MANAGEMENT OF IPO

What is an IPO

Why is an IPO required

Key Terms used

What is the process of an IPO

What are the critical areas to focus

 MANAGEMENT OF IPO

What is an IPO?

An Initial Public Offer (when offered for the first time)

Subsequent offers are termed as FPOs (Follow-on Public Offer)

The key term is “Public” (meaning large number of people)

The offer shall be open for everybody to subscribe

 MANAGEMENT OF IPO

Why is an IPO required?

To gather large amount of capital

To dilute the risk of loss

To ensure the listing of shares

To have a widespread shareholder base

 MANAGEMENT OF IPO

Key Terms used

SEBI
SEBI Guidelines
Promoters
Public
Prospectus
Price
Price Band
Merchant Banker
Registrar and Share Transfer Agent (RTA)
 MANAGEMENT OF IPO

Key Terms used

Eligibility criteria
QIB (Qualified Institutional Buyers)
Book Building
Green Shoe Option
Offer document
Underwriting
Composite issue
Depository
 MANAGEMENT OF IPO

The process of an IPO

Eligibility criteria:

Net Tangible assets of Rs. 3.00 Crore in each of the preceding 3 years.
and

Track record of Distributable profits at least 3 out of 5 preceding years.

and

The Company has a Networth of Rs. 1.00 Crore in preceding 3 years.

and

The proposed issue should not exceed 5 times of its Pre-issue networth.
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The process of an IPO - Eligibility criteria: (Alternate route)

Book building process and 50% of the offer to QIBs

or
15% participation in project by F/Is or Schedule Banks;
10% of the Project cost from appraiser;
10% of the Issue to QIBs
and
Minimum post issue face capital of Rs.10 Crores
or
Market making for 2 years
and
Minimum number of allottees atleast 1000
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Appointment of merchant Banker

Appointment of Registrar and Share Transfer Agent

Grading of the Company’s Securities

Drafting of Prospectus – filing with SEBI

Filing of Prospectus with Stock Exchanges

Obtaining of In-principle approval from stock exchange

 MANAGEMENT OF IPO

What is the process of an IPO

Appointment of Brokers, Advertisers and Bankers

Conducting Road shows and Press Conference

Opening and closing of Subscription list

Preparation of Basis of Allotment

Allotment of shares

Listing of shares
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What are the critical areas to focus

Compliance with SEBI Guidelines

90% subscription of the issue
Underwriting Agreements
Firm Allotments
Listing approvals from the Stock Exchanges
ROC approval for the prospectus
Advertising and Road Shows
Statutory advertisements
In-time allotments and refunds
Listing of the shares with the Exchanges
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SEBI GUIDELINES:

1. Filing of prospectus:
Prospectus to be filed with SEBI
Through Merchant Banker
At least 30 days < filing with ROC
SEBI may suggest changes < 30 days
SEBI to consider only after approval from
St.Ex
Issuer is obligated
SEBI is not obligated
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SEBI GUIDELINES:

2. Application for Listing:

No IPO without application for listing

3. Dematerialization of shares:
,

Agreement with Depository

Present shares also to be in dmat
public may opt either physical or dmat
shares
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SEBI GUIDELINES:

4. “Qualified Institutional Buyer” shall mean:

• a. public financial institution as defined in

section 4A of the Companies Act, 1956;
• b. scheduled commercial banks;
• c. mutual funds;
• d. foreign institutional investor registered with
SEBI;
• e. multilateral and bilateral development
financial institutions;
• f. venture capital funds registered with SEBI;
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SEBI GUIDELINES:

• g. foreign venture capital investors registered

with SEBI;
• h. state industrial development corporations;
• i. insurance companies registered with the
Insurance Regulatory and Development
Authority (IRDA);
• j. provident funds with minimum corpus of
Rs. 25 crores;
• k. pension funds with minimum corpus of Rs.
25 crores).
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SEBI GUIDELINES:

5. Exemption from Eligibility Norms:

Banking Co. including Pvt. Banks

Subject to licensing by RBI
New Bank being set up on acquisition or
take over of a bank
An infrastructure Company, whose project
is appraised by F/I, IL & FS and IDFC
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SEBI GUIDELINES:

6. IPO Grading:
No IPO unless; (as on the date of filing
the prospectus with ROC):
Grading for IPO has been obtained from
at least one agency
Grading and the rationale have been
included in the prospectus
Grading expenses to be borne by the
issuer
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SEBI GUIDELINES:

7. Present shares to be fully paid-up:

No IPO, if there are any shares

partly paid up as on the date of IPO

The Shares to be fully paid up or

forfeited
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SEBI GUIDELINES:

8. Pricing of the Securities:

Listed Co’s Unlisted Co.s Infrastructure

co.

Free price Free price Free price

Subject to the Disclosure norms issued by SEBI

Banks to obtain approval from RBI
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SEBI GUIDELINES:

9. Price Band:
Price Band to be 20%
Max price can be 20% above the floor price
Board of directors may be authorized to fix
the price
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SEBI GUIDELINES:

10. Denomination of shares

Denomination of the shares is not restricted
In case the issue price is <Rs.500, the Face
Value shall be Rs.10/-
The Face Value may be less, where the
issue price is Rs.500 or more
Full disclosure of the face value in offer
document
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SEBI GUIDELINES:

11. Promoter Contribution and Lock-in:

20% of the post issue share cap is to be held by
promoters

12. Securities not included in the above:

Where the equity has been acquired during the
preceding 3 years and;
- where the consideration is not cash
or
- where the shares are given through
bonus issue from revaluation reserve
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SEBI GUIDELINES:
Guidelines on issue of advertisement:
• advertisement shall be truthful, fair and clear
• shall not contain untrue or misleading or misleading
statement
• disclose all relevant facts
• clear, concise and
• understandable language
• Avoid technical, legal, complex terms
• No advertisement in Crawlers
• Reference to the red-herring prospectus
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SEBI GUIDELINES:
Guidelines on issue of advertisement:
• No slogans, captions or one liners
• Shall include risk factors
• Risk factors to be given in the same font size
• The print size shall not be less than point size 7
• The style of the font shall be Times new roman
• No advertisement relating to the full or over
subscription while the issue is open
• Closure announcement can be made only after RTA
certifies that 90% is subscribed