IPO

Initial Public Offer

Initial Public Offering (IPO)

◆ Unlistedcompany makes either a fresh

issue of securities or

◆ Anoffer for sale of its existing securities or

both for the first time to the public.
A follow on public offering (FPO)

An already listed company makes either a

fresh issue of securities to the public or

An offer for sale to the public, through an

offer document.
Rights Issue (RI)

Listed company which proposes to issue

fresh securities to its existing shareholders
as on a record date.
A preferential issue

Issue of shares or of convertible securities

by listed companies to a select group of
persons under Section 81 of the
Companies Act, 1956 which is neither a
rights issue nor a public issue.
 Laws governing IPO

◆ COPMPANIES ACT 2013

◆ SEBIDisclosure and Investor

Protection (DIP) Guidelines 2000
 COPMPANIES ACT 2013
◆ Issue of Securities

◆ Listing of Securities

◆ Allotment
 SEBI Disclosure and Investor
Protection (DIP) Guidelines 2000
◆ EligibilityNorms
◆ Pricing of Issue

◆ Listing Requirements

◆ Disclosure Norms

◆ Lock-in Period for Promoters

◆ Content of Offer Documents

◆ Pre-and-Post Issue Obligations

 Eligibility Norms

◆ Pre-Issue Net Worth of not less than 1 cr.

in 3 out of preceding 5 yrs and has
minimum Net Worth in preceding 2 yrs

◆ Track Record of Distributable Profits for at

least 3 out of immediately preceding 5 yrs

◆ Issue size does not exceed 5 times it’s

Pre-Issue Net Worth
 Qualified Institutional Buyers
◆ Qualified Institutional Buyers are those
institutional investors who are generally
perceived to possess expertise and the
financial muscle to evaluate and invest in
the capital markets.

◆ 60% of the Issue size will have to be

Allotted to QIBs
 RELIANCE Petroleum Ltd.
Basis of Allocation
◆ Issue was made through 100% Book
Building Process where at least 60% of the
net issue was To be allotted on
Proportionate Basis to QIBs
◆ Not less than 10% of the net issue was
available for allotment on proportionate to
Non-institutional Bidders
◆ Not less than 30% of the Issue was was
available for allotment on proportionate to
Retail Bidders
 Allocation
Category No. of No. of Subscripti
App. Shares on
Retail 2094659 20116569 14.90
Bidders 32
Non – Ins 13209 26221318 58.27
Bidders 92

QIBs 411 18415945 68.20

000
 Green-shoe Option

◆ A green shoe option is a clause

contained in the underwriting agreement
of an initial public offering (IPO). The
green shoe option, which is also often
referred to as an over-allotment provision,
allows the underwriting syndicate to buy
up to an additional 15% of the shares at
the offering price if public demand for the
shares exceeds expectations and the stock
trades above its offering price.
 Pricing of Issue

◆ Can Freely Price the Issue

◆ CanIssue Shares at Higher price

than Offered to Public

◆ May Issue Securities at Differential

Prices in its Public and Rights Issue
 Listing Requirements
◆ Net Tangible Assets of at least 3 cr. in each of the
preceding 3 full yrs of which not more than 50% is
held in Monetary Assets

◆ Pre-Issue Net Worth of not less than 1 cr. in 3 out of

preceding 5 yrs and has minimum Net Worth in
preceding 2 yrs

◆ Track Record of Distributable Profits for at least 3 out

of immediately preceding 5 yrs

◆ Issue size does not exceed 5 times it’s Pre-Issue Net

Worth

◆ In case of Name Change within last one yr at least

50% of the Revenue for preceding 1 yr is earned by
New Name
 Disclosure Norms
Offer Document
◆ Cover Page :full contact details of the
issuer company, lead managers and
registrars, the nature, number, price
and amount of instruments offered and
issue size, and the particulars regarding
listing.

◆ Risk Factors : Internal and external

risks faced by the company.
◆ Introduction : summary of the industry
and business of the issuer company, the
offering details in brief, summary of
consolidated financial, operating and other
data. merchant bankers and their
responsibilities, capital structure, objects
of the offering, funds requirement, funding
plan, schedule of implementation,
◆ Financial Statements : Outstanding
litigations and material developments,
litigations involving the company and its
subsidiaries, promoters and group
companies are disclosed.
 Lock-in Period for Promoters
◆ Promoter’s Shareholding Shall not be
less than 20% of the Post-Issue
Capital
◆ Promoter’s Minimum Contribution is
locked for 3 yrs
◆ Any Excess to Minimum Contribution
is locked in for 1 yr
 Pre-and-Post Issue Obligations

◆ Approval of Board of Directors

◆ Approval of Shareholders
◆ Appointment of Intermediaries
◆ Appointment of Lead Manager
◆ Preparation Of Draft Prospectus
◆ Filing of Draft Prospectus with SEBI
◆ Application for Listing in Stock Exchange
◆ Filing of prospectus with Registrar of
Companies
◆ Promotion of Issue
◆ Printing and Distribution of Applications
◆ Statutory Announcements
◆ Collection of Applications
◆ Processing of Applications
◆ Determination of Liability of Underwriters
◆ Finalization of Allotment
◆ Giving of Demat Credit and Refund of
Orders
◆ Listing of Issue
 Role of Merchant Bankers
◆ Due Diligence in all aspects of offering and
adequacy of Disclosures in Offer
Document
◆ Ensures Underwriters pay Amount of
Devolvement
◆ Ensures Minimum number of Collection
Centers
◆ Ensures that the Issuer Company has
entered into a contract with the
Depository for Dematerialization
 Role of a Lead Manager
◆ Due diligence of company’s operations/
management/ business plans/ legal etc.
◆ Drafting and design of Offer Documents,
Prospectus, Statutory Advertisements and
Memorandum containing salient features
of the Prospectus.
◆ Marketing strategies for the issue.
 Role of a Registrar
◆ List of eligible allottees
◆ Deleting the invalid applications

◆ Corporate action for crediting of shares

to the demat accounts

◆ Dispatch of refund orders
 BOOK BUILDING
◆ IT IS A PROCESS OF OFFERING SECURITIES IN WHICH
BIDS OF VARIOUS PRICES FROM INVESTOR THROUGH
SYNDICATE MEMBERS ARE COLLECTED.
◆ BASED ON BIDS DMAND FOR THE SECURITIES IS
ASSESSED AND ITS PRICE IS DISCOVERED.
◆ IT IS BASICALLY A PROCESS USED IN IPO FOR EFFICIENT
PRICE DISCOVERY,WHEREIN DURING THE PERIOD FOR
WHICH THE IPO IS OPEN, BIDS ARE COLLECTED FROM
INVESTORS AT VARIOUS PRICES WHICH ARE ABOVE OR
EQUAL TO FLOOR PRICE
◆ NSE OFFERS ITS INFRASTRUCTURE FOR
CONDUCTING ONLINE IPOS THROUGH BB.
◆ IT HELPS TO DISCOVER PRICE AS WEL AS
DEMAND FOR A SECURITY TO BE ISSUED
THRUGH A PROCESS OF BIDDING BY
INVESTORS.
◆ THE TRADING GET COMMENCED FROM T+16
DAYS
 ADVANTAGES
◆ 1 THE INVESTORS PARTS WITH MONEY
ONLY AFTER ALLOTMENT.
◆ 2 IT ELIMINATES REFUNDS EXCEPT IN
CASE OF DIRECT APPLICATION.
◆ 3 IT REDUCES THE TIME TAKEN FOR
ISSUE PROCESS.

◆ THE SECURITIES GET LISTED WITHIN 15

DAYS FROM THE CLOSURE OF THE ISSUE.
 BOOK BUILDING
◆ IN CASE OF 100% ◆ IN CASE OF 75%-
◆ MAXIMUM 60%- MAXIMUM 60%-
ALLOTED TO QIB’S ALLOTED TO QIB’S
◆ MINIMUM 15%-NON ◆ MINIMUM 15%-NII’S
INSTITUTIONAL ◆ MINIMUM 25%-
INVESTORS PUBLIC OFFERED AT
◆ MINIMUM 25%- PRICE DETERMINED
RETAIL INVESTORS
 BUY BACK
◆ IT
HELPS IN IMPROVING LIQUIDITY
AND HELS COORPERATE IN
ENHANCING SHARE HOLDERS
WEALTH
 CONT……
◆ COMPANY’S ARE PERMITTED TO BUY
BACK SHARES FROM-
◆ 1 EXISTING SHARE HOLDERS- BY MEANS
OF OFFER DOCUMENT
◆ 2 OPEN MARKET THROUGH SE-OFFER TO
REMAIN OPEN FOR MAX 30 DAYS
◆ 3 SHARE HOLDERS HOLDING ODD LOT
SHARES
Questions?