{"id":6218,"date":"2019-09-03T19:30:19","date_gmt":"2019-09-03T14:00:19","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=6218"},"modified":"2021-04-06T17:21:16","modified_gmt":"2021-04-06T11:51:16","slug":"the-procedure-of-initial-public-offering-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/","title":{"rendered":"The Procedure of Initial Public Offering in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Generally,\nan unlisted company chooses to go for Initial Public Offering (IPO) when the\nneed for raising a massive amount of capital arises. Usually, the process of\nIPO lets companies sell their securities, and in turn, they get to raise funds.\n<\/p>\n\n\n\n<p>Before\nan IPO, the company is private with limited accredited investors and a few\nshareholders. However, after an IPO, the company becomes a public or listed\ncompany on the stock exchange whose shares are offered to the public. <\/p>\n\n\n\n<p>Therefore,\nthe process of IPO is also referred to as \u2018going public.\u201d But many of you might\nbe wondering how to go public or how to sell your company\u2019s existing or new\nsecurities on a recognized stock exchange. Well, that\u2019s what this blog is all\nabout.<\/p>\n\n\n\n<p>We\nwill make you aware of the procedure of Initial Public Offering in India. But,\nprior to that, you must understand the idea of IPO clearly. Hence, let\u2019s start\nwith the definition.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3be4bc51e75\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3be4bc51e75\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#What_is_Initial_Public_Offering\" title=\"What\nis Initial Public Offering?\">What\nis Initial Public Offering?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#What_is_New_Listing\" title=\"What\nis New Listing?\">What\nis New Listing?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Why_does_a_Company_need_to_file_for_an_IPO\" title=\"Why\ndoes a Company need to file for an IPO?\">Why\ndoes a Company need to file for an IPO?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Eligibility_Criteria_for_Initial_Public_Offering\" title=\"Eligibility\nCriteria for Initial Public Offering\">Eligibility\nCriteria for Initial Public Offering<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Process_of_Initial_Public_Offering_IPO_in_India\" title=\"Process\nof Initial Public Offering (IPO) in India\">Process\nof Initial Public Offering (IPO) in India<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_1_Listing_with_SEC\" title=\"Step 1: Listing with SEC\">Step 1: Listing with SEC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_2_In-principal_approval_of_draft_prospectus_from_SEBI\" title=\"Step 2: In-principal\napproval of draft prospectus from SEBI\">Step 2: In-principal\napproval of draft prospectus from SEBI<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_3_Fixing_the_price_of_Shares\" title=\"Step 3: Fixing the\nprice of Shares\">Step 3: Fixing the\nprice of Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_4_Making_the_shares_available_to_the_public\" title=\"Step 4: Making the\nshares available to the public&nbsp;\">Step 4: Making the\nshares available to the public&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_5_Submission_of_Application\" title=\"Step 5: Submission of\nApplication\">Step 5: Submission of\nApplication<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/the-procedure-of-initial-public-offering-in-india\/#Step_6_Listing_of_shares_on_the_stock_exchange\" title=\"Step 6: Listing of\nshares on the stock exchange\">Step 6: Listing of\nshares on the stock exchange<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Initial_Public_Offering\"><\/span>What\nis Initial Public Offering?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An Initial Public Offering is a process of listing the shares and other securities of an unlisted company on the stock exchange. In other words, an IPO is a process where a private company offers its shares to the public. <\/p>\n\n\n\n<p>Moreover,\nit\u2019s a path for raising funds and the first share sale by a company to the\ninstitutional investors, public, and HNIs. After the initial sale or share, the\ncompany no longer remains a private company. It becomes a public company whose\nshares are listed on the stock exchange. <\/p>\n\n\n\n<p>Apart\nfrom these, the main objective of an IPO could be to expand the existing activities\nof the company. Furthermore, it could be to set up a new project or any other\ngoal as specified by the company in its offer letter. <\/p>\n\n\n\n<p>The entire process of an IPO is regulated by the <strong>Securities and Exchange Board of India (SEBI<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup><strong>). <\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_New_Listing\"><\/span>What\nis New Listing?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A new listing is a route through which a listed company approaches the stock exchange for listing its equity shares. Hence, the company that fulfills the eligibility criteria specified by the Exchange on a timely basis is listed on the Stock Exchange. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_does_a_Company_need_to_file_for_an_IPO\"><\/span>Why\ndoes a Company need to file for an IPO?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There\nare various benefits of a company preferring to convert its privately-held\nstatus to a public listed company. Some of them are described below:<\/p>\n\n\n\n<ul><li>To facilitate the\nprocess of Mergers and Acquisitions<\/li><li>For raising funds from\na wider pool of investors<\/li><li>To let early investors\nmake an exit<\/li><li>For gaining the\nincreased visibility<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_Criteria_for_Initial_Public_Offering\"><\/span>Eligibility\nCriteria for Initial Public Offering<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to NSE (National Stock Exchange), an applicant who is desirous of listing its securities with NSE must satisfy the following criteria:<\/p>\n\n\n\n<ul><li>The applicant must have the paid-up equity capital of not less than \u20b910 crores. Furthermore, the capitalization of the applicant\u2019s equity should be at least \u20b925 crores.<\/li><li>The issuer must adhere to the criteria pertaining to listing as emerging from inter-alia from the : <p>1. Companies Act, 2013,<\/p> <p>2. Securities Contracts (Regulations) Act, 1956,<\/p> <p>3. Securities and Exchange Board of India Act, 1992,<\/p> <p>4. Any rules and\/or regulations set under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statues.<\/p> <\/li><li>A minimum of three years track record of either <p>1. The applicant who seeks listing; or<\/p> <p>2. The promoters\/promoting company that is incorporated in or outside India; or<\/p> 3. Partnership firm and subsequently converted into a company (not in existence as a Company for three years) and approaches the exchange for listing. Moreover, the company so formed will be considered for listing only if it fulfills the conditions specified by the SEBI in this regard. <p>4. The company must not have referred to the BIFR (Board for Industrial and Financial Reconstruction).<\/p> <p>5. The company\u2019s net worth has not been wiped out by the accumulated losses resulting in negative net worth. Besides, this criterion doesn\u2019t apply to companies with the proposed issue size of less than \u20b9500 crores.<\/p> <p>6. The company should not have received any winding up petition admitted by a court.<\/p> <\/li><li>The applicant willing to list its securities must meet the exchange on the following: <p>1. There shouldn\u2019t be any disciplinary action by other stock exchanges as well as regulatory authorities in the last three years.<\/p> <p>2. The applicant must follow the redressal mechanism of Investor grievance.<\/p> <p>3. The promoting or applicant company shareholding pattern on March 31st of last three financial years separately displaying promoters and other groups&#8217; shareholding pattern must be as per the regulatory requirements.<\/p> <p>4. The promoting company, applicant, companies promoted by the promoters, group companies litigation record, the status of litigation, the nature of litigation during the last three years should be clarified to the exchange.<\/p> <p>5. The applicant must present the track record of the director(s) of the company displaying that they are not accused of any civil or criminal cases.<\/p><\/li><\/ul>\n\n\n\n<p><strong>Also, read about<\/strong> <a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/swaritadvisors.com\/learning\/how-can-i-start-my-own-mutual-fund-company\/\" target=\"_blank\">how to start your own Mutual Fund Company in India<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Process_of_Initial_Public_Offering_IPO_in_India\"><\/span>Process\nof Initial Public Offering (IPO) in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The applicant needs to\nfollow several steps before making an application for listing its securities on\nthe National Stock Exchange. Usually, such steps are necessary to ensure that\nthe issuer complies with the specific compliance requirements prior to listing\nits securities.&nbsp;<\/p>\n\n\n\n<p><strong>The steps include:<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_1_Listing_with_SEC\"><\/span>Step 1: Listing with SEC<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The applicant, along with the under-writers, needs to file the\nregistration statement with the Securities and Exchange Commission, which\nincludes every financial data and business plan of the company. Furthermore, it\nshould also mention how it\u2019s going to utilize the funds that are to be raised\nfrom the IPO as well as the securities of public investment.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_2_In-principal_approval_of_draft_prospectus_from_SEBI\"><\/span>Step 2: In-principal\napproval of draft prospectus from SEBI<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Secondly, the issuer has to file the draft prospectus. Along\nwith this, it\u2019s necessary to attach the documents as mentioned in the checklist\nfor IPO vetting. Furthermore, the prospectus should be drafted in a way as\nprescribed by the SEBI (ICDR) Regulations, notification, circulars, other\nstatutes, etc.&nbsp;<\/p>\n\n\n\n<p>SEBI will thoroughly analyze and examine these documents.\nFurthermore, it will provide approval only after it is entirely convinced.\nUntil the company receives the approval from SEBI, it must mention the status\nof SEBI\u2019s approval pending on its prospectus.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_3_Fixing_the_price_of_Shares\"><\/span>Step 3: Fixing the\nprice of Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the receipt of the approval from SEBI, the company needs to\nfix the price of the share as well as the number of shares it is going to\nissue.&nbsp;<\/p>\n\n\n\n<p>Usually, IPOs can be issued in two ways: a) fixed price and b)\nbook building. A fixed price is a kind of IPO issue where the company decided\nthe share price in advance.&nbsp;<\/p>\n\n\n\n<p>However, book building is the one where a company has offers a\nrange of share prices. Then, you have to bid shares within this range.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_4_Making_the_shares_available_to_the_public\"><\/span>Step 4: Making the\nshares available to the public&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Once the company has decided which type of issue you want to\nproceed with, the company could make its shares available to the general\npublic.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_5_Submission_of_Application\"><\/span>Step 5: Submission of\nApplication<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the investors need to submit their applications indicating\nthat they are interested in buying the shares by the issuers. On the receipt of\nthe subscriptions from the public, it proceeds further with the allotment of\nshares.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Step_6_Listing_of_shares_on_the_stock_exchange\"><\/span>Step 6: Listing of\nshares on the stock exchange<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Ultimately, when you are done with the above processes, you can\nlist the shares on the stock market. Once the shares are issued in the primary\nmarket to the investors, they will be listed in the secondary market. Later,\ntrading such shares becomes a daily business.&nbsp;<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/what-is-securities-transaction-tax-a-complete-guide\/\" >What is Securities Transaction Tax- A Complete Guide<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Generally, an unlisted company chooses to go for Initial Public Offering (IPO) when the need for raising a massive amount of capital arises. Usually, the process of IPO lets companies sell their securities, and in turn, they get to raise funds. Before an IPO, the company is private with limited accredited investors and a few [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":6219,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[546],"tags":[547,551],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/6218"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=6218"}],"version-history":[{"count":16,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/6218\/revisions"}],"predecessor-version":[{"id":18569,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/6218\/revisions\/18569"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/6219"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=6218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=6218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=6218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}