FREE Equity Delivery and MF
Flat ₹20/trade Intra-day/F&O
|
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.
hide
Content:
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.
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:
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:
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.
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.
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.
A Red Herring Prospectus (RHP) is prepared and filed with the Exchange(s).
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.
Together with the PR & advertizing agency, Merchant Bankers advertise the IPO to the public. This process is called an IPO roadshow. They arrange investor meetings in different cities with the promoters of the company. The meetings are also arranged with journalists, analysts and other media representatives.
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.
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.
Once the public offering is closed, the application data is forwarded by the exchanges to the IPO registrar, which handles the allotment.
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 allottee's account, 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.
Trading of IPO shares is set up on the stock exchanges in two steps:
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.
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.
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.
The overall IPO process for mainboard and SME IPOs is the same except for the minor differences listed below:
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.
Platform | Duration |
---|---|
Mainboard IPO |
6 to 12 months |
SME IPO |
3 to 4 months. |
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 |
An IPO process involves the following steps:
The IPO process is lengthy, costly and time-consuming. The IPO process for mainboard companies takes between 6 to 12 months and depends on several factors. The IPO process for small and medium-sized enterprises (SMEs) takes 3-4 months.
The issuer intends to open the issue within 12 months of obtaining SEBI approval in the case of a mainboard issue and stock exchange approval in the case of an SME issue.
Platform | Duration |
---|---|
Mainboard IPO |
6 to 12 months |
SME IPO |
3 to 4 months. |
The IPO process is a method by which private companies sell their shares to the general public for the first time to raise capital. The IPO process begins with the hiring of book lead managers and ends with the listing of the company's shares.
The IPO process involves assessing the eligibility of the issuer for an IPO application, compiling all IPO-related documents, drafting and preparing the prospectus, filing the application with SEBI and the stock exchanges, the IPO roadshow, IPO opening and closing formalities, and filing the listing and post-listing documents.
The IPO process of a company takes place when a private company goes public for the first time and sells its shares. The issuer or the company planning to go public hires a merchant banker (lead manager) to oversee the IPO process. The process begins with due diligence and ends with the listing of the shares.
An IPO is a public offering of shares of a private company to the general public for the first time. The IPO process begins with the appointment of the lead manager by the issuing company and ends with the listing of the IPO shares on the stock exchanges. The key steps of the IPO process are as follows:
Add a public comment...
FREE Intraday Trading (Eq, F&O)
Flat ₹20 Per Trade in F&O
|