER
48. PD - PRICE DISCOVERY
49. P&D - PRICE AND DEMAND
50. ATR - ATTITUDES TO RISK
51. VOL - VOLATILITY
52. AI - AVAILABLE INFORMATION
53. MM - MARKET MECHANISM
54. NDRS - NON-DEAL ROADSHOWS
55. ETFS - EXCHANGE-TRADED FUNDS
56. SAT - SECURITIES APPELLATE TRIBUNAL
57. INR - INDIAN RUPEES
58. BOD - BOARD OF DIRECTORS
59. UK - UNITED KINGDOM
60. RBI - RESERVE BANK OF INDIA
61. RHP - RED HERRING PROSPECTUS

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62. PR - PUBLIC RELATIONS
63. sNII - SMALL NON-INSTITUTIONAL INVESTOR
64. bNII - BIG NON-INSTITUTIONAL INVESTOR
65. PAN - PERMANENT ACCOUNT NUMBER
66. BOA - BASIS OF ALLOTMENT
67. RII - RETAIL INDIVIDUAL INVESTOR
68. DP - DEPOSITORY PARTICIPANT
69. CAN - CONFIRMATION OF ALLOCATION NOTE
70. RII - RETAIL INDIVIDUAL INVESTORS
71. AIM - ALTERNATIVE INVESTMENT MARKET
72. PLUS - THE PLUS MARKETS GROUP PLC
73. UK - UNITED KINGDOM
74. CPA - CERTIFIED PUBLIC ACCOUNTANT
75. GBP - BRITISH POUND
76. USD - UNITED STATES DOLLAR
77. R&D - RESEARCH AND DEVELOPMENT
78. P/E - PRICE-TO-EARNINGS
79. P/B - PRICE-TO-BOOK
80. P/S - PRICE-TO-SALES
81. AGM - ANNUAL GENERAL MEETING
82. KYC - KNOW YOUR CUSTOMER
83. ROC - REGISTRAR OF COMPANIES
84. MCA - MINISTRY OF CORPORATE AFFAIRS
85. MSME - MICRO, SMALL, AND MEDIUM ENTERPRISES
86. IEPF - INVESTOR EDUCATION AND PROTECTION FUND
87. AOC - ANNUAL ACCOUNTS
88. MGT - MANAGEMENT
89. PAS - PRIVATE ASSET SYSTEM
90. DPT - DEPOSIT
91. XBRL - eXTENSIBLE BUSINESS REPORTING LANGUAGE
92. OP - ONE PERSON
93. BPM - BOARD AND PORTFOLIO MANAGEMENT

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94. CIR - CIRCULAR
95. FY - FINANCIAL YEAR
96. GDP - GROSS DOMESTIC PRODUCT
97. FII - FOREIGN INSTITUTIONAL INVESTMENT
98. DCF - DISCOUNTED CASH FLOW
99. PAT - PROFIT AFTER TAX
100. RTA - REGISTRAR AND TRANSFER AGENT
101. CA - CHARTERED ACCOUNTANT
102. ROE - RETURN ON EQUITY
103. CAGR - COMPOUND ANNUAL GROWTH RATE
104. EY - ERNST & YOUNG
105. CAPEX - CAPITAL EXPENDITURE
106. KPI - KEY PERFORMANCE INDICATOR
107. VC - VENTURE CAPITAL
108. GST - GOODS AND SERVICES TAX
109. ESG - ENVIRONMENTAL, SOCIAL, AND GOVERNANCE
110. FDI - FOREIGN DIRECT INVESTMENT
111.InvIT - INFRASTRUCTURE INVESTMENT TRUST

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 CHAPTER 1: INTRODUCTION IPO

An IPO is an initial public offering, in which shares of a private company are made available to
the public for the first time. An IPO allows a company to raise equity capital from public
investors. An Initial public offering (IPO) refers to the process of offering shares of a private
corporation to the public in a new stock issuance. Companies must meet requirements by
exchanges and the Securities and Exchange Commission (SEC) to hold an IPO. IPOs provide
companies with an opportunity to obtain capital by offering shares through the primary market.
Companies hire investment banks to market, gauge demand, set the IPO price and date, and more.
An IPO can be seen as an exit strategy for the company’s founders and early investors, realizing
the full profit from their private investment.

1.1 OVERVIEW OF IPOs

An overview of IPOs provides a foundational understanding of what they are and how they
function:

 Definition: An Initial Public Offering (IPO) is the process through which a private
company becomes publicly traded by offering its shares to the general public for the first
time on a stock exchange.
 Purpose: Companies pursue IPOs to raise capital for various purposes, such as expansion,
debt repayment, research and development, or acquisitions.
 Process:
- Preparation: The company engages investment banks to underwrite the offering, prepares
financial statements, and navigates regulatory requirements.
- Pricing: The company and its underwriters determine the IPO price based on factors like
company valuation, market conditions, and investor demand.
- Offering: The company issues share to institutional and retail investors through the stock
exchange.
- Listing: Shares are listed on a stock exchange, enabling them to be traded publicly.
 Benefits for Companies:
- Access to capital markets for funding growth.
- Increased visibility and credibility in the market.
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 - Liquidity for existing shareholders.
 Benefits for Investors:
- Opportunity to invest in early-stage companies with growth potential.
- Possibility of capital appreciation.
- Ability to diversify investment portfolios.
 Risks:

- Market volatility can affect share prices.

- Lack of historical performance data for the company.

- Potential for dilution of ownership stake for existing shareholders.

 Regulatory Framework:

- IPOs are regulated by securities commissions or regulatory bodies in each country.

- Disclosure requirements ensure that investors have access to relevant information about
the company’s financial health and prospects.
 Market Impact:

- IPOs can influence market sentiment and liquidity.

- Successful IPOs may attract more companies to go public.

Overall, IPOs play a crucial role in the financial ecosystem by facilitating capital formation and
providing investment opportunities for both companies and investors.

1.2 IMPORTANCE OF IPO IN INDIAN MARKET

 Capital Formation: IPOs provide an avenue for companies to raise capital from the public
markets. This capital can be used for various purposes such as expansion, research and
development, debt repayment, and working capital requirements. For growing companies,
especially in emerging sectors like technology and healthcare, access to capital through
IPOs is crucial for fueling growth and innovation.

 Economic Growth: A vibrant IPO market contributes to economic growth by fostering

entrepreneurship, job creation, and innovation. When companies go public, they not only
raise capital but also increase their visibility and credibility, attracting talent and
investments, which in turn stimulates economic activity.
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  Investor Participation: IPOs offer retail and institutional investors the opportunity to invest
in promising companies in their early stages of growth. This democratization of
investment allows individuals to participate in wealth creation and diversify their
investment portfolios. Moreover, successful IPOs can instill confidence in the stock
market and attract more investors, thereby deepening the capital markets in India.

 Market Development: The presence of a robust IPO market enhances the overall
development of the capital markets in India. It provides liquidity to existing shareholders,
facilitates mergers and acquisitions, and encourages corporate governance and
transparency standards. Additionally, IPOs contribute to the growth of stock exchanges
and ancillary services such as investment banking, legal advisory, and financial research.

 Global Visibility: Successful IPOs of Indian companies not only raise capital domestically
but also enhance India’s visibility in the global financial markets.

Indian IPOs listed on international exchanges can attract foreign investment and foster cross-
border collaborations and partnerships. This exposure can further strengthen India’s position as a
favorable destination for investment and business opportunities.

In conclusion, IPO markets play a pivotal role in India’s economic growth, capital market
development, and global integration. By providing companies with access to capital and investors
with investment opportunities, IPOs contribute to wealth creation, job generation, and the overall
prosperity of the economy.

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 CHAPTER 2: HISTORICAL BACKGROUND

The genesis of Initial Public Offerings (IPOs) in the Indian financial market dates back to the 19th
century and is closely linked with the establishment of stock exchanges in the country. The
Bombay Stock Exchange (BSE), established in 1875, provided a platform for companies to raise
capital from the public. However, in the post-independence era, especially during the 1980s and
1990s, IPOs began to gain notable traction.This period witnessed a liberalization of the Indian
economy, paving the way for private enterprises to flourish.

The buoyant economic conditions coupled with regulatory reforms catalyzed the growth of
IPOs.The creation of the Securities and Exchange Board of India (SEBI) in 1992 was a turning
point, introducing stringent regulations and transparency to the IPO process. These reforms
bolstered investor confidence and attracted many domestic and international companies to list on
Indian bourses.Over the years, Initial Public Offering have evolved, reflecting the dynamism of
the Indian economy, and have become a prominent feature of the country’s capital market
narrative.

2.1 EVOLUTION OF IPO MARKETS IN INDIA

The history of Initial Public Offerings (IPOs) in India is a fascinating journey that reflects the
dynamic evolution of the country's economy and financial markets. From modest beginnings to
today's mega listings, Indian IPOs have played a pivotal role in shaping the nation's corporate
landscape. This article will take you on a comprehensive journey through the milestones, trends,
and statistics that define the history of Indian IPOs.

I. Humble Beginnings (Late 19th Century - 1980s):

The concept of IPOs in India can be traced back to the late 19th century, with the establishment of
the Bombay Stock Exchange (BSE) in 1875. However, the market for public offerings remained
relatively subdued until the 1980s. During this period, companies seeking capital infusion
predominantly relied on traditional debt financing.

The 1980s marked a significant turning point with the introduction of economic reforms,
liberalization, and globalization. The era saw a gradual shift towards equity financing, and a few
15
pioneering companies leaped to go public. The IPO landscape began to transform, laying the
foundation for the vibrant market we witness today.

II. Regulatory Reforms and Milestones (1990s - Early 2000s):

The Securities and Exchange Board of India (SEBI) was established in 1988, and the subsequent
years witnessed a series of regulatory reforms aimed at fostering transparency, investor protection,
and market efficiency. The introduction of the SEBI (Disclosure and Investor Protection)
Guidelines in 1992 was a landmark event that standardized disclosure norms for companies going
public.

The mid-1990s to the early 2000s saw a surge in IPO activity. Companies from diverse sectors,
including information technology, telecommunications, and pharmaceuticals, tapped into the
capital market to fuel their growth ambitions. The IPO boom was fueled by robust economic
growth, technological advancements, and a growing appetite for equity investments among retail
and institutional investors.

III. Dotcom Boom and Bust (Late 1990s):

The late 1990s witnessed the global dotcom boom, and India was not immune to the fervor.
Several technology and internet-based companies rushed to go public, leading to a frenzy of IPOs.
The BSE Sen sex soared to unprecedented levels, reflecting the exuberance in the market.
However, the dot-com bubble eventually burst in the early 2000s, resulting in a sharp correction in
stock prices and a cautious approach towards IPOs.

IV. Recovery and Resilience (Mid-2000s - 2010s):

Post the dot-com bust, the Indian IPO market displayed resilience and gradually recovered. The
mid-2000s saw a resurgence of IPO activity, driven by a mix of domestic and global factors.
Robust economic growth, a stable political environment, and increasing investor confidence
contributed to the positive sentiment.

The introduction of Book Building as a price discovery mechanism in 2005 brought more
efficiency to the IPO process. Companies increasingly adopted this method to determine the IPO
price based on investor demand, contributing to more realistic valuations.

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V. Regulatory Enhancements and Reforms (2010s):

The SEBI continued to play a proactive role in refining regulations to align with global best
practices and address emerging challenges. The introduction of the SEBI (Issue of Capital and
Disclosure Requirements) Regulations in 2009 streamlined the IPO process, emphasizing
transparency, and investor protection.

The SEBI's efforts to curb fraudulent activities and market manipulation through enhanced
surveillance mechanisms bolstered investor confidence. The introduction of the Institutional
Trading Platform (ITP) in 2013 provided a dedicated exchange for startups to list and raise capital.

VI. Mega Listings and Market Dynamics (2010s - Present):

The last decade witnessed a surge in mega listings, with companies raising substantial capital
through IPOs. The Indian stock market saw blockbuster listings in various sectors, including
technology, finance, and consumer goods. The advent of unicorns – privately held startups valued
at over a billion dollars – going public added to the excitement.

Technology companies, in particular, played a pivotal role in shaping the IPO landscape. The
success of e-commerce giants, fin-tech firms, and software companies in the public markets
showcased the maturity and potential of India's tech ecosystem.

some key statistics and trends that highlight the evolution of Indian IPOs:

2.1.1 Number of IPOs:

 1990s: Limited IPO activity, gradual increase

 2000s: Surge in IPOs, especially during the mid-2000s.
 2010s: Robust IPO activity with a focus on quality issuance's.
 2020s: Record-breaking IPOs, with mega listings dominating.

2.1.2 Sectoral Distribution:

Early Years: Diversification across traditional industries.

2000s: Emergence of technology and IT-enabled services.
2010s: Dominance of technology, finance, and consumer sectors.
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 2020s: Continued tech dominance, with a rise in green and sustainable offerings.

2.1.3 Market Capitalization:

1990s-2000s: Gradual increase in overall market capitalization.

2010s-Present: Significant expansion, driven by mega listings and valuation surges.

2.1.4 Investor Participation:

1990s-2000s: Increasing interest from institutional investors.

2010s-Present: Growing retail investor participation, especially in high-profile IPOs.

2.2 INDIA'S IPO BOOM: A SIGN OF VIBRANT MARKETS AND GROWING

INVESTOR CONFIDENCE

In recent years, the Indian equity market has witnessed an astounding surge in IPO activity,
defying global economic uncertainties and underscoring the resilience of the Indian economy.
Post the 2020 Covid crash, Rossari Biotech initiated the wave of IPOs, witnessing overwhelming
subscription and listing success. This event paved the way for numerous IPOs, demonstrating the
robustness of Indian equity markets and attracting investments from various segments, including
fervent participation from HNIs and retail investors.

Over the past three years, the main board IPOs have displayed remarkable strength. In 2021, 63
companies went public, raising Rs 1.2 lakh crore. Despite global market challenges, 2022
witnessed 40 IPOs, accumulating Rs 60,000 crore. As of November in 2023, 48 companies have
already gone public, raising more than Rs 45,000 crore.

This IPO surge extends to the SME space as well, with 2023 breaking records with 156 IPOs,
raising more than Rs 4,200 crore. The increasing average ticket size in SME IPOs, from Rs 13
crores in 2021 to Rs 18 crore in 2022 and Rs 25 crore in 2023, indicates that promoters are
seeking larger capital to fuel their growth ambitions, and investors are responding positively to
these opportunities.The active participation of retail investors has been a key driver of this IPO

18
boom, often resulting in massive over-subscriptions. This reflects a growing appetite for equities
among retail investors and a heightened confidence in the Indian economy.

Notably, almost 50% of IPOs have been primary tranche issuance's, signaling that companies are
raising fresh capital to expand their businesses or pay off debt. This demonstrates promoters'
confidence in the future prospects of their companies and their belief in the ability of the Indian
market to fund their growth aspirations.

SEBI's strategic move to reduce IPO listing timelines from T+6 to T+3 days is a significant step
towards streamlining the IPO process, making it more attractive for both issuers and investors. By
expediting the listing process, issuers can access capital more quickly, bolster market sentiment,
mitigate pricing risks, and streamline administrative operations. For investors, it means gaining
early access to shares, reducing holding period risk, improving liquidity, and fostering confidence
in the Indian capital markets.

Furthermore, SEBI has introduced several measures for the primary market space in the last
couple of years, such as increasing lock-in periods for anchor investors and further segmenting
the NII tranche for big and relatively smaller ticket sizes. These measures aim to enhance
transparency and avoid sharp swings in market prices.
Looking ahead, with India projected to surpass $4,000 per capita income by 2030, the growth
potential for listed companies, both large and small, is immense. This growth will be driven by a
surge in consumer spending, fueled by rising purchasing power and the digitization of the
economy.

Investors participating in this growth story can benefit in the long run by adopting a systematic
portfolio approach diversified across different equity categories, including large cap, mid-cap,
small-cap, and SMEs. Currently, only 3% of India's population invests in the market, but with
rising disposable incomes, a substantial influx of capital into the equity markets is anticipated.
This influx will further fuel the growth of the Indian equity market and provide immense
opportunities for business .

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Recent highlights include India’s largest life insurer, LIC, raising capital and becoming the largest
IPO ever, with 73.38 lakh applications. This record was surpassed last week when Tata
Technologies, a Tata Group company, launched its IPO, garnering a massive 73.58 lakh
applications and listing with 140% gains.

The last week witnessed the launch of five main board IPOs, a scenario previously seen only in
March 2021. ?2.2 trillion was blocked in these IPOs, constituting around 6.5% of the nation's
currency in circulation. IREDA Ltd surged 88% on the listing day, becoming the second-highest
opening by a PSU IPO after IRCTC. Gandhar Oil Refinery opened at 76% up.

The IPO landscape has witnessed a notable shift in the types of companies going public in the last
few years. Tech-focused IPOs have dominated the primary markets, with companies like Zomato,
Policy Bazaar, Paytm, Nykaa, Nazara, Delhivery, Hosanna, etc., making their mark. This trend
highlights the growing acceptance of new-age sectors by Indian markets and the willingness of
investors to embrace innovation.

Recently, even PhonePe's decision to relocate its base from Singapore to India last year after
paying a huge tax in doing so showcases the faith in Indian primary markets. Now, several other
unicorn tech startups are also considering shifting their base to India and looking to gain the
regulator’s confidence and go public soon. This notable shift underscores the evolving dynamics
of the Indian IPO landscape and change in view of Indian investors towards new-age sectors.

In conclusion, India's IPO market is poised for continued growth, driven by a combination of
factors, including a resilient economy, investor confidence, a supportive regulatory environment,
and the rise of tech-focused companies. As India's financial markets mature and its economy
expands, the IPO market will play an increasingly crucial role in fueling the nation's growth and
creating wealth for investors.

2.3 INDIAN IPO LANDSCAPE IN 2023: A REVIEW AND FUTURE OUTLOOK

In the ever-evolving world of IPOs, the year 2023 has been a tale of two halves. The primary
markets experienced a dry and slow first six months, only to witness a significant surge in new
stocks going public in the latter part of the year. There have been 46 IPOs in 2023, raising a
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cumulative Rs 41095.36 crore. This marks a 30% decline from Rs 59301.7 crore raised through
40 IPOs in 2022.
The record-breaking blockbuster year of 2021, with 63 IPOs raising a whopping Rs 1,18,723.17
crore, set a high benchmark. In comparison, 2023 falls short, with regulatory developments and
economic factors influencing the market dynamics. India emerged as the global leader in the
number of IPOs year-to-date in 2023.
The Jul-Sep period of 2023 saw a staggering 21 IPOs in the Indian main market, compared to just
four in the same quarter of 2022.The three largest IPOs in Q3 in terms of proceeds were RR
Kabel, Concord Biotech, and SAMHI Hotels, with key sectors contributing to this surge including
diversified industrial products, consumer products and retail, and technology.

While the most subscribed IPO for the year has been in Tata Technologies seeing applications of
over Rs 1 lakh crore.SME IPOs in India also recorded impressive listings. In fact, many SME
IPOs in2023 have significantly been oversubscribed, demonstrating strong investor appetite
bolstered by strong after-listing performances of over 150 companies trading at a premium of
range of 20 (109 companies) to 100% (59 Companies).

A total of 181 SME IPOs have been able to raise over 4,643 crore rupees this year. We are
expecting this boom to continue next year with the upcoming elections keeping markets
optimistic.

As India aims to become a $5 trillion economy, SMEs and startups will play a pivotal role given
their significant economic contribution.Equity investments in Indian SMEs present a major
opportunity to help meet this growing credit need. Private equity firms are well-positioned to
capitalize on this opportunity by financing innovation, job creation, and scaling among emerging
SMEs and startups.

The rise of fintechs and the growing digital lending market, expected to reach $515 billion by
2030, have enabled improved financial access for underserved customers like SMEs.
PE firms have invested $17.8 billion in Indian fintechs between 2019-2023 to support SME and
startup growth through innovative solutions. By aiding SMEs’ digital transformation, PE investors
are driving value creation.

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2.3.1 Driving Forces and Momentum for 2024
As 2024 dawns, India boasts a market capitalization surpassing $4 trillion in 2023, securing the
global fourth position behind the U.S., China, and Japan.

The nation records a 22.4% YoY surge in registered investors, reaching 8.49 crore, driven by
positive market sentiments, accessible online trading platforms and social media awareness.
Bihar, UP, and MP witnessed significant surges in new investors, with Bihar leading at 36.6%,
followed by UP (33.8%) and MP (28.9%), as per National Stock Exchange data.

Maharashtra boasts the largest investor pool with a 16.9% increase, totaling over 1.48 crore
registered investors. Northeastern states, particularly Mizoram, Nagaland, and Tripura, also
experienced notable growth, promising a robust outlook for fundraising activities in 2024.
India’s rising population of retail investors significantly contributed to the domestic market’s
resilience, countering foreign investors’ selling pressure observed before November 2023.

The IPO landscape is currently witnessing a surge in activity driven by an urge to tap the capital
markets pre- or post-Indian general elections, coupled with strong economic activity and positive
investor sentiment.

This momentum is expected to continue well into the second half of 2024. To capitalize on this
growth, businesses must prioritize transparency, robust governance, and innovation in their
business models.

Regulatory developments in 2023 aimed at enhancing disclosures and market practices, including
the introduction of the T+3 mechanism for IPOs, have added a layer of efficiency to the process.
This voluntary measure is set to become mandatory from December 2023. Issuers from traditional
sectors took the lead in listing, receiving significant investor interest.

While not billion-dollar deals, these issuers paved the way for a potential revival of the IPO
market in 2024, potentially hosting larger deals. As the country gears up for general elections in
May 2024, promoters and bankers are aiming to expedite their stock market listings, anticipating
volatility during the voting period.

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The uncertainty surrounding economic and business policy continuation, especially if a new
political party comes to power, adds urgency to the listing plans.The IPO pipeline for 2024
appears robust, with a mix of new-age companies and those from traditional sectors. The positive
market sentiment towards issuers with solid fundamentals, demonstrated by the last round of
listings in 2023, is expected to gather momentum and carry into 2024.
While a temporary lull in the months leading to the general elections might be anticipated,
investors are likely to resume interest post the elections, marking a potential uptick in IPO activity.

2.3.2 Challenges and Preparations

Despite a positive outlook, we must remain agile and prepared for uncertainties. Factors such as
geo-political challenges, commodity market stability, and the beginning of the rate cut cycle by
Central Banks globally are expected to boost the global market.

However, one should be ready to adapt, ensuring realistic valuations, the adoption of innovative
models, sufficient working capital, and a healthy balance sheet to maintain profitability. The wait-
and-watch approach ahead of the elections in India might result in a temporary slowdown, but a
pickup is expected post the electoral uncertainties. Firms that proactively address these challenges
and embrace a strategic approach will be well-positioned to make their mark in the dynamic IPO
market of 2024.

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 CHAPTER 3: REGULATORY FRAMEWORK

Initial public offerings (IPOs) play an important role in the growth and expansion of the Indian
economy by providing a platform for companies to raise capital from the public. However, IPOs
are also associated with risks, particularly for investors in retail market. Therefore, it is essential
to have a robust and powerful regulation on framework in place to ensure that companies seeking
to be public company comply with the legal and regulatory requirements and protect the interests
of investors.The Securities and Exchange Board of India (SEBI) is the regulatory body
responsible for supervises the IPO market in India. In this blog, we will discuss SEBI's regulatory
framework for IPOs in India and its impact on the IPO market.

3.1 SEBI'S REGULATORY FRAMEWORK FOR IPOS

SEBI is the foremost regulator for IPOs in India and has put in place a legal framework to make
sure that companies interested to go public comply with legal and regulatory requirements. SEBI's
primary objective is protection of investors' interests and ensure transparency and fairness in the
market.Companies willing to go public in India must be compelled with various legal
requirements under SEBI's regulatory framework.

3.1.1 Some of these requirements include:

Before issuing or announcing a public offer, companies must file a draft red herring prospectus
(DRHP) with SEBI.
 In furtherance with the deliberate use of proceeds from the IPO, the DRHP shall provide
detailed and in brief information about the company's business framework, possible risk
factors and financial performances.
 An independent auditor shall be appointed to audit company's financial statements and to
comply with the rules and guidelines prescribed by the SEBI.
 The company shall ensure to comply with the SEBI's guidelines on corporate governance,
including the appointment of independent directors, audit committees, and disclosure of
related party transactions.
 SEBI also analyses the DRHP filed by the company to ensure that DHRP complies with all
legal and regulatory requirements prescribed by SEBI. SEBI has the authority to even ask for
additional information or clarification from the company before approving the DRHP.
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The legal requirements mandated by SEBI have had a considerable impact on the IPO market in
India. There has been increase transparency in company's operations and financial changes which
has increased investors' confidence to invest in the IPOs. As a result, the number of IPOs in India
has increased significantly over the last few years.

SEBI's Disclosure Requirements for IPOs

The disclosure requirements are one of the crucial and analytical scope of SEBI's framework for
IPOs. Companies are required to declare in depth information about their operations, financial
performance, and risk factors in the DRHP. The objective of SEBI behind the mandate is to give
assurance that information which the investors' have is accurate and trustworthy.

SEBI's disclosure standards are specifically crucial in preserving and safeguarding the interests of
retail investors, who may not have access to the same degree of information as institutional
investors. By mandating corporations to disclose all important information, SEBI guarantees that
retail investors may make informed investment decisions.

3.1.2 SEBI's IPO Pricing Guidelines

SEBI has also established standards for pricing related to initial public offerings (IPOs) to
guarantee and ensure that investors procure a fair price for their shares. The pricing standards
strive to safeguard investors from investing in high priced shares by averting corporations from
overvaluing their shares.

According to pricing norms of SEBI, the price of the shares cannot exceed the price band
indicated in the DRHP. The price band is laid down by the firm and its investment bankers and is
based on a number of criteria, including the company's financial performance, market
circumstances and industry forecast. Pricing standards of SEBI have assisted in ensuring that
investors procure a fair price for their shares and that corporations do not overvalue their shares.

3.2 RECENT DEVELOPMENTS IN SEBI'S REGULATORY FRAMEWORK FOR IPOS

Regulatory framework of SEBI regarding IPOs is persistently evolving to keep up with the
dynamic market and investor expectations. SEBI has introduced several reforms in recent years to
ensure efficiency and transparency in the IPO process.
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The introduction of the electronic Initial Public Offering (e-IPO) system is one of the remarkable
developments in SEBI's regulatory framework. The e-IPO system is an online platform that
allows investors to apply for shares in an IPO electronically, putting an end to the need for
physical applications. It has made the IPO process more accessible and efficient, especially for
retail investors.

Certain measures to lessen the time taken for companies to list their shares on the stock exchange
after an IPO has also been introduced by SEBI. The time between the IPO closing date and the
listing date has been reduced by SEBI from six days to three days. This has assisted companies to
raise capital rapidly and made the IPO process more approachable and accessible for investors.
Several measures have been taken by SEBI to enhance the quality of the DRHP filed by
companies. A fast-track approval process for companies that have a track record of good
corporate governance and financial performance has also been introduced by SEBI. As compared
to the usual 60-90 days, now the companies that qualify for the fast-track approval process can
receive approval for their DRHP in just 21 days.

3.2.1 Conclusion
Regulatory framework of SEBI for IPOs in India has played an important role in safeguarding the
investors' interests and making sure that there is transparency and fairness in market for IPO.
Legal and regulatory requirements of SEBI for companies interested in going public, disclosure
requirements, and guidelines related to pricing have helped boost transparency and confidence of
investors in the IPO market.

The introduction of the e-IPO system, fast-track approval process, and lessened listing time are
some of the recent developments that have made the IPO process more efficient, structured, and
accessible to investors.Regulatory framework pf SEBI regarding IPOs is a continuous process,
and the regulator is continuously advancing its rules and guidelines to keep pace with the
dynamic market and expectations and requirements of the investors.

With the growing Indian economy, the IPO market will play an essential role in providing capital
to companies, and SEBI's regulatory framework will continue to play a vital role to make sure
that the market remains fair and transparent.

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The Securities and Exchange Board of India (SEBI) is the entity regulating the Indian commodity
markets and capital Indian markets. SEBI guidelines for an IPO are clearly laid out, and recently,
these have seen some amendments.

 SEBI Guidelines for an IPO

When you open a Demat account and start your way to investment in the equity markets, a
governing body, known as SEBI, is working in your best interests as an investor. The Securities
and Exchange Board of India lays down ground rules that govern trading activity in the markets,
and this promotes best practices in trading and investment. However, during the frenzy of 2021’s
IPO activity, with some sixty or more IPOs launched, SEBI sought to modify some of the
regulations in a bid to safeguard the interests of non-institutional and retail investors. As a result,
many rules have changed, and it is worth probing into key rules to know how they help investors.

 An Increase in Transparency

In new SEBI guidelines for an IPO, the first rule is related to transparent operations. The rule
states that those organizations raising funds that have to do with aims of inorganic growth must
make their targets and goals clear. In the event such companies are unable to qualify their targets,
amounts which are reserved to meet investments and acquisitions must not go above 25% of the
amount raised in total. Additionally, spending cannot go above 35%. This helps investors to make
decisions about the right upcoming IPO to invest in. Unless companies make their goals and fund
requirements totally clear, their permissions for IPOs will not be granted.

 Anchor Investors Get More of a Lock-In Time

Anchor investors are permitted to sell just 50% of investments after a lock-in of 30 days. To make
a sale of the 50% left over, anchor investors must wait for 90 days. Several companies launching
IPOs were busy allocating stock to anchor investors previously. This was mainly done so that
IPOs could gain high traction. After 30 days of lock-in, investors could exit with a bull run of the
IPO behind them. For regular investors, this meant a steep dip in the value of shares after the IPO
listing. This will be prevented now. SEBI guidelines for an IPO are clearly on the side of the new
investor.

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  Restrictions on the Offer to Sell

Before the new SEBI guidelines for an IPO came out, several companies about to launch IPOs did
so due to an IPO offering opportunities for promoters and current company shareholders to exit.
This was especially true for venture capitalists who wanted out of the company structure. The
reasons for an IPO launch in such companies was far removed from actually raising capital for
business operations. Therefore, some initial investors gained more than those retail investors of
the IPO. The new rule states that current shareholders who own above 20% of company stock are
not allowed to sell above 50% of their shares. Those with lower than 20% are not permitted to sell
above 10% of the total shareholding.

 New SEBI Guidelines Bring Fair Play

Above and beyond the rules mentioned, SEBI will also make a move to monitor and track all
funds raised by an IPO to check that funds are being used for the purpose for which the IPO was
launched. If you are an investor in an upcoming IPO, this would be a good time to invest with
regulations in action.Recent developments in SEBI's regulatory framework

SEBI on Tuesday proposed changes in the regulatory framework for Special Situation Funds to
facilitate the acquisition of stressed loans. Special Situation Funds (SSFs) are sub-category
Alternative Investment Funds (AIFs).Securities & Exchange Board of India’s (SEBI's) board
approved a framework for Index Providers to enhance transparency and accountability in
governing and administering financial benchmarks in the securities market.

The New Regulations Framed by SEBI , Framework for Registration of Index Providers:

 SEBI announced the approval of regulations establishing a framework for the registration of
Index Providers. This framework will be applicable specifically to 'Significant Indices,' which
SEBI will identify based on objective criteria.The regulatory structure aligns with the
International Organization of Securities Commissions (IOSCO) Principles for Financial
Benchmarks.

1. Dematerialization Requirement for AIF Investments:

 SEBI introduced a requirement for Alternative Investment Funds (AIFs) to hold fresh
investments made after September 2024 in dematerialized form.

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 However, existing investments are exempt, except in cases mandated by applicable law or
when the AIF, alone or with other SEBI-registered entities, has control in the investee company.
 The mandate for the appointment of custodians, previously applicable to specific AIF
categories, will now extend to all AIFs.

2. Amendments to SEBI (Real Estate Investment Trusts) Regulations:

 The SEBI board approved amendments to the Real Estate Investment Trusts
(REITs) Regulations, creating a regulatory framework for Small & Medium REITs
(SM REITs) with an asset value of at least ₹50 crore.
 SM REITs will be able to establish separate schemes for owning real estate assets
through special purpose vehicles (SPVs).

3. Flexibility in Social Stock Exchange (SSE) Framework:

 SEBI provided flexibility in the framework for the Social Stock Exchange (SSE) to
boost fundraising by Not-for-Profit Organizations (NPOs).
 This includes a reduction in the minimum issue size and application size for public
issuance of Zero Coupon Zero Principal Instruments (ZCZP) by NPOs on SSE,
encouraging wider participation, including retail investors.

4. Nomenclature Change and Comfort Measures for NPOs:

 SEBI approved a change in the nomenclature from "Social Auditor" to "Social

Impact Assessor" to convey a positive approach toward the social sector.
 This measure is intended to provide comfort to NPOs involved in the SSE and
reinforce SEBI's support for social impact initiatives.

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 CHAPTER 4: TYPES OF IPO
An Initial Public Offer (IPO), a method through which a company can raise funds by issuing its
shares to the public, is the most basic step of a company going public and ultimately resulting in
available for broader investor participation on the bourses.

IPOs have attracted many new investors and market participants to take a keen interest in the
world of investing. IPO provides investors with an excellent opportunity to invest in a company in
an earlier stage of its growth cycle.

Companies may opt for IPOs to raise funds for financing new projects, scale the business, or even
give a partial or full exit to early investors and promoters. As it is a form of equity financing, it is
a cheaper and more affordable way to raise funds. Before investing in an IPO, knowing the
different types of IPO is essential.

There are two types of IPO that a company can choose from. Fixed price issues and book-
building issues.

4.1 Fixed price issue

A fixed price issue is an IPO type in which a company’s shares have a fixed price. A company,
with the help of a merchant banker or underwriter, evaluates various factors in order to come up
with a fixed price for the issue.

While evaluating a company’s offerings, the merchant bank or underwriter will assess the
company's assets, liabilities, risks and valuation. Along with the current valuation, the merchant
bank will also try to ascertain the future growth prospects of the company in order to come up
with a price for the issue. Typically, these issues are undervalued, and the price is below the
market value, making it popular amongst retail investors as they can benefit from the company's
revaluation.

4.2 Book-building issue

A book-building issue is another type of IPO. This method discovers the price of the shares during
the IPO process itself. When the company comes out with the issue, they set a price band or a
range instead of a fixed price.

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The lowest price of the range is called the ‘floor price’ while the highest point is called the ‘cap
price’. While applying for this IPO type, investors can bid for a price in this range. The share
price is decided after evaluating all bids. A company may select one or a combination of both
from the different types of IPO in order to issue shares to the public.

4.3 The key differentiating factors between the two types of IPO.

 Price: In a fixed price issue, the price of the shares is fixed before the issue. In a book-
building issue, the exact price of the share is unknown, but investors are given a price band or
range within which they can place bids.
 Payment: When an investor applies for a book-building issue, the full amount of the bid
needs to be paid. In the case of the shares not being allotted, the funds are credited back to the
account of bidder. In a fixed-price issue, the payment needs to be done only after the shares
are allotted.
 Demand: In a fixed price issue, there is no method or way in which one can get to know the
demand for the IPO. In a book-building issue, the demand for the issue can be known after
each day the issue is open.

4.4 Applying for IPOs

In order to apply for an IPO, an individual needs to have a Demat account in which the securities
can be stored safely and digitally. A trading account which will help facilitate the buying and
selling of securities, and a bank account through which the funds can be used to apply for the IPO.

 The first step in order to apply for an IPO is to create or log in to your account with a broker.

 After logging in, one should navigate to the IPO section where the different IPOs open for
subscription are listed.

 After selecting the preferred IPO, an investor can place an order. An investor can select the
lot size or the price at which they want to place the bid.

 In the case of a book-building issue, the amount of the bid will be debited from your account
after the order is placed. If the shares are not allotted, the funds will be credited back to your
account. Alternatively, one can apply for an IPO through a bank’s Application Supported by
Blocked Amount (ASBA).
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 The IPO is considered to be over when the shares are allotted and listed on the stock
exchanges.

In conclusion, IPOs are helpful for companies as it is a cheaper way to raise funds for various
needs. Moreover, IPOs provide wonderful opportunities for investors to be a part of a company
with a prospect for growth.

4.5 BOOK BUILDING

Book Building is the process by which an underwriter determines the price at which the shares
must be sold in an Initial Public Offer (IPO)Book Building is the process by which an underwriter
determines the price at which the shares must be sold in an Initial Public Offer (IPO)Book
Building is the process by which an underwriter determines the price at which the shares must be
sold in an Initial Public Offer (IPO)

 Book Building Types

An issuing company may conduct the IPO in one of the following ways:

100% Book Built Offer

In this type of offering, the entire 100% of the issue may be offered through the book-building
process.
75% Book Building
In this type of offering, 75% of the net offering can be offered through the book-building process
and 25% can be offered at the threshold determined through the book-building process.

2. FIXED PRICE ISSUE

A fixed-price issue is a type of IPO in which the offering price is set before the IPO opens for the
subscription. Investors must apply for the IPO at the fixed price set and may or may not receive
an allotment based on the subscription status of the issue.

4.6 BOOK BUILDING VS FIXED PRICE IPO

Book Building IPO Fixed Price IPO

Introduced by SEBI in 1995 for efficient The traditional old method for IPO issues.
pricing.
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A book-built issue has a price range. A fixed price IPO has a fixed price.
The offer price is determined at the end The offering price is set in advance.
of the bidding process.
The demand for the book-built issue is The demand for a fixed price IPO is known
known daily as the book builds. at the end of the subscription period for the
issue.
QIBs can place bids by paying 10% of The QIB must pay 100% of the
the application amount at the time of subscription amount at the time of
application and the balance at the time of application.
allotment.
A book-building IPO prospectus is filed A fixed-price IPO prospectus is filed with
with the RoC upon completion of the the RoC before the issue opens.
offering.
Popular method Less commonly used method
The price range can be revised in a book- The offering price cannot be changed once
built issue while the issue is open. the issue is open for subscription.
The chances of fair pricing are good as The price can be undervalued or
the price is set based on supply and overvalued.
demand.
Investors can bid at any price within the Investors can only subscribe at a fixed
price range. price.
Generally adopted by Mainboard IPO Generally adopted by SME IPO
companies. companies.

4.7. OFFER FOR SALE ( OFS) VS FRESH ISSUE (IPO)

The main difference between an OFS and an IPO is that an OFS (Offer for Sale) lets promoters or
large shareholders sell already listed shares to the public, while an IPO (Initial Public Offering) is
the first time a company’s shares are offered to the public.

4.7.1 OFFER FOR SALE (OFS)

OFS, which stands for “Offer for Sale,” is a way for existing shareholders, often called
“promoters,” to sell a portion of their stake in a listed company to the public.

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Suppose Mr. Sharma, a major shareholder in Zomato Ltd., decides to reduce his stake by 5%.
Instead of selling these shares in the open market, he opts for OFS, allowing retail and
institutional investors to purchase these shares at a predetermined price, ensuring a more
organized and transparent sale.

4.7.2. FRESH ISSUE

An Initial Public Offering (IPO) is when a private company offers its shares to the public for the
first time, usually to raise capital for expansion or other business activities.

Let’s understand this with an example from Mama Earth. Initially, the founders of Mama Earth
owned 100% of the shares. They’re the sole bosses. But they want to grow the business and need
extra cash for that. So, they decided to sell some of their shares to the public through an IPO. After
the IPO, they still own many shares, but not all. Let’s say they now own 70% of the shares, and
the public owns the other 30%.

When Mama Earth goes public, ownership gets diluted. It’s not just the founders’ share anymore;
it’s shared with whoever buys the shares. So, the founders’ ownership percentage decreases, but
ideally, the company’s value increases because of the capital influx.

4.7.3 DISTINCTION OF IPO VS OFS

The main difference between an IPO and an OFS is that an IPO deals with new shares or the
company’s first appearance on the stock market, while an OFS is when the promoters sell existing
shares.

Basis of IPO OFS

Differences

Nature In an IPO, fresh shares are In OFS, existing shares are sold
introduced, allowing new by major shareholders, making it
investors to participate in a resale rather than an issuance.

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 ownership.

Purpose IPO aims to raise capital for OFS allows existing shareholders
growth, expansion, or debt to offload their stake, thereby
repayment for the company. monetizing their investment.

Pricing IPO pricing is determined OFS is usually priced at a

through a book-building discount to the current market
process, taking bids from price to attract buyers more
various investors. quickly.

Share Dilution In an IPO, new shares alter OFS involves selling existing
existing ownership percentages, shares; thus, there is no dilution
leading to dilution. of ownership.

Regulatory IPO requires rigorous scrutiny OFS follows a simplified process

Process by SEBI and involves several compared to IPO, with less
legal and financial disclosures. regulatory oversight.

Investor IPO is open to all types of OFS is often restricted to specific

Accessibility investors, allowing more groups, such as institutional
extensive participation. investors.

Impact on IPO can transform the OFS has no direct impact on the
Company’s company’s structure, changing company’s financial structure;
Financial the debt-to-equity ratio with it’s merely a transfer of
Structure new equity. ownership.

Time Frame IPOs often take longer to OFS can be completed relatively
prepare and execute, given the quickly, as it is more streamlined

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 detailed requirements. and requires fewer formalities.

Effect on IPOs may enhance market OFS may or may not have a
Market liquidity by introducing fresh significant impact on market
Liquidity shares to the public market. liquidity, depending on the size
of the sale.

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 CHAPTER 5: PROCESS OF IPO

A company can change itself from a privately-held body to a publicly-traded entity through the
process of Initial Public Offering (IPO). Typically, companies offer IPO to raise money and get
access to liquidity by offering their stocks/shares to the public. Companies have to abide by the
IPO process in India - as stipulated by stock exchanges - before its shares are eligible to be
publicly traded. This process is often complicated and long-drawn.

IPO Process Steps:

Step 1: Hiring Of An Underwriter Or Investment Bank

To start the initial public offering process, the company will take the help of financial experts, like
investment banks. The underwriters assure the company about the capital being raised and act as
intermediaries between the company and its investors. The experts will also study the crucial
financial parameters of the company and sign an underwriting agreement. The underwriting
agreement will usually have the following components:

1. Details of the deal

2. Amount to be raised
3. Details of securities being issued

Step 2: Registration For IPO

This IPO step involves the preparation of a registration statement along with the draft prospectus,
also known as Red Herring Prospectus (RHP). Submission of RHP is mandatory, as per the
Companies Act. This document comprises all the compulsory disclosures as per the SEBI and
Companies Act. Here’s a look at the key components of RHP:

4. Definitions: It contains the definitions of the industry-specific terms.

5. Risk Factors: This section discloses the possibilities that could impact a company’s finances.
6. Use of Proceeds: This section discloses how the money raised from investors will be used.
7. Industry Description: This section details the working of the company in the overall
industry segment. For instance, if the company belongs to the IT segment, the section will
provide forecasts and predictions about the segment.
8. Business Description: This section will detail the core business activities of the company.
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9. Management: This section provides information about key management personnel.
10. Financial Description: This section comprises financial statements along with the auditor's
report.
11. Legal and Other Information: This section details the litigation against the company along
with miscellaneous information.

This document has to be submitted to the registrar of companies, three days before the offer
opens to the public for bidding. Alongside, the submitted registration statement has to be
compliant with the SEC rules. Post-submission, the company can make an application for an
IPO to SEBI.

Step 3: Verification by SEBI:

Market regulator, SEBI then verifies the disclosure of facts by the company. If the application is
approved, the company can announce a date for its IPO.

Step 4: Making An Application To The Stock Exchange

The company now has to make an application to the stock exchange for floating its initial issue.

Step 5: Creating a Buzz By Roadshows

Before an IPO opens to the public, the company endeavors to create a buzz in the market by
roadshows. Over a period of two weeks, the executives and staff of the company will advertise the
impending IPO across the country. This is basically a marketing and advertising tactic to attract
potential investors. The key highlights of the company are shared with various people, including
business analysts and fund managers. The executives adopt various user-friendly measures, like
Question and Answer sessions, multimedia presentations, group meetings, online virtual
roadshows, and so on.

Step 6: Pricing of IPO

The company can now initiate pricing of IPO either through Fixed Price IPO or by Book Binding
Offering. In the case of Fixed Price Offering, the price of the company’s stocks is announced in
advance. In the event of Book Binding Offering, a price range of 20% is announced, following

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which investors can place their bids within the price bracket. For the bidding process, the
investors have to place their bids as per the company’s quoted Lot price, which is the minimum
number of shares to be purchased. Alongside, the company also provides for IPO Floor Price,
which is the minimum bid price and IPO Cap Price, which is the highest bidding price. The
booking is typically open from three to five working days and investors can avail the opportunity
of revising their bids within the stipulated time. After completion of the bidding process, the
company will determine the Cut-Off price, which is the final price at which the issue will be sold.

Step 7: Allotment of Shares

Once the IPO price is finalized, the company along with the underwriters will determine the
number of shares to be allotted to each investor. In the case of over-subscription, partial allotments
will be made. The IPO stocks are usually allotted to the bidders within 10 working days of the last
bidding date.

5.1. IPO PRICING MECHANISMS

The IPO price is determined based on various factors. Some of the major factors that are
considered while determining the IPO price are:

1.Company Valuation
2.Demand for the company
3.Growth Prospects
4.Peer Comparison
5.Market Trend
6.The IPO price is decided by the promoters and the selling shareholders of the issuer company in
joint consultation with the book-running lead manager.
7.The issuer company and the lead manager/merchant banker consider various factors such as
company valuation, company strength, growth prospectus, demand, peer comparison with other
companies and more while determining the issue price or price range.

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5.2. UNDERWRITING PROCESS

Issuing an Initial Public Offering or IPO allows a company to raise funds for business expansion,
debt repayment, cash-flow requirements, and general corporate purposes. Launching an IPO can
be a make-or-break situation for the issuing company, and its success or failure can have serious
consequences. But before a company can float its IPO in the market, it must select an underwriter.
An underwriter has a crucial role to play in the success of an IPO.

An IPO underwriter is a specialist who works closely with the issuing company and helps satisfy
all regulatory requirements of the Securities and Exchange Board of India (SEBI). An underwriter
in an IPO also acts as an intermediary between the issuing company, investors, and the market
regulator. It can be an investment bank or a financial institution. Depending on the size of an IPO,
the issuing company can hire one or more underwriters.

An underwriter's exact roles and responsibilities depend on the underwriting agreement signed
between the issuing company and the investment banker. Generally, it helps a company prepare
for the IPO, analyse factors such as the amount of money that can be raised, and decide on the
valuation of the IPO and the types and quantity of securities that can be issued.

Some typical roles and responsibilities of an IPO underwriter are as follows:

 Ascertain the risks associated with an IPO

One of the primary roles of an IPO underwriter is to determine the risks associated with a public
issue. The success or failure of an IPO can have long-term ramifications on the issuing company’s
operations and business. For example, it may not be able to generate the required amount and may
suffer a loss of face. An IPO underwriter analyses and discusses all such risks with the issuing
company. Upon discussion with the underwriter, a company decides whether or not to float an IPO.
Also, when a company goes public, the owners have to dilute their stake and also become more
transparent and accountable. They no more can take corporate decisions of their own will. An IPO
underwriter analyses and discusses all such risks with the issuing company. Upon discussion with
the underwriter, a company decides whether or not to float an IPO.

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 Helps in preparing the DRHP:

Once a company decides to go ahead with the IPO, it must file a Draft Red Herring Prospectus
(DRHP) with the market regulator. This DRHP is prepared only after consultation with the IPO
underwriter. The issuing company needs to specify several crucial details in the information,
including the expected IPO size, number of equity shares that would be sold, objectives of the
offer, strengths and weaknesses of the company, etc. If the SEBI doesn’t find these details
satisfactory, it can reject the IPO application.

 Provides a guarantee to the issuing company:

After thoroughly assessing the issuing company’s fundamentals, objectives, and business plan, an
underwriter guarantees the minimum number of IPO shares that will be sold. Alternatively, IPO
underwriters assure issuing companies of a certain revenue by selling a specific quantity of shares
to public investors. However, in some cases, the underwriters are not supposed to guarantee
minimum sales. Instead, they need to put their best effort into selling as many shares as possible.

 Ensuring regulatory compliance

IPO underwriters specialize in their jobs. Through their expertise, they guide the issuing
companies on how they can ensure regulatory compliance with the market regulator SEBI. For
example, the underwriters advise issuing companies so that their IPOs are neither undervalued nor
overvalued. They also ensure that the issuing companies pay the required charges in time and
release the necessary data on their websites for investors’ perusal.

To conclude

An IPO underwriter needs to play several roles throughout the IPO cycle. In return for their
services, they charge a designated fee from the issuing company. Furthermore, underwriters can
be classified into various types depending on their precise capacity. Some common types of
underwriters are mortgage underwriters, insurance underwriters, equity underwriters, and debt
security underwriters.

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 CHAPTER 6: PREPARATION AND PLANNING OF IPO

Initiating an IPO can have a profound impact on an organization and requires a significant shift in
focus. Businesses should treat your IPO as a defining milestone in a complex transformation from
a private to a public company, and not as an event. It should have:

1. A holistic and structured approach

2. A managed transformation of people, processes, systems and culture of an organization
3. A process that starts long before the transaction

Thorough preparation is necessary for a smooth process. This is especially true for the finance
organization, which requires the experience, depth and agility to address the demands and scrutiny
of public markets. Furthermore, the finance organization must be appropriately aligned with other
critical functional areas, including internal audit, investor relations, legal, IT and human resources.

PREPARATION AND PLANNING FOR AN IPO

On the journey of transformation into a public company, success depends a great deal on a
coordinated team effort by the internal management and the advisory team. Following economic
uncertainty, it is more important than ever to build a quality IPO advisory team.

The IPO value journey

 EARLY PREPARATION
1. On the journey of transformation into a public company, success depends a great deal on a
coordinated team effort
2. By the internal management and the advisory team. Following economic uncertainty, it is
more important than ever to
3. Build a quality advisory team. Begin to assemble your advisory team well in advance of your
public launch.

 ATTRACT PRIVATE EQUITY EXISTS

1. Compare the different exit options and the viability/advantages of multi-tracking.
2. Identify the most profitable structuring options
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3. Identify value-enhancement opportunities (and the associated time/value choices)
4. Consider the financial information requirements for the different options and identify where
gaps need to be filled
5. Consider the robustness of the value story and support it with current initiatives
6. In a carve out or demerger situation, identify standalone earnings and parent company impact
as well as the timing and costs to achieve

 OUTPERFORM COMPETITORS ON KEY BENCHMARKS

1. Focus on the financial factors that investors pay significant emphasis on, especially debt to
equity ratio, earning per share (EPS) growth, sales growth, return on equity (ROE),
profitability and earnings before interest, tax depreciation and amortization (EBITDA)
growth
2. Other non-financial factors, including quality of management, corporate strategy and
execution, brand strength and operational effectiveness, and corporate governance, are also
scrutinized by the investors
3. Be able to articulate a compelling equity story backed up by a strong track record of growth
that sets you apart from your peers while maximizing value for owners

 EVALUATE CAPITAL RAISING OPTIONS

1. Start early with a holistic discussion about the strategic options offered by IPO and M&A
markets and consider an array of exit and funding alternatives in an IPO readiness assessment.
2. Pursue pre-IPO transactions to achieve maximum value — especially debt financial and
refinancing corporate-organization, private placements or business alliances

 ADDRESS INVESTOR`S CURRENT CONCERNS

1. Recognize the need for enhanced corporate governance, especially recruiting qualified non-
executive board members, improving internal controls and forming a qualified audit
committee
2. Fine-tune your internal business operations, especially working capital management,
regulatory risk and rationalizing the business structure
3. Deal with current accounting challenges, especially asset valuation impairment, consolidated
subsidiary financial statement issues and revenue recognition

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4. An entity should also consider the regulatory requirements of the local stock exchange before
filing for an IPO, as discussed subsequently
Companies need to consider regulatory framework and compliance to be met while going for an
IPO. For fast-growing private companies seeking to raise capital, an initial public offering (IPO)
can propel their growth. While the market looks promising, companies that are fully prepared will
be best able to leverage the window of the current IPO opportunity.

6.1 DUE DILIGENCE PROCESS

Once Investment bank is hired by Issuer Company, Investment bank makes appointments of
various intermediaries like Registrar to the issue, Depository, Compliance Officer, Monitoring
Agency, Authorized collection Agents and Set up collection center etc in consultation with the
lead manager. Practically it is the Investment Bank who make the Issuer Company in touch with
such intermediaries.

 Registrar – A registrar for an IPO mainly involves in processing of IPO applications,

allocate shares to applicants based on SEBI guidelines, process refunds through ECS or
cheque and transfer allocated shares to investors’ Demat accounts.

 Monitoring Agency – Monitoring Agency monitor the investments of the IPO funds in the
various projects for which the funds are raised by the Issuer Company from the public.
Project implementation progress report shall be submitted to SEBI on half yearly basis till full
utilization of the funds raised.

 Depository – The role of the Depository is to offer Demat accounts to investors. Hold, and
maintain a record of securities in Demat accounts for investors. Make online trading fast &
secure.

 Compliance Officer – Compliance officer is responsible for monitoring the compliance of

the Act, rules and regulations, notifications, guidelines, instructions, etc. issued by the Board
or the Central Government, monitoring the compliance of the securities laws and for redressal
of investors’ grievances.

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 Sponsor banks- Sponsor banks are bankers to the issue registered with SEBI and have been
recently introduced to effectuate a Unified Payments Interface (UPI) as a payment
mechanism for bids submitted by retail individual investors (RIIs) through intermediaries.
They are appointed by the issuer and are responsible for (1) initiating a mandate request (i.e.,
requesting the RIIs to authorize blocking of funds that is equivalent to their application
amount); (2) receiving the status of the block request from the RII and sharing it with the
stock exchanges; and (3) ensuring subsequent debit of funds to the issuer’s account in the
case of allotment.

 Legal counsel- Legal counsel to the issuer undertakes legal due diligence, advises on the
Indian laws applicable to the issuer and the IPO, and assists in drafting the non-business
sections of the offer document.

6.1.1 Due Diligence Certificate

One of the major activities done by the Investment bank in relation to IPO management at this
stage is to Issue of Due Diligence Certificate to Issuer Company. Regulation 24 of SEBI (ICDR)
Regulation, 2018 mandate that lead manager shall exercise due diligence and satisfy themselves
about all aspects of the issue including genuineness and adequacy of disclosure in the draft offer
document and the offer document Whether Issuer Company fulfills the eligibility criteria relating
to a minimum tangible asset, Net worth, and average operating profit ,whether the issuer satisfies
the general conditions for IPO, whether the issuer has made all the material disclosure in draft
offer documents and whether the minimum promoter contribution requirement mentioned in
Regulation 14 is fulfilled.

In the first step of Due diligence Terms of Engagement are decided between Investment bank and
Issuer Company. A Non-Disclosure agreement is signed between both parties as sensitive financial,
operational, legal and regulatory information would be disclosed during this due diligence process.
Operational data, Financial data, legal and regulatory data and information of the business is
Collected and Investment bank work to gain full understanding how the company operates, how
it’s structured, how healthy it is financially, and whether there are any potential issues that could
be a roadblock to going public. The due diligence process effectively clears the way for the next
steps in the IPO process.

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6.2. ENGAGEMENT OF IPO INTERMEDIARIES

IPO intermediaries are the parties (companies/individuals) that assist an issuer in completing an
IPO and a successful listing. Major IPO intermediaries include merchant bankers, registrars,
bankers, underwriters, and market makers.IPO intermediaries provide services to help a company
initiate and complete the IPO process and get listed. IPO prospectus documents detail the
involvement of all parties in the IPO.

These intermediaries act as a bridge between the company and investors and coordinate with other
intermediaries and parties to ensure a smooth IPO process.

1.Issuer Company :

The issuer of an IPO is a private company that wishes to go public and issue new shares or sell
existing shares to the general public for the first time through an IPO. Generally, an issuer is a
company that offers securities to raise capital.

Three categories of issuers can conduct an initial public offering:

 Large-scale companies (Mainboard)

 Small and medium enterprises (SME)
 Startups

2.Stock Exchanges:

A stock exchange is a company that provides a trading platform where investors can buy and sell
equity shares, bonds, ETFs and other listed securities. Exchanges match buy and sell orders and
provide a legal guarantee for transactions.

The Securities and Exchange Board of India (SEBI) regulates the exchanges. SEBI sets the rules
and regulations for the exchanges and ensures that the exchanges follow them. BSE and NSE are
the two most prominent stock exchanges in India.

Exchanges appoint stock brokers who work as intermediaries between investors and the exchange.
An investor (individual or institutional) must have an account with a stock broker to trade on a
stock exchange.

3.SEBI, The Market Regulator:

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SEBI (Securities and Exchange Board of India) is a regulatory body for the capital market in India.
It is a government organization established by Government of India " ...to protect the interests of
investors in securities and to promote the development of, and to regulate the securities market
and for matters connected there with or incidental there to".

SEBI's role in IPO

Any company seeking to raise more than Rs 50 lakhs through an IPO has to submit a draft
offering document to SEBI for approval. The company must submit its offer within a window of
12 months from the date of SEBI's approval.

Below are some clarifications issued by SEBI on public issues for investors and issuers:

1. Merchant Bankers are responsible for conducting due diligence* and certifying that the
information provided in the offering documents is in compliance with SEBI's Investor
Protection Guidelines.
2. SEBI does not take any responsibility for the financial soundness of any project for which
funds are raised through the Issue.
3. SEBI makes no representation regarding investments in securities..
4. Investors should review the material contents and disclosures in an offering document before
making an investment decision.
5. SEBI does not propose or recommend any issues.
6. Issuers have the freedom to choose or set the issue price of their securities without
interference from regulators.

*IPO Due Diligence is the gathering and reviewing of information about a company or business. It
is obtained from all parties assisting the company in the IPO process.

4. Merchant Banker (Lead manager):

Merchant bankers are independent financial institutions registered with SEBI. They assist
companies in their IPO from start to end. They are also called Lead Managers or Book-running
Lead Managers(BRLM). An IPO can have one or more lead managers.

A merchant banker assists a company throughout the IPO process, from due diligence and
determining if the company is eligible for an IPO, to applying for an IPO with the exchanges, to
preparing a prospectus, IPO advertising, road shows, marketing, and the post-listing process.

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Merchant Banker Role in IPO

A lead manager's role in an IPO can be segregated into two categories as Pre-Issue and Post-Issue.

Pre-Issue Responsibilities of a Merchant Banker as lead manager

1.Due diligence (gathering and verifying the issuer's details).

2.Checking the eligibility criteria of the company as per stock exchanges and SEBI.
3.Underwriting agreement (If acting as a manager or underwriter).
4.Determining the fees for an IPO.
5.Structuring the issue/offering details.
6.Preparing the draft prospectus (DRHP).
7. Completing the IPO application form.
8. Submission of IPO Application and DRHP to SEBI and BSE.
9. Roadshow and Advertisement of Issue.
10. Red herring prospectus (RHP) drafting and submission.
11. Resolving observations received from SEBI.

4.Bankers to an Issue:

The issuer company appoints banker/s to help them manage the funds collected in the IPO process
and transfer them to the Escrow Account, Allotment Account or Refund account as the case may
be. A company can appoint one or more bankers to the issue that are registered with SEBI. Check
out for the list of SEBI registered Bankers to an Issue.

The responsibilities of the bankers to an Issue include the below:

1. Transfer all the funds collected in the Escrow account.

2. Transfer funds to Allotment account and thereafter to Company account on receipt of
instructions from Lead Manager.
3. Transfer surplus funds to Refund account.
4. Transfer funds to investor account from refund account in case of non-allotment on receipt of
instructions from Registrar and Lead Manager.
5. Provide updated bank statement for each of the above accounts to Registrar, Lead Manager
and Company at regular frequency or as demanded.
6. Closure of all accounts once there is Nil balance in all the above accounts.
7. Address investor complaints relating to refunds.

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5.Self-Certified Syndicate Banks (SCSB):

Self-Certified Syndicate Banks commonly referred to as SCSBs are the SEBI registered banks that
provide ASBA services to the investors. With ASBA mandatory for IPO application, investors can
apply for an IPO provided they have an account with any of the bank that offers the facility of
ASBA.

The investors can apply online by using the Net banking services of the SCSB or offline by
submitting the form to the nearest branch. The main responsibilities of the SCSB include the
following:

1.Accepting the applications.

2.Blocking the funds.
3.Co-ordinating with brokers to confirm the fund blocking that allows broker to upload bid to
exchange.
4.Co-ordinating with the banker of issue for required transfer of funds.
5.Co-ordinating with depositories and refund and ensure smooth execution of allotment and
refund process.

6.Registrar to the Issue (RTI):

The IPO registrar is an entity that assists the issuer in the allotment of IPO shares and maintains
records of the company's shareholding. Registrar of IPO

The IPO Registrar is responsible for the final allotment of shares in consultation with the issuer
company and the stock exchanges after preparing a list of valid and invalid IPO applications. Here
you can find the list of IPO registrars in India.

Registrar's roles and responsibilities

1.Collecting IPO application data from stock exchanges and banks.

2.Preparing a list of valid applications in cooperation with depositories and banks.
3.Preparing the basis of allotment in consultation with stock exchange/s.
4.Processing the allotment of shares.
5.Processing and dispatching allotment letters.
6.Initiation of the refund procedure for non-allotment recipients.
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Registrar as a Transfer Agent

Once the shares are listed, the Registrar also maintains a list of registered shareholders for the
listed companies. For this task, they are called 'Share Transfer Agents'. They maintain information
such as the shareholder's name, contact information, and dividend information (if any). The RTA's
job is to keep proper records of the shares and make changes as needed to reflect true ownership
of the securities by making name changes, endorsements, etc.

7. IPO Underwriter:

An IPO underwriter is an intermediary that undertakes the risk of purchasing the shares in case of
the IPO under subscription. IPO underwriting is a process wherein the underwriter and the issuer
company get into an agreement wherein the underwriter agrees to purchase the unsold shares of an
IPO in return for an underwriting commission.

The underwriting commission is a fee charged by the merchant banker in its capacity as
underwriter for entering into the underwriting agreement. It is the fee charged by an investment
banker for underwriting an issue of securities.

For example, if it was agreed between the underwriter and the issuer that the underwriter would be
responsible for selling 3% of the shares offered, and the underwriter is unable to sell all of the
shares, the underwriter would be responsible for the unsold shares and would have to purchase
them from the issuer.

Underwriter roles and responsibilities in an IPO

1.Compliance with Underwriting Agreement clauses.

2.In charge of selling the predetermined number of shares.
3.Responsible for purchasing the remaining shares or unsold shares.
4.IPO Roadshow, promotion and marketing.
5.Help the issuer in determining share valuation**, whether the shares are overvalued or
undervalued.
6.Consulting and advising the issuer for the IPO process.

Share valuation means determining the value of a company's shares in an IPO by the issuer
company. IPO shares can be overvalued or undervalued. Overvalued securities are those that are

50
trading above their market value. Undervalued securities are those that are traded below their
market value.

8. Market Maker:

Market makers are licensed stockbrokers (NSE list | BSE list) who buy or sell stocks in the stock
market at specific prices to improve liquidity and price discovery. They provide liquidity in thinly
traded stocks. They also monitor the trading in the script and report to the exchange when
irregularities occur.

Market-making is mandatory for SME IPOs and voluntary for main board IPOs. Most SME stocks
face liquidity issues that could make it difficult for investors to exit. Market makers are here to
help.The market makers helps with this.

Market makers are paid by the issuing company for the risk they take. The risk includes a market
maker buying shares from a seller in the market and the share price begins to fall and the market
maker not being able to find another buyer because of the price fluctuation, so the market maker
takes a loss on the unsold shares.

Market makers are also allowed to place 2-way orders (buy and sell) simultaneously. For example,
they can place an order in the range of Rs.98-100. They will buy shares at 98 and sell them at 100.

The lead manager introduces the market makers to the issuing company. They provide the market
makers' details in the DRHP document. The issuer company pays a fee to the market makers.

9. Depositories:

Depositories are the financial institutions that hold the shares in electronic form. In India, there are
two depositories, NSDL and CDSL. The issuer company enters into a tripartite agreement with
both the depositories individually and Registrar. Depositories play an important role in smooth
execution of managing of IPO shares. The main responsibilities of the depositories include the
below :

A. Dematerialization of physical shares held by the issuer company.

B. Credit the IPO shares to the beneficiary account of the allottee once allotment is finalized.
C. Trading and settlement of IPO shares on listing.
D. Maintain records of shareholders to account for any corporate action benefits post listing.
E. Ensure security of the shares held in the electronic form with no fear of theft.

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 CHAPTER 7: DOCUMENTATION IN IPO

Several pieces of documentation need to be completed, and submitted to the relevant offices
where necessary, as part of a private company’s journey to going public.Initially, the focus will be
on documents related to agreeing terms with an underwriter, while submitting pre-IPO
information to the Securities and Exchange Commission (SEC) is also an important part of the
process.

Among the required documents are:

 Engagement Letter
 Letter of Intent
 Underwriting Agreement
 Registration Statement
 Red Herring Document

 Engagement Letter
This letter will be written by the underwriter the company wants to work with during the IPO, and
generally includes two key pieces of information related to financial compensation: the
reimbursement clause and the gross spread.

The reimbursement clause sets out that the company must cover any out-of-pocket costs incurred
by the underwriter during the process, even if the IPO is withdrawn at some point, whether early
on or at a later stage.

Gross spread refers to the underwriting discount. More specifically, we mean the discount the
issuing company grants to the underwriter when the latter purchases securities earmarked for sale
to the investing public. In other words, gross spread is the difference between the purchase price
and sale price of the securities underwriters sell during the IPO. The discount usually equates to 4
to 7% of the eventual sale price and can translate into a significant source of income for
underwriters.In the event of the company working with a syndicate of underwriters, the “lead”
underwriter tends to receive 20% of the gross spread, with 60% divided up between other
syndicate members, and the remaining 20% earmarked for covering costs associated with the
underwriting process, e.g., roadshow expenses.

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 Letter of Intent
The Letter of Intent is drafted and agreed upon by both parties – the issuing company and the
underwriter – and summarizes their shared preliminary understanding of the deal that is being
proposed.
In this document:
 The underwriter commits to enter an underwriting agreement with the issuing company.
 The company gives an undertaking that it will provide the underwriter with all necessary
information and to offer full assistance in all IPO-related due diligence efforts.
 The potential size of the transaction will be provided. Most likely, it won’t be feasible to offer
a precise figure at the time this letter is drafted, but it should be possible to include valuation
ranges of stock to be sold and a ballpark figure for the capital likely to be raised.
 It is also common to include a pledge from the company around what is referred to as an over
allotment option. This gives the underwriter the leeway to sell additional stock beyond
whatever level is ultimately agreed. Typically, the over allotment is set at 15%. The logic here
is that having this latitude allows underwriters to react to demand among investors. So, if
demand is high and stock is trading above the offering price, the underwriter will have the
ability to release additional stock for sale, with a view towards making the most of the higher
than anticipated level of interest.
This document effectively governs the relationship between company and underwriter during the
period before a final price for the offering is decided. Once that price is set, the formal
Underwriting Agreement supersedes the Letter of Intent as the key document between the parties.

 Underwriting Agreement
An Underwriting Agreement is a formal contract entered into between the company going public
and the underwriter/team of underwriters bringing their know-how and contacts to the transaction.
One of the key purposes of the agreement is to ensure that all parties are clear on their role and
responsibilities, with this, in theory, reducing the potential for conflict.

 Registration Statement:
Form S-1 Registration Statement Under the Securities Act of 1933 – more commonly referred to
simply as the Registration Statement – is the mechanism through which a private company
formally asks permission to become a publicly-traded entity. The statement consists of two parts,

53
with part one focusing on the IPO prospectus and part two dealing with additional relevant
information, with the completed document to be filed with the SEC.

Part two of the form relates to private information required by the SEC, but which will not
necessarily be made public, including, for example, the indemnification of directors and officers
and recent sales of unregistered securities.The purpose of the exercise is to ensure that investors
have access to necessary detailed and reliable information about the company in question and
what is being proposed. With that in mind, it is important to recognize that this is a formal legal
document, therefore the issuing company will be made liable in the event of any material
misrepresentations or omissions being detected. Once the statement has been filed, the SEC will
then perform due diligence to ensure that all required information has been disclosed in the
submission.

 Red Herring Prospectus:

However, important as the document is, it will not be possible to file a complete Registration
Statement early in the IPO process. Why? Because the company and the underwriter will not
finalize plans on the price of the issue or the number of shares to be offered until quite late in the
day, so this information cannot be included in the initial Form S-1 submission.
Instead, this preliminary submission tends to be referred to as a Red Herring Prospectus, in
reference to the cover page disclaimer, formatted in bold red text, flagging that some of the
information provided has not yet been finalized.

In practical terms, the Red Herring Prospectus contains much of the information that will be in the
final submission, minus the details mentioned above (issue price and number of shares), and,
crucially, assists the company and underwriter in the process of marketing the flotation to potential
investors. To cut a long story short, it is this marketing process that will give the company and
underwriter an indication of the level of investor interest, which will in turn inform the final
decision-making process on issue price and number of shares to be sold, and once that information
is on hand, then the definitive draft of the Registration Statement can be submitted to the SEC.
The IPO process can be demanding and time-consuming. The documents referred to above
represent merely one strand of the obligations a company on this journey will need to meet.

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7.1. DRAFTING RED HERRING PROSPECTUS

A DRHP is a preliminary document that is created before a full prospectus. It outlines the business
plan, financial information and may include summaries of the company’s major products or
services. A red herring prospectus includes less detailed information than a full prospectus to give
investors an idea if they want to invest in the company.
In some cases, there are additional fees associated with the DRHP.
Red herring prospectuses are often used by companies that have already gone public and just want
to provide potential investors with an overview of their operations. A company may also want to
provide investors with more detailed information about their operations without going through the
expense of preparing a full prospectus.
A full prospectus provides investors with in-depth information about the company, including
financial statements and risk factors for the business. In order to be approved by securities
regulators, full prospectuses must be reviewed by accountants who confirm it meets all regulatory
requirements.

A Draft Red Herring Prospectus (DRHP) is a document that is prepared to introduce a new
business or product to a potential investor.
This document should be able to communicate the product vision and target audience. This is not
a final document for an investor, but rather a way of demonstrating value and providing investors
with enough information for them to decide whether they want to invest in the company or not.
It should also include sections on the current status of the business, as well as any risks involved
with investing in this company. The DRHP is a document that is used as a loose framework for the
initial stages of the Ipo process.

Thus, a DRHP is a crucial document for investors and companies that can be a significant tool in
helping to attract more investors for the company’s IPO and can help investors make the best
choices.
 A DRHP is a preliminary document which provides information about the business
and its management, product or service, potential markets, and financing. It also includes
financial projections.

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  It should be read in conjunction with an offer for securities to ensure that all
relevant information has been disclosed to investors before they decide whether to invest in
the company.
 A DRHP can be used by companies when they are planning to raise equity funds
for future investments in their business activities or when they are planning to sell shares.

7.2 ROLE OF UNDERWRITERS AND LEAD MANAGERS

IPO is a long process. The role of a lead manager is very crucial in an IPO. Let us look at the
importance of a lead manager and their functions.One of the most significant responsibilities of
the lead manager in an IPO is in a public issue. In other words, the success or failure of an IPO
depends on the lead manager. Therefore, they’re also known as book builders or merchant
bankers.

Functions of a Lead Manager

 Structuring the new issue

Lead managers prepare the new issue that the company issues for the IPO. Factors like the
company’s capital requirement and the investors’ expectations affect this structuring process.

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 Drafting of the prospectus
The lead managers also create the prospectus that is delivered to SEBI. They try to make the
prospectus as attractive as possible to attract more investors. Rules and regulations of SEBI, along
with company laws, are also followed while preparing the prospectus.

 Preparing underwriting agreements

Lead managers prepare the underwriting agreements with the financial institution, brokers and
investment banks. This agreement is done between the company and the investment bank, where
the bank agrees to work for the company’s IPO.

 Prospectus Deliberation
After preparing the prospectus, the lead managers discuss it with all the authorities and experts
involved in the IPO. Finally, they send the final prospectus after making the last changes.

 Coordinating with all the members and functions

A lead manager is like a junction. They coordinate all the major tasks among everyone. They also
arrange meetings for various investors, brokers, etc., with the company.

 Keeping an eye on the issue

A lead manager has to be vigilant. So, they need to pay attention to the issue from its day one to
the closing day.

 Allocating the shares

Once the IPO closes, the lead manager helps the company allot the shares. First, they go through
all the applications. Lead managers allot shares to applicants based on the company’s priorities.

 Listing of Shares
A lead manager helps the company list its shares in the IPO stock market after the IPO. Then,
once the IPO is over, either BSE or NSE lists the company under them. Also, they help the
company by sending letters and documents to the stock exchange.

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 CHAPTER 8: PRICE DISCOVERY IN IPOs

Price Discovery helps the buyers and sellers to set the market prices of the tradable assets. It is
because of the mechanism of price discovery set out what sellers are willing to accept and what
buyers are willing to pay. Due to this price discovery is concerned with finding the equilibrium
price that facilitates the greatest liquidity.

Price Discovery matches buyers and sellers based on the number , size , location and
competitiveness of the asset. One of the way of how different factors are determined is through
auctions. Auction markets enables the buyer and seller to compete till the market price is found.
At this point the market will be highly liquid as buyers and sellers match easily.

The below mentioned factors describe about price discovery level

 Supply and Demand

 Attitudes to Risk
 Volatility
 Available Information
 Market Mechanism

1. Supply and Demand:

Supply and Demand are the two greatest factors that determines asset price and dictate how
crucial price discovery mechanism are for traders. If the demand is higher than supply, the price
of the asset will increase for the buyers who are willing to pay more due to scarcity which in turn
favors the sellers. At the same time if the supply is higher than demand then the buyers won’t buy
the asset as it will be easily available in the market.

In the market when the supply and demand are equal , then the price is said to be in equilibrium
as there is an equal number of buyers and sellers meaning the price are fair to both the parties.
Price discovery enables the traders to determine whether the buyers or sellers are dominant in a
market and what is fair market price.

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2. Attitudes to Risk

A buyer or seller attitude to risk can greatly affect the level at which the price is agreed. If the
buyer is willing to take on the risk of a fall in the price for the potential reward of a large rise in
price they might be willing to pay additional in order to secure their position. This means that the
price is set higher than the assets intrinsic value and the asset is overbought and can fall in the
coming days or weeks. Risk can be calculated through a risk and return reward ratio and it is
important for both buyers and sellers to keep their risk to an acceptable level. It can be done by
using stop limits on the active positions.

3. Volatility

Volatility is linked to risk. Volatility is one of the factors which determines whether the buyer
choose to enter or close the position in any particular market. Some traders actively seek out
volatile markets as they offer potential for large profits. However there are chances such traders
incur loss. Traders however can speculate on markets rising as well as falling. This means that
they have the opportunity to profit even the markets are bearish.

4. Available Information

The amount of information available can determine the levels at which they are willing to buy or
sell. For example buyers may wish to wait to get some key information about the market
announcements. This in turn increases demand or supply which means the asset price might
change in line with any changes that occur in the market.

5. Market Mechanism

Price discovery is not same as valuation. Price discovery works off market mechanism which seek
to establish the market price of an asset rather than its intrinsic value. As a result price discovery
is more associated with what buyer is willing to pay and a seller is willing to accept , rather than
the analytic’s behind an asset. In this way price discovery is more reliant on market mechanism
such as the micro-economic supply and demand. With price discovery investors have confidence
that the price is being quoted at the true market price. This reduces uncertainty surrounding an
assets price in turn and that increases liquidity and also reduces cost.

59
Price Discovery matters in Trading because demand and supply are the driving forces behind the
financial market. In such cases market is constantly in a state of bearish or bullish flux, it is
important here to continuously check whether a stock, commodity index or forex pair is
overbought and whether its price is fair to buyers and sellers

By assessing this, the investor or trader can assess whether an asset is currently trading above or
below its market value and they can use this information as the basis of whether to open a long or
short position.

8.1. Price Discovery V/S Valuation

Valuation is the present value of presumed cash flows, interest rates, competitive analysis, and
technological changes. Valuation is also known as fair value and intrinsic value. By comparing
market value to valuation, analysts determine if an asset is overpriced or underpriced by the
market. Market price is actual correct price but any differences may provide trading opportunities.

Price discovery is not the same as valuation. Of course the market price is the actual correct price
but any differences may provide trading opportunities if and when the market price adjusts to
include any information in the valuation models not previously considered.

Conclusion

Price discovery is the means though which an asset’s price is set by matching buyers and sellers
according to a price that both sides find acceptable. It is largely driven by supply and demand. It
is useful mechanism to gauge whether an asset is currently overbought or oversold. It can help
you assess whether buyers or sellers are dominant in any one particular market.

The price discovery phase refers to the process in financial markets where buyers and sellers
interact to determine the market price of an asset. During this phase, the forces of supply and
demand come together to establish the equilibrium price at which transactions occur.
After the price discovery phase, the determined price becomes the prevailing market price. This
price serves as a reference point for future trades and reflects the collective perception of market
participants regarding the value of the asset. Trading continues based on this established price
level.
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Several factors affect price discovery, including supply and demand dynamics, market liquidity,
investor sentiment, economic indicators, geopolitical events, and market participants’ expectations
and behavior. These factors can influence the buying and selling decisions of market participants,
thereby impacting the equilibrium price.

The different methods of price discovery include auction-based methods, such as open outcry or
electronic trading platforms, where buyers and sellers place bids and offers to establish prices.
Additionally, in certain markets, price discovery can occur through continuous trading
mechanisms, like order matching algorithms, where trades are executed based on predefined rules.

8.1. Book Building Process In IPO

Companies in today’s fast-paced world frequently look for new ways to raise money for growth
and expansion. The book-building procedure for Initial Public Offerings (IPOs) is one such
common strategy. This article seeks to offer a thorough explanation of the book building process
for IPO, its method, sub-types, comparison with fixed pricing issues, and the accompanying
benefits and drawbacks.

The process of deciding the price at which securities, such as stocks, are sold to the public during
an IPO is referred to as book building process. Investment banks or underwriters work with the
issuing firm to create a “book” or demand for the shares of these companies among institutional
and retail investors under this method.

Companies in today’s fast-paced world frequently look for new ways to raise money for growth
and expansion. The book-building procedure for Initial Public Offerings (IPOs) is one such
common strategy.

The meaning of book building

The process of deciding the price at which securities, such as stocks, are sold to the public during
an IPO is referred to as book building process. Investment banks or underwriters work with the
issuing firm to create a “book” or demand for the shares of these companies among institutional
and retail investors under this method.

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The process involved in book building

The book-building process typically involves the following steps:

 Appointment of Lead Managers

Lead managers or underwriters are chosen by the company issuing the shares and are in charge of
overseeing the IPO procedure and working with regulatory bodies.

 Price Discovery

The appointed lead managers understand and create the demand for the company’s securities and
determine the indicative price range based on interest expressed by potential investors. This range
reflects a floor price and a cap price.

 Bidding Phase

Qualified institutional buyers (QIBs), non-institutional investors, and retail individual investors
can place bids within the price range set in the previous step. The investors specify the quantity
and the price at which they are willing to purchase the shares during this period.

 Book Building Period

The book building period typically lasts a few days, during which investors can revise their bids.
The lead managers gauge the bids received at various price levels.

 Allocation

After the book building period ends, the lead managers allocate shares to investors based on the
demand, bidding price, and relevant regulations. The final price at which shares are issued is
known as the cut-off price.

Companies opt for the book-building process for the following reasons:

 Efficient Price Discovery

Book building process enables companies to gauge investor interest for IPOs and ascertain the
most appropriate price for their shares based on market demand.

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 Enhanced Investor Participation

The process allows for participation from a wider range of investors, including institutional and
retail investors, thereby increasing the overall subscription and liquidity of the shares.

 Flexibility

Flexibility is provided via book building, which enables the issuing business to modify the price
range in reaction to investor demand and market conditions.

Sub-types of book building

 Accelerated Book Building

Accelerated book building is a form of book building that is employed when there is a pressing
need to finish the offering quickly. It focuses largely on institutional investors and has a shorter
book building period.

 Partial Book Building Process

In this sub-type, only a portion of the issue is set aside for book building; the remainder is made
available at a fixed fee. This enables the use of both fixed pricing systems and book building
process.

The key differences between the book building process and the fixed price issue are as follows:

Basis Book Building Process Fixed Price Issue

Price Determined through the bidding Predetermined by the

Determination process based on investor demand. issuing company.

Broad range of investors can Limited participation of

Investor
participate, including institutional specific category of
Participation
and retail investors. investors.

Flexibility Price range can be adjusted by the Fixed price offered to all

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 lead manger based on market investors.
response.

Efficient price discovery based on Limited price discovery

Price Discovery market demand and investor because of predetermined
bidding. price.

Involves multiple steps and

Relatively simpler process
Complexity coordination between various
with fewer steps involved.
stakeholders.

Fluctuating investor demand and

Less susceptible to market
Volatility Risk market conditions can introduce
fluctuations and volatility.
volatility and uncertainty.

Conclusion

The book building process is a common IPO method on the stock market because it promotes
greater investor engagement and effective price discovery. Companies choose for this process
because of its numerous advantages, irrespective of some drawbacks it might have over alternate
methods.

Investors put bids during book building stating the amount and price at which they are ready to
buy shares. The final cut-off price is decided by the lead managers after they examine the bids
received.

8.2. OFFER PRICE

Introduction
Valuation of share during an open offer has been a constant subject of disputes. The acquirer and
shareholders are often at loggerheads in relation to the offer price. Where the acquirer seeks to
reduce its cost of acquisition, shareholders seek to extract most out of the exit opportunity. This
has led to multiple instances where the offer price was challenged by the shareholders before the
Securities and Exchange Board of India (‘SEBI').
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In this, to explore the conundrum surrounding the valuation of shares (offer price) during open
offers, the process of valuation of shares in case of open offers and some recent cases where the
valuation was challenged by the shareholders, and the price was revised by the regulator. Towards
the end, certain changes that can be accommodated in the SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011 (‘Takeover Regulations’) to provide better protection to
shareholders are notified.

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 CHAPTER 9: ALLOTMENT AND LISTING PROCESS
IPO Process
The IPO process begins on the day the issuing company decides to go public till the listing of the
IPO and the post-issue activities. The IPO process in India is a complex and lengthy task. The
IPO process is governed by SEBI, the market regulator , which protects the interests of investors
and regulates the securities market and related matters. The presence of many IPOs is a sign of a
healthy stock market and economy.
Content:

 IPO Process (Step by Step Guide)

 Mainboard and SME IPO Process Comparison
 IPO Process Timeline India

The IPO process involves various stages where the prescribed regulations must be followed
closely. In this chapter, we will cover the IPO process in detail by explaining it step-by-step.

IPO Process

A company must follow the IPO procedures set by the exchange(s) on which the company wishes
to list its shares after the IPO. The IPO procedure in India is as follows:

1. Merchant Banker (Lead Manager) Appointment

The company appoints a Merchant Banker (Lead Manager) to assist the issuer throughout the IPO
process, starting from due diligence to post-listing support. They orchestrate the entire IPO
process and coordinate with all parties involved in the IPO from start to end.

The Issuer Company and the merchant banker conduct due diligence and prepare the draft
prospectus (DRHP) .

A merchant banker is a SEBI-registered financial institution that assists companies with financial
solutions, such as raising funds, providing advisory services, acting as an underwriter, and more.

Note:

 A company can appoint one or more merchant bankers. For large IPOs, multiple lead
managers are common.
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 Most banks and large non-bank financial institutions are licensed as merchant bankers.

2. DRHP Approval from SEBI

The DRHP document is submitted to SEBI for review. This process takes between 2 to 4 months.
SEBI reviews the information in the DRHP and issues the necessary approvals.

Note: SME IPOs don't require approval from SEBI. They must be approved by the stock
exchange.

3. IPO Application to Exchanges

Merchant bankers then submit the IPO application and DRHP document to the stock exchanges
for approval. The exchange gives the company in principle approval after verifying the IPO
application.

4. Price determination

The issuer and the merchant bank determine the IPO pricing method: fixed-price issue or book-
building issue. In a fixed-price offering, the price at which shares are sold and allotted in the
fixed-price offering is announced to investors prior to the IPO.

In Book Building Issue, the issuer decides a price range (e.g., Rs 80 to 90) or a 20% price range
within which investors can bid for the shares. The final price is determined after the bidding
process is completed. Within this price range, both retail and institutional buyers are invited to bid
for the IPO.

5. RHP Submission

A Red Herring Prospectus (RHP) is prepared and filed with the Exchange. The RHP is an updated
version of the DRHP document. It contains current information about the company, i.e., the most
recent financial data. It also contains additional information such as the IPO timeline and pricing
details to help investors make an informed decision.

6. Road Show

Together with the PR & advertising agency, Merchant Bankers advertise the IPO to the public.
This process is called an IPO roadshow. They arrange investor meetings in different cities with

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the promoters of the company. The meetings are also arranged with journalists, analysts and other
media representatives.

7. IPO Open for Anchor Investor

The IPO will be open to anchor investors (if any). An anchor investor is a qualified institutional
buyer (QIB) who applies for an IPO under the anchor investor section and submits a bid for an
amount of at least Rs 10 crore. The company allots the shares to the anchor investor one day
before the issue opens to the public.

8. IPO Open for Public

The IPO is opened to the public to place bids for the shares offered in the IPO. An offering may
be open to the public for a minimum of three days and up to ten days. While the offering is open,
investors place bids for the available shares. Submitting bids does not guarantee shares, as in most
cases shares are allotted through a lottery.

IPO applications are submitted to the stock exchange's IPO platform by investors through a
broker or bank. Investors receive a unique IPO application number.

9. IPO Shares Allotment

Once the public offering is closed, the application data is forwarded by the exchanges to the IPO
registrar, which handles the allotment.

 The exchange sends the IPO application file to the banks to confirm that the bank account and
the Demat account used in the IPO application belong to the same person.
 The banks confirm whether the account numbers match or not.
 The registrar rejects all IPO applications that are flagged as "3rd party".
 The registrar draws a lottery or allocates shares on pro-rata basis to applicants as applicable.
 The money is withdrawn from the investor's account.
 The shares are transferred to the investor's account.

10. IPO Listing Date Announcement

The company submits the listing documents to the stock exchange. The company then sends a
credit confirmation from the depository, i.e., the shares are transferred to the allottees account,

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and the stock exchange issues a listing circular to the market the next day. The circular contains
information such as the final price, ISIN, code and symbol.

11. IPO Shares Listing

Trading of IPO shares is set up on the stock exchanges in two steps:

 Pre-open Session
The pre- opening session is a pricing mechanism for newly listed shares. It is a special trading
session for IPOs on the first day of their listing. The Pre-Open Session lasts 45 minutes (9:00 a.m.
to 9:45 a.m.), during which orders can be entered, modified and canceled.
From 9:45 a.m. to 9:55 a.m., orders placed during the first 45 minutes are matched, the opening
price of the IPO is determined and a trading confirmation is sent to traders.

 Commencement of trading
Normal trading begins at 10 a.m. on the day of listing. At this time, anyone can buy or sell the
shares of the IPO on the market.

12. Post-Listing Documents

After listing, the issuer must submit documents to the stock exchange, including invitations to
board meetings, annual reports, shareholding samples, audit reports, corporate governance reports
and audit reports.

Mainboard and SME IPO Process Comparison

The overall IPO process for Mainboard and SME IPOs is the same except for the minor
differences listed below:

 In the case of SME IPO, the IPO documents are reviewed by the stock exchange and not by
SEBI, as in the case of the Mainboard IPO.
 Appointment of a Market Maker is mandatory in case of an SME IPO. The market maker is
appointed by the issuer company and the merchant banker in joint consultation.
 In case of a fixed-price IPO SME IPO, an RHP document must be filed with the RoC
(Registrar of Companies) prior to the opening of the issue. For mainboard IPOs ( Book
building Issue ), the RHP can be filed after the closing of the issue.
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9.1. IPO Process Timeline India

The duration of the IPO process in India ranges from 3 months to a year, depending on various
factors such as the type of IPO, the complexity of the transaction, the size of the company, the
market situation, etc.

Note: A company should complete an IPO within 12 months of receiving SEBI's comments on the
initial filing.

IPO Process Timelines by IPO Platform (Tentative)

Platform Duration
Mainboard IPO 6 to 12 months

SME IPO 3 to 4 months.

IPO Process Timelines by Stages (Tentative)

Phase Timeline
Planning 2 weeks

Due diligence 4-5 weeks

DRHP Preparation 1 week

SEBI Approval 4-8 weeks

RHP Submission 2-3 weeks

IPO Launch Minimum 3 days

Allotment Within 1 day of issue closure

Listing Within 3 day of issue closure

Post issue activities 2-3 weeks

IPO allotment
IPO allotment is the process of allocating shares to the investors who have applied for the IPO.
1. IPO Allotment Rules
2. IPO Allotment Method
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3. IPO Allotment by Investor Category
4. IPO Allotment Process
5. IPO Allotment Date
6. IPO Allotment Status Check
7. IPO Allotment Chances
8. Basis of Allotment Explained
9. Page Glossary

IPO allotment is the allocation or distribution of shares to the investors in an IPO. The allocation
is determined by the Registrar in consultation with the Exchange. IPO allotment announcement is
done by the registrar 3-4 days after the IPO bidding period gets over. Investor could visit
registrar's website to check the allotment status.

IPO allotment depends on the demand of IPO shares. If the IPO is oversubscribed (received more
bids then the shares offered), not all investors may receive an allocation. If the IPO is not fully
subscribed, all investors will receive allotment.

1. IPO Allotment Rules

 The IPO allotment is made by the Registrar in consultation with the designated stock
exchange.
 The IPO allotment depends on the number of shares offered and the bids received from
investor in the particular investor category (i.e. Retail, NII, QIB).
 The rules for IPO allotment vary by investor category (i.e. Retail, NII, QIB).
 Only valid applications are considered for allocation. Invalid applications (i.e. application
with wrong Demat account number, multiple applications with same PAN, etc) are rejected.
 Only the applications received at or above the cut-off price are considered for allocation.
 An under-subscription in one category (other than the QIB category) may be offset with over-
subscription from another category in consultation with the Lead Manager, the Registrar, the
Exchange and the issuer.
 Unsubscribed shares in the QIB category are not available for subscription in other categories.
 The registrar prepares and publish the Basis of Allotment document that provides detail about
the allotment.

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2. IPO Allotment Method

The IPO allotment mechanism depends on the investor category and the IPO subscription levels.

Note:

 If an IPO is Under subscribed across each investor category, all investors with valid
applications will receive a full allotment. The IPO must receive a minimum total subscription
of 90% to succeed.
 If the IPO is over-subscribed for one category and under-subscribed for another, the over-
subscription may be adjusted with the under-subscribed portion of the other category, except
for QIB.
 In case of over subscription, the issuer will allocate shares based on a lottery system or
proportionately based on the investor category. Let us take a look at the IPO allocation criteria
for each investor category.

3. IPO Allotment by Investor Category

1. IPO Allotment to Retail Investors (RII)

Each retail individual investor (RII) gets allocated at least one lot; provided there are those many
shares reserved for RII in the IPO and the number of RII applicants. IPO shares are allocated in a
bunch known as lot. A lot includes x number of shares worth around Rs 15,000 in Mainboard IPO
and Rs 1,00,000 in SME IPO. The number of shares in lot (lot size) is declared by the issuer
company along with the issue price.

The number of maximum retail investors who could get allotment in an IPO is derived by dividing
the total number of shares offered in RII reserved category by the lot size.

Maximum RII Allottee = (Total shares offered to RII) / (IPO lot size)

2. IPO allotment in NII category

NII Sub Category

NII IPO investor category is divided in 2 parts:

Sub Category Investment Limits Reservation

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 Small NII (sNII) Rs 2 lakhs to Rs 10 lakhs 1/3 of total NII reserved portion

Big NII (bNII) More than Rs 10 lakhs 2/3 of total NII reserved portion

Each NII investor will be allotted a minimum bid lot as applicable to that category, subject to
availability of shares. The minimum bid lot will be equal to the minimum application size for
more than Rs 2 lakhs. In case any shares are left after allotment of minimum bid lot, the same will
be allotted on a pro-rata basis.

In case of under subscription, all investors will receive the full allotment. The unsubscribed
portion of the NII may be used to meet any excess demand from other categories.

Note:

 The allotment method for small and Big NII is the same.
 Even though the Big NII category has a minimum subscription amount of Rs 10 lakhs, in case
of over-subscription, shares worth Rs 2 lakhs will be allotted (the minimum NII bid amount).
This is similar to the allocation for the Small NII sub-category.
 There is no segregation of Big NII and Small NII in SME IPO.

3. IPO allotment in QIB category

The allotment to QIB investors will be made on a proportionate basis in case of oversubscription.
In case of an under-subscription, all QIB investors will receive the full allotment. However, the
under-subscribed portion in the QIB category cannot be allotted to other investor categories.

The mutual funds in the QIB category will be allotted up to 5% of the QIB category. If the
demand for the mutual funds exceeds 5% of the QIB category, the allocation shall be made
proportionally up to 5%. However, if mutual fund demand is less than 5% of the QIB category, all
mutual funds will receive the full allotment. The remaining unsubscribed portion may be used to
meet the demand of other QIB investors on a pro-rata basis for up to 95% of the QIB category.

4. IPO Allotment to Anchor Investors

In mainboard bookbuilding IPOs, anchor investors are offered shares up to 60% of the QIB
category. Of the 60%, one-third of the anchor investors' share is reserved for domestic mutual
funds.

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The issuer decides on the selection of the anchor investors and their allocation in consultation with
the lead manager. The registrar maintains a physical book to record the applications received from
Anchor Investors. If the offer price is higher than the Anchor Investor offer price, the anchor
investors are sent revised confirmation of allocation note (CAN) for payment of differential
amount.

Anchor Reservation Criteria

The issuer must observe the following guidelines when allocating shares to anchor investors.

Anchor
Investor
Anchor Investor Limit
Reservatio
n
Up to Rs.
Maximum 2 Anchor Investors.
10 crores

Rs. 10
Minimum 2 and maximum 15 Anchor Investors subject to minimum allotment
crores - Rs.
of Rs 5 crores per Anchor Investor.
250 crores

Minimum 5 and maximum 15 anchor investors for allocation up to Rs 250

Rs 250
crores and additional 10 anchor investors for every additional Rs 250 crores
crores
subject to minimum allotment of Rs 5 crores per Anchor Investor.

5. IPO Allotment to Employees

The allocation to employees will be made on a pro rata basis in the event of oversubscription.

The maximum value of allocation to eligible employees shall not exceed Rs 200,000 unless the
Employee Reservation Portion is under-subscribed. If the employee quota is not fully subscribed,
the unsubscribed portion gets allocated on a proportionate basis to Eligible Employees for value
exceeding Rs. 200,000 up to Rs. 500,000.

6. IPO Allotment to Shareholders

The allocation to shareholders will be made on proportionate basis in the event of

oversubscription.
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If an investor has placed a bid in the shareholder category for an amount exceeding Rs 200,000
and also in any other category, then the bid will be considered as multiple bids and will get
rejected.

If an investor bids in the shareholder category up to an amount of Rs 200,000, he may also bid in
the Employee category (if applicable) up to Rs 200,000 and any other category. Such bids will not
be counted as multiple bids and will have a chance to get allotment in respective category as per
the criteria explained above for each category.

4. IPO Allotment Process

The registrar of the IPO is responsible for the allotment process. The basis for allotment is
finalized by the registrar in consultation with the designated exchanges. The following are the
general steps taken by the Registrar to complete the IPO allotment process.

 Receive IPO application data from the stock exchange as soon as the issue is completed.
 Validation of IPO applications that don't meet eligibility criteria.
 Validation of IPO application data with depositories and banks to identify 3rd party IPO
applications.
 Rejection of invalid applications with technical errors.
 Valid applications at or above cut-off price are grouped at the lot size level to determine the
total demand for shares in each category.
 Finalize the basis of allotment (BOA) in consultation with designated exchanges.
 Sending the allotment advice via email/SMS to inform investors of the allotment status.
 Notifying banks and depositories and coordinating with them to ensure that the investor's
bank account is debited on the scheduled allotment date and the shares are credited to the
investor's Demat account.

5. IPO Allotment Date

IPO allotment date is the date on which the IPO allotment is announced by the Registrar to the
issue. Investors can check the status of their IPO applications on IPO allotment date. The IPO
allotment is a key event that investors follow in over-subscribed IPOs where the allotment is made
by lottery.The registrar of the issue uploads the allotment results on its website, where investors

75
can check the status of their allotment by entering the PAN number, IPO application number or
Demat account number. The IPO allotment should be completed within five business days of the
closing of the offering.

6. IPO Allotment Status Check

The IPO allotment status check is to determine whether the investor has received the shares or
allotment in an IPO. An investor needs either a PAN number, an application number, or a Demat
account number to check the allotment status. The allotment status is made available online by the
Registrar to the Issue on the date of the IPO allotment.

Steps to check IPO allotment status

A. Visit IPO Allotment Status Page at Chittagong.com.

B. Select the desired IPO.
C. Go to the Allotment tab and click on the IPO allotment status button.
D. Users will be redirected to the Registrar's website.
E. Select the IPO from the drop-down.
F. Enter PAN number, application number or DP Client ID.
G. Submit and check the allotment status.

If investors have received the allotment, the allotment status page on the website will display the
number of shares allotted, and if no allotment has been made, the page will be blank.

7. IPO Allotment Chances

There is no fixed IPO allotment formula or IPO allotment chances calculator that can guarantee
investors an allotment in an IPO. The allotment depends on the level of subscription in the IPO
and the category in which the investor has applied.

In most IPOs, the allotment is made by lottery because they are oversubscribed. Your chances of
receiving an allocation are the same as other applicants.

Although there is no rule of thumb that can guarantee investors an allotment in an IPO, investors
can always follow some good practices to increase their chances of allotment as mentioned below:

 In the Retail category, apply for 1 lot of shares from multiple family accounts.
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 If you must choose between the Retail, sHNI, and bHNI categories, wait until the last day to
see the response and find out where you have the best chance of allotment.
 Do not apply at the last minute. Try to apply before 1 p.m. on the issue closing day.
 Make sure you fill out all the information correctly.
 Be sure to approve the UPI mandate by the deadline.
 Check the basis of allotment document to determine your eligibility for allotment. If you feel
you should be allotted IPO shares but haven't received them, contact the Registrar for a
response.
 Study some old Basis of Allotment documents to understand how allotments are made.

8. Basis of Allotment Explained

The basis of allotment is the process that decides the allocation of shares in an IPO to the investors
who have applied for it. The basis of allotment is included in the offer documents and is finalized
by the registrar, company and lead manager in consultation with the Designated exchanges.

The allotment shall be made according to the pro-rata or lottery system based on the investor
category and demand for the IPO.

The Basis of Allotment (BOA) is a document published by the registrar in the leading daily
newspaper once the allotment is finalized in consultation with the Designated Exchange/s. The
BOA document contains the below details:

 Total Number of applications received per Investor Category.

 Total number of shares applied per Investor Category.
 Subscription Rate per Investor Category.
 Categorization of RII and NII based on the number of shares applied for each category.
 Details on the below for each of the above grouped category segregated based on the number
of shares applied:
 Number of applications received.
 % of application received per group to total applications.
 Total number of shares applied.
 % of shares applied per group to total number of shares applied.
 of Shares allotted per bidder.
 Ratio of bidders allotted shares to total bidders in each group.
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  Total no. of shares allotted per group.

9. Page Glossary

1. Maximum RII Allottee

The maximum RII allottee is the number of maximum retail individual investors who will receive
allotment in an IPO.

As per the SEBI rule, each RII investor should receive minimum one lot. Thus, to achieve this, the
number of shares offered/reserved for RIIs in an IPO is divided by the lot size to know the
maximum number of RII to whom the shares will be allotted.

2. Confirmation of Allocation Note (CAN)

The Allotment Confirmation is the letter, notice or communication of allotment of shares to the
Anchor Investors who secured an allotment.

3. Designated stock exchange

A stock exchange that the issuer selects for a particular issue or on which its securities are listed.
The exchange being considered for listing is called the designated exchange. For example, ABC
Ltd will list its new shares on the BSE. Here, the BSE is the designated exchange.

9.2. LISTING ON STOCK EXCHANGE

Stock market listing is a way of raising long-term equity finance for your company by offering
shares to potential investors. Listing on a stock market is unlikely to be suitable for smaller
businesses, as the process involved can be time-consuming and costly. Additionally, investors are
only interested in buying shares in companies that have secure earnings streams and strong
growth prospects. They will also expect a higher return from an investment in a smaller business,
which is considered more risky than one made in a large, established company. There are three
stock markets in the UK: the London Stock Exchange, where larger companies are listed; and the

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Alternative Investment Market(AIM) and PLUS, which are designed for smaller, growing
companies.

Common use: A stock market listing is normally used to raise capital for a business’s
consolidation and growth objectives, such as new production facilities, expanding in overseas
markets or paying back a venture capital investor.

Listing is also a way of attracting private investors into a business and for facilitating an owner-
manager to cash in on their investment. This type of investor includes business angels,
Enterprise Investment Scheme investors and Venture Capital Trust Investors, who generally like
an exit strategy in place.

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 CHAPTER 10: POST IPO ACTIVITIES

Post-IPO Scenario

After the IPO, the company’s shares get listed on the stock exchange. The free transfer of shares is
now possible without any restrictions. Any investor can buy or sell shares at prevailing market
price at any time. Transactions only need to go through a stock broker. An exception are promoter
shares which may have a lock-in period of 1-3 years after listing.

Therefore, post-IPO, the shares become highly liquid assets that can be converted to cash instantly.
For pre-IPO investors, the IPO provides an exit opportunity.

10.1 MARKET ANALYSIS ON IPO

If you find yourself drawn to the thrill of investing in companies at their early stages, then
understanding how to analyse IPOs (Initial Public Offerings) is your key to unlocking their
potential. In this comprehensive guide, we'll take you on a journey through the exciting process of
IPO analysis, equipping you with the knowledge and tools needed to make well-informed
investment decisions.

IPOs have the power to reshape a company's future and present remarkable growth prospects.
However, the allure of IPOs can be accompanied by uncertainty and risks. That's why it's essential
to navigate this landscape with confidence and a strategic approach. By the end of this guide,
you'll be equipped to conduct IPO stock analysis like a seasoned investor, allowing you to
identify promising opportunities and steer clear of potential pitfalls.

KEY FACTORS TO CONSIDER WHILE

EVALUATING AN IPO

To do a thorough IPO analysis, here are some of the key aspects that you must evaluate:

 Grasping The Pulse Of The Market

Before delving into specific IPOs, take a macro view of the market. Keep an eye on the
overall economic conditions, industry trends, and geopolitical events that could impact market
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 sentiment. Understand that IPOs can be influenced by broader market fluctuations and
prevalent macroeconomic trends, so being aware of the market's direction is vital.

 Decoding The DRHP

The Draft Red Herring Prospectus (DRHP) is a treasure trove of information for potential
investors. It provides insights into the company's operations, Financials, risks, and future
prospects. Don't shy away from studying this document carefully. Furthermore, conduct
additional financial research to understand the company's historical performance, competitive
advantages, and potential risks.

 Evaluating Financial Valuation Ratios

Numbers rarely lie, and financial ratios can speak volumes about a company's valuation.
Ratios like Price-to-Earnings (P/E), Price-to-Book (P/B), and Price-to-Sales (P/S) provide
valuable insights into the company's financial health and market position. Compare these ratios
with industry peers to assess the IPOs relative value.

 Assessing Growth Prospects

A company's potential for growth is a key determinant of its IPO appeal. Look for factors such
as innovative products or services, expansion plans, and untapped markets. A well-defined
growth strategy can indicate the potential for future revenue and profit expansion.

 Scanning The Management Team

Behind every successful company is a capable management team. Research the backgrounds
and experience of key executives to gauge their track record and ability to execute the
company's vision. A competent management team can significantly impact a company's
success, boosting its prospects, and enhancing its reputation among potential investors.

 Verifying The Intended Use Of The IPO Money

One of the critical questions to ask is, "How will the company use the funds raised from the
IPO?" A clear plan for utilizing the capital can reveal the company's growth priorities and
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 financial prudence. Naturally, a company desiring to expand its operations or tap into newer
markets is looking to grow and offers a higher probability of giving you good returns upon the
listing of its shares.

 Monitoring Over-Subscription
Keep a close eye on the level of over-subscription during the IPO process. Over-subscription
occurs when the demand for shares exceeds the number of shares available. High over-
subscription can signal strong market interest in the company, but it may also indicate potential
post-listing volatility.

 Evaluating IPO Price And Dividend Policy

The IPO price should align with the company's fundamentals. An excessively high or low IPO
price can affect investor interest. Additionally, consider the company's dividend policy, if any,
as it can be a significant factor for long-term investors seeking income.

 Choosing A Reliable Broker

Selecting the right broker is a crucial aspect of IPO investing that can significantly impact
your overall experience. While investing directly in IPOs is typically done through your
brokerage account, not all brokers offer the same level of support and resources for IPO
investments. Look for a broker with a good track record, user-friendly technology, a robust
mobile app with high safety measures, and prompt customer support. A supportive broker can
help you navigate the IPO subscription process seamlessly. Also compare the brokerage fees,
transaction costs, and any other applicable charges. Strive to find a balance between
competitive pricing and quality services.

 Gauging Institutional Investors' Interest

Institutional investors are often regarded as sophisticated market players. Their interest in an
IPO can provide valuable insights into the company's prospects and future potential.
Monitoring their involvement can help you assess the quality of the offering.

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 Leveraging Advanced Technology
In the digital age, staying informed has never been easier. Use online tools and resources to
conduct IPO analysis and stay updated on IPO news, market trends, and expert opinions.
Technological advancements such as AI-driven Insights, Automated Data Analytic's, Rob-
Advisors, and Quantitative Analysis Tools allow you to make data-driven decisions with ease.
If you have selected the right broker, then most of these tools will be at your disposal as part of
the broker’s trading platform.

10.2. UTILISATION OF RAISED CAPITAL

Many companies plan to use the capital generated by an IPO to continue growing their business
and following their general business plan. This can include a variety of stated uses of IPO funds
including investment in working capital, sales and marketing development, or capital
expenditures. Each of these uses can generate long-term sustainable growth and development of
the business. As is the case with each of the other uses of capital, companies may choose to list
these expenditures generally or specifically.

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 CHAPTER 11: FACTORS INFLUENCING IPOs

 Economic Indicators:

Economic indicators like Gross Domestic Product (GDP), inflation rate, and unemployment rate
reflect the overall health of the economy. When GDP growth is strong and unemployment is low,
consumer spending and business activities tend to increase, positively impacting company profits
and stock prices. Conversely, high inflation or rising unemployment can lead to reduced consumer
spending and economic uncertainty, causing stock prices to decline. So, favorable economic data
is significant to increase investor confidence in the company’s stocks.

 Inflation & Interest Rates:

As prices of goods and services rise, consumers may reduce spending, potentially leading to
lower company profits and stock prices. Central banks may respond to high inflation by raising
interest rates, increasing borrowing costs for businesses and affecting their profitability. Further,
increasing costs of products dampens consumer spending, affecting corporate profits and stock
performance. On the other hand lower interest rates can stimulate borrowing and spending,
leading to higher company earnings and potentially higher stock prices.

There are more challenges caused by inflation. When investors are uncertain about the future
value of money, it results in conservative investment behavior, influencing stock market trends.
Moreover, inflation's effect on the valuation of future company cash flows can also lead to
changes in stock valuations. Different sectors can also be impacted, with commodities and real
estate potentially benefiting, while technology may suffer.

 Corporate Earnings:

Company performance, as reflected in quarterly earnings reports, directly impacts stock prices.
Strong earnings growth indicates a healthy business environment, attracting investors and
potentially driving stock prices higher. Conversely, disappointing earnings can lead to decreased
investor confidence and a drop in stock prices. However, these are not the thumb rules. Investors
pick the stocks' basis sentiment around its future growth.

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For example, Reliance Industries Limited (RIL) is one of the largest conglomerates in India with
interests in various sectors, including petrochemicals, refining, telecommunications, and retail.
When RIL reports strong quarterly earnings, it indicates robust profits from its diverse businesses.
This tends to increase investor confidence, often leading to a rise in its stock price.

 Exchange Rates:

The currency fluctuations can affect revenues, profits, competitive positioning and overall
financial performance of multinational companies, especially for the companies that rely heavily
on international markets. Investors closely monitor these fluctuations and assess their potential
impact on a company's earnings and stock price. Companies with well-defined currency risk
management strategies and a diversified global presence may be better equipped to navigate the
challenges posed by currency volatility.

 Global Events:

Geopolitical events such as trade tensions, conflicts, or economic crises can create uncertainty in
financial markets. Investors may become cautious or risk-averse, leading to stock market
volatility. Positive global developments, on the other hand, can boost investor confidence and lead
to market gains. For instance in 2022, events like energy-price-led inflation, rising interest rates
and political uncertainty caused by the war, led to high volatility in equity-markets across the
globe.

 Government Policies:

Government decisions on taxation, regulations, and fiscal policies can significantly affect
businesses. Favorable policies can stimulate economic growth and boost stock prices, while
unfavorable policies can create uncertainty and negatively impact investor sentiment.

For example, the RBI's monetary policy decisions, such as changes in cash reserve ratios and
open market operations, influence liquidity in the banking system, which in turn affects stock
market liquidity and performance.

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Further changes in the corporate taxes can directly impact the industry. So, policy makers
generally analyze the impact of increasing taxes on the business profits and investor sentiments
prior implementation.

 Foreign Institutional Investment (FII) Flows:

Foreign investors' buying and selling of Indian stocks can have a substantial impact on stock
prices as it impacts market liquidity. Increased foreign investments can lead to higher demand for
stocks, pushing prices up. Conversely, significant outflows can create selling pressure and result
in price declines.

 Investor Sentiment:

Investor sentiment, driven by emotions, plays a crucial role in market movements. Positive
sentiment can lead to higher demand for stocks, causing prices to rise. Negative sentiment can
trigger panic selling, driving prices down. Factors like news headlines, social media, and overall
economic outlook can influence market sentiment.

For instance, news about excellent performance of specific industries and sectors can influence
the overall market. Positive developments in a particular sector can drive up stocks within that
industry, affecting market indices.

 Industry Trends:

Stock market trends are also dependent on performance and trends within specific industries or
sectors. Factors such as supply and demand dynamics, changing consumer preferences, and
regulatory shifts can impact the profitability and prospects of companies within those sectors.

 Market Liquidity:

The ease with which assets can be bought or sold without causing significant price changes is
referred to as market liquidity. Lower liquidity can result in higher price volatility and wider bid-
ask spreads, potentially affecting stock prices.

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 Technological Advancements:

Technological innovations can disrupt industries and create new investment opportunities.
Companies that leverage emerging technologies may experience rapid growth and attract investor
interest, leading to stock price appreciation.

Conclusion

Investing in the stock market is a journey guided by a myriad of intertwined factors. When you
open a demat account to start an investment journey it is important to understand how these
factors work. From economic indicators that reveal the pulse of the nation's financial health to the
global events that send shock-waves through markets, each factor plays a crucial role in shaping
the trajectory of stock prices. Navigating this complex landscape requires a blend of knowledge,
analysis, and an understanding of human psychology. By staying attuned to economic shifts,
government policies, technological advancements, and the ebb and flow of investor sentiment,
you can make more informed investment decisions.

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 CHAPTER 12: CASE STUDIES

12.1 SUCCESSFUL IPO

1. Adani Wilmar

The Adani Wilmar IPO is the best-performing initial public offering among all the listed stocks
in the Indian share markets in recent years. On the listing date, Adani Wilmar Limited's shares
closed at Rs 265.2 against the IPO issue price of Rs 230. The listing day gain was Rs 35.20.
Since listing, Adani Wilmar share prices touched a high of Rs 878 a piece but have since come
down to Rs 411.4 as on 21 April 2023 on NSE. Adani Wilmar is a 50:50 joint venture between
Adani Group and Singapore's Wilmar International Ltd. Adani Wilmar entered the food
products market in 2013 and now are one of the fastest growing companies in the sector. The
company’s product portfolio includes- edible oil, FMCG and packaged foods, and industry
essentials. The company has a well-diversified product portfolio with many products acquiring
the highest market share in its category.

2. Hariom Pipes Industries

The IPO was launched in March 2022 at a price band of Rs 144 to Rs 153 per equity share and
the company’s share price today is Rs 544.5 on BSE, which means the stock has delivered
multi-bagger return to its allottees. The Rs 130-crore IPO of Hariom Pipe Industries was
subscribed 7.93 times. The company manufactures steel MS pipes, scaffolding, HR strips, MS
billets, and sponge iron. It has a wide distribution network in south India. An increase in the
company’s profitability in FY21 compared to FY20, an expected higher demand for steel and
the anti-dumping duty levied by the government has helped the company’s share price to soar.

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12.2. FAILED IPO

1. Zomato

In July 2021, the food delivery and restaurant aggregator company, Zomato, went public with
its IPO. The company had made its stock market debut in July 2021. The IPO had listed with a
price band of Rs 72-76. Despite the company’s high valuation and significant demand from
investors, the stock fell sharply after listing, leading to losses for many investors. The stock is
and is currently trading at Rs 56 a piece on BSE. Zomato, the Indian food delivery and
restaurant aggregator platform, has faced a number of challenges in recent years. The key
challenge the company has faced is competition in the food delivery space. The company faces
stiff competition from another food delivery company, Swiggy as well as new entrants like
Uber Eats and Amazon. Besides, Zomato has struggled to turn a profit till now and the
company’s losses have continued to mount. This is mainly due to the high marketing and sales
costs associated with its business model. The above factors have raised questions about the
company’s long-term prospects and impacted Zomato’s IPO in July 2021. The IPO was initially
met with strong investor demand but ultimately the demand faded in the months following its
debut. While Zomato remains a major player in India’s food delivery and restaurant aggregator
market, the company will need to address these challenges for its long-term success.

2. Paytm

Paytm’s Rs 18,300 crore IPO failed to live up to expectations on listing day. One97
Communications Ltd, the parent company of the digital payments app PayTM, lost 27% of its
share price on the day of its listing of Rs 2,150. One of the major factors behind Paytm’s
struggles has been the intense competition in India’s digital payments and financial services
market. The company faces stiff competition from PhonePe, Google Pay, Amazon Pay as well
as WhatsApp Pay. Another challenge for Paytm has been its profitability. The company has
struggled to turn a profit due to its high marketing and sales costs. The valuations were
stretched far beyond limits

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Conclusion

Companies that have performed well are those that have strong growth and demand potential.
These are companies that do not have massive outflow but an ability to enhance their profits.
Many companies that have gone public through IPOs in India have been unable to turn a profit,
leading to lower confidence among investors and an eventual decline in the share prices for
some offerings. Inability to turn a profit for many years since the beginning of operations has
been a significant challenge for many companies in India that have gone public through initial
public offerings (IPOs) in recent years. This is majorly common for new-age technology start-
ups, in areas such as e-commerce, digital payments, and food delivery. One of the main reasons
for this is the intense competition in sectors where these companies operate and the overlap of
business operations. Due to the intense competition and niche products, these companies have
to rely heavily on marketing and sales in order to gain visibility and establish their position in
the market. This cost keeps on ballooning making it difficult for them to turn a profit. In
addition, regulatory challenges and compliance costs also affect the profitability of these
companies. Investors in startups need to be cautious and not overvalue companies based on
intangible factors. Investors should instead focus on developing a realistic understanding of the
company’s fundamentals, revenue potential, cost structure, and competitive positioning. IPOs
come in the cycle. When the market is in a bull run, a large number of companies flock to issue
their IPOs to cash in on higher prices. With so many companies rushing to the IPO market,
investors have more options than ever before and are not willing to pay the steep valuations
demanded by the companies. Promoters need to keep the pricing more reasonable so that
investors are able to invest in good companies at fair prices. If you wish to invest in any IPO,
like the upcoming Oyo Rooms or Mankind Pharma, you should open a Demat account with
Samco and get your investment going..

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 CHAPTER 13: CONCLUSION

1. Trends in IPO Activity: The study reveals the fluctuating trends in IPO activity over the
past decade, highlighting periods of heightened activity and lulls. Factors such as market
sentiment, regulatory changes, and economic conditions significantly influence the frequency
and volume of IPOs.

2. Performance of IPOs: Analysis of IPO performance metrics, including initial returns, long-
term stock performance, and under pricing, indicates varying levels of success among IPOs.
While some IPOs experience significant initial gains, others may struggle to maintain
momentum post-listing.

3. Impact of Regulatory Changes: Examination of regulatory reforms, such as SEBI

guidelines and listing requirements, demonstrates their impact on IPO dynamics. Regulatory
interventions aim to enhance transparency, protect investor interests, and promote market
integrity, influencing issuer behavior and investor confidence.

4. Investor Behavior: Understanding investor behavior in IPO markets is crucial for predicting
demand and pricing dynamics. Investor sentiment, risk appetite, and market conditions shape
subscription levels and pricing strategies, impacting IPO outcomes.

5. Sectoral Analysis: Analysis of Sectoral trends reveals patterns in IPO activity across
industries, highlighting sectors with high IPO activity and investor interest. Sector-specific
factors, such as technological innovation, regulatory changes, and market demand, influence
IPO trends within each industry.

6. Role of Underwriters and Intermediaries: The study examines the role of underwriters,
merchant bankers, and other intermediaries in the IPO process. Their expertise, market
knowledge, and network influence the success of IPOs, shaping pricing strategies, allocation
mechanisms, and investor outreach efforts.

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7. Long-term Implications: Beyond the immediate post-listing period, the study assesses the
long-term implications of IPOs on capital markets, economic growth, and investor wealth
creation. Successful IPOs contribute to market development, corporate expansion, and wealth
generation, while failures may have adverse effects on investor confidence and market stability.

8. Policy Recommendations: Based on the findings, the study offers policy recommendations
to regulators, policymakers, and market participants to enhance the efficiency, transparency,
and resilience of IPO markets in India. These recommendations aim to address regulatory gaps,
improve market infrastructure, and foster a conducive environment for IPO issuance and
investor participation.

Overall, the comprehensive analysis of IPO dynamics in India provides valuable insights into
market trends, investor behavior, regulatory influences, and long-term implications. By
understanding the underlying dynamics and challenges, stakeholders can make informed
decisions to navigate the complexities of the IPO market and contribute to its sustainable
growth and development.

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 BIBILOGRAPHY
WEBSITES:
1. https://economictimes.indiatimes.com/?from=mdr (Author Vivek Goel, Managing Partner, Tailwind
Capital Advisors)
2. https://www.legalserviceindia.com/article/l53-BROKERS.html
3. https://www.motilaloswal.com/
4. https://www.icicidirect.com/
5. https://www.chittorgarh.com/ipo/ipo_dashboard.asp
6. www.indianinfoline.com
7. https://www.ey.com
8. www.globalshares.com
9. www.5paisa.com
10. www.wealthdesk.in
11. https://www.ipohub.org/
12. https://www.religareonline.com/

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