Report On IPO Process
Report On IPO Process
Report On IPO Process
Report On
IPO PROCESS
By:
Balaji Bapurao Gaikwad
19BSP0637
Submitted to,
Mr. Abhishek Kumar (company guide)
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TABLE OF CONTENTS
1. INTRODUCTION 3
2. ADVANTAGES 3
3. DISADVANTAGES 3
4. ELIGIBILITY CRITERIA 4
5. PROCESS 5-6
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1. INTRODUCTION-
An Initial public offering (IPO) or stock market launch is a type of public offering
where shares of stock in a company are sold to the general public for the first time.
This is done by offering those shares to the public, which were held by the promoters
or the private investors.
This is why doing an IPO is also referred to as "going public."
IPO’s are often issued by smaller, younger companies seeking capital to expand, but
can also be done by large privately-owned companies looking to become publicly
traded.
Through this process, a privately held company is transformed into a public company.
Initial public offerings can be used to raise new equity capital for companies,
to monetize the investments of private shareholders such as company founders or private
equity investors, and to enable easy trading of existing holdings or future capital raising by
becoming publicly traded.
2. ADVANTAGES-
An IPO accords several benefits to the previously private company:
Enlarging and diversifying equity base
Enabling cheaper access to capital
Increasing exposure, prestige, and public image
Attracting and retaining better management and employees through liquid equity
participation
Facilitating acquisitions (potentially in return for shares of stock)
Creating multiple financing opportunities: equity, convertible debt, cheaper bank
loans, etc.
3. DISADVANTAGES-
There are several disadvantages to completing an initial public offering:
Significant legal, accounting and marketing costs, many of which are ongoing
Requirement to disclose financial and business information
Meaningful time, effort and attention required of management
Risk that required funding will not be raised
Public dissemination of information which may be useful to competitors, suppliers
and customers.
Loss of control and stronger agency problems due to new shareholders
Increased risk of litigation, including private securities class actions and shareholder
derivative actions.
4. ELIGIBILITY CRITERIA-
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SEBI has dictated the following criteria that need to be fulfilled:
The company should have at least Rs 15 crore as its pre-tax operating profit in the last
three years
A total net worth of at least Rs.1 crore each in the preceding three years
Net tangible assets of at least Rs. 3 crores in the preceding three years, of which not
more than 50% must be kept in the form of monetary assets.
If the company has undergone any merger and now operates with a different name
than it first started with, it has to provide a proof that almost 50% of its revenue from
the past year was generated by doing business with the changed name.
The issuing size should not be more than 5 times the pre-issue net value
The issuing company has to adhere to certain regulations under the Securities
Contracts (Regulations) Act 1956 and Securities, Exchange Board of India Act 1992
and others.
If a given company, does not qualify these criteria, an alternate way is suggested by the
SEBI, called the QIB route under which the POI can be issued under the book building
route. The company can allot almost 75% of its public offering to Qualified Investment
Buyers (QIB), who are expert institutional buyers closely working with SEBI.
5. PROCESS-
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There are 7 essential steps involved in the listing process through an IPO.
Step 1: Hire an investment bank
Step 2: Register with SEC
Step 3: Draft the Red Herring document
Step 4: Go on road show
Step 5: IPO is priced
Step 6: Available to public
Step 7: Going through with the IPO
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where it be going to list their shares. The Company asks the SEC to announce the
registration statement effectual so that purchases can be made.
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