MANAGEMENT OF IPO What is an IPO Why is an IPO required Key Terms used What is the process of an IPO...

MANAGEMENT OF IPOMANAGEMENT OF IPO

What is an IPOWhat is an IPO

Why is an IPO requiredWhy is an IPO required

Key Terms usedKey Terms used

What is the process of an IPOWhat is the process of an IPO

What are the critical areas to focusWhat are the critical areas to focus


What is an IPO?What is an IPO?

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

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

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

The offer shall be open for everybody to subscribeThe offer shall be open for everybody to subscribe


Why is an IPO required?Why is an IPO required?

To gather large amount of capitalTo gather large amount of capital

To dilute the risk of loss To dilute the risk of loss

To ensure the listing of sharesTo ensure the listing of shares

To have a widespread shareholder baseTo have a widespread shareholder base



SEBISEBI

SEBI GuidelinesSEBI Guidelines

Promoters Promoters

PublicPublic

ProspectusProspectus

PricePrice

Price BandPrice Band

Merchant BankerMerchant Banker

Registrar and Share Transfer Agent (RTA)Registrar and Share Transfer Agent (RTA)



Eligibility criteriaEligibility criteria

QIB (Qualified Institutional Buyers)QIB (Qualified Institutional Buyers)

Book BuildingBook Building

Green Shoe OptionGreen Shoe Option

Offer documentOffer document

UnderwritingUnderwriting

Composite issueComposite issue

DepositoryDepository


The process of an IPOThe process of an IPO

Eligibility criteriaEligibility criteria::

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

andand

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

andand

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

andand

The proposed issue should not exceed 5 times of its Pre-issue networth.The proposed issue should not exceed 5 times of its Pre-issue networth.


The process of an IPO -The process of an IPO - Eligibility criteria: (Alternate route) Eligibility criteria: (Alternate route)

Book building process and 50% of the offer to QIBsBook building process and 50% of the offer to QIBs

oror

15% participation in project by F/Is or Schedule Banks;15% participation in project by F/Is or Schedule Banks;

10% of the Project cost from appraiser;10% of the Project cost from appraiser;

10% of the Issue to QIBs10% of the Issue to QIBs

andand

Minimum post issue face capital of Rs.10 CroresMinimum post issue face capital of Rs.10 Crores

oror

Market making for 2 years Market making for 2 years

andand

Minimum number of allottees atleast 1000Minimum number of allottees atleast 1000


Appointment of merchant BankerAppointment of merchant Banker

Appointment of Registrar and Share Transfer AgentAppointment of Registrar and Share Transfer Agent

Grading of the Company’s SecuritiesGrading of the Company’s Securities

Drafting of Prospectus – filing with SEBIDrafting of Prospectus – filing with SEBI

Filing of Prospectus with Stock ExchangesFiling of Prospectus with Stock Exchanges

Obtaining of In-principle approval from stock Obtaining of In-principle approval from stock

exchangeexchange


What is the process of an IPOWhat is the process of an IPO

Appointment of Brokers, Advertisers and BankersAppointment of Brokers, Advertisers and Bankers

Conducting Road shows and Press ConferenceConducting Road shows and Press Conference

Opening and closing of Subscription listOpening and closing of Subscription list

Preparation of Basis of AllotmentPreparation of Basis of Allotment

Allotment of sharesAllotment of shares

Listing of sharesListing of shares


What are the critical areas to focusWhat are the critical areas to focus

Compliance with SEBI GuidelinesCompliance with SEBI Guidelines

90% subscription of the issue90% subscription of the issue

Underwriting AgreementsUnderwriting Agreements

Firm AllotmentsFirm Allotments

Listing approvals from the Stock ExchangesListing approvals from the Stock Exchanges

ROC approval for the prospectusROC approval for the prospectus

Advertising and Road ShowsAdvertising and Road Shows

Statutory advertisementsStatutory advertisements

In-time allotments and refundsIn-time allotments and refunds

Listing of the shares with the ExchangesListing of the shares with the Exchanges


SEBI GUIDELINES:SEBI GUIDELINES:

1.1. Filing of prospectus:Filing of prospectus:

Prospectus to be filed with SEBIProspectus to be filed with SEBIThrough Merchant BankerThrough Merchant BankerAt least 30 days < filing with ROCAt least 30 days < filing with ROCSEBI may suggest changes < 30 daysSEBI may suggest changes < 30 daysSEBI to consider only after approval from SEBI to consider only after approval from St.ExSt.ExIssuer is obligatedIssuer is obligatedSEBI is not obligatedSEBI is not obligated



2. Application for Listing:2. Application for Listing:

No IPO without application for listingNo IPO without application for listing

3. Dematerialization of shares:3. Dematerialization of shares: ,,

Agreement with DepositoryAgreement with DepositoryPresent shares also to be in dmatPresent shares also to be in dmatpublic may opt either physical or dmat public may opt either physical or dmat sharesshares



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;



• 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).



5. Exemption from Eligibility Norms:5. Exemption from Eligibility Norms:

Banking Co. including Pvt. BanksBanking Co. including Pvt. Banks

Subject to licensing by RBISubject to licensing by RBI

New Bank being set up on acquisition or New Bank being set up on acquisition or take over of a banktake over of a bank

An infrastructure Company, whose An infrastructure Company, whose project is appraised by F/I, IL & FS and project is appraised by F/I, IL & FS and IDFCIDFC



6. IPO Grading:6. IPO Grading:

No IPO unless; (as on the date of No IPO unless; (as on the date of filing filing the prospectus with ROC):the prospectus with ROC):

Grading for IPO has been obtained from Grading for IPO has been obtained from at least one agencyat least one agency

Grading and the rationale have been Grading and the rationale have been included in the prospectusincluded in the prospectus

Grading expenses to be borne by the Grading expenses to be borne by the issuerissuer



7.7. Present shares to be fully paid-up:Present shares to be fully paid-up:

No IPO, if there are any shares No IPO, if there are any shares partly paid up as on the date of IPOpartly paid up as on the date of IPO

The Shares to be fully paid up or The Shares to be fully paid up or forfeitedforfeited



8. Pricing of the Securities:8. Pricing of the Securities:

Listed Co’s Unlisted Co.s Infrastructure Listed Co’s Unlisted Co.s Infrastructure co.co.

Free price Free price Free priceFree price Free price Free price

Subject to the Disclosure norms issued by SEBISubject to the Disclosure norms issued by SEBIBanks to obtain approval from RBIBanks to obtain approval from RBI



9. Price Band:9. Price Band:

Price Band to be 20%Price Band to be 20%

Max price can be 20% above the Max price can be 20% above the floor pricefloor price

Board of directors may be Board of directors may be authorized to fix the priceauthorized to fix the price



10. Denomination of shares10. Denomination of shares

Denomination of the shares is not Denomination of the shares is not restrictedrestricted

In case the issue price is <Rs.500, the In case the issue price is <Rs.500, the Face Value shall be Rs.10/-Face Value shall be Rs.10/-

The Face Value may be less, where the The Face Value may be less, where the issue price is Rs.500 or moreissue price is Rs.500 or more

Full disclosure of the face value in offer Full disclosure of the face value in offer documentdocument



11. Promoter Contribution and Lock-in:11. Promoter Contribution and Lock-in: 20% of the post issue share cap is to be held by 20% of the post issue share cap is to be held by

promoterspromoters

12. Securities not included in the above:12. Securities not included in the above:Where the equity has been acquired during the Where the equity has been acquired during the preceding 3 years and;preceding 3 years and; - where the consideration is not cash- where the consideration is not cash

oror - where the shares are given through - where the shares are given through bonus issue from bonus issue from

revaluation reserverevaluation reserve


SEBI GUIDELINES:SEBI GUIDELINES:Guidelines on issue of advertisement: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


SEBI GUIDELINES:SEBI GUIDELINES:Guidelines on issue of advertisement: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

MANAGEMENT OF IPO What is an IPO Why is an IPO required Key Terms used What is the process of an IPO...

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