Ipo Process

Topics: Initial public offering, Stock, Underwriting Pages: 6 (1792 words) Published: February 22, 2013
IPO Process
Stock offered to public
Approval by SEBI
Draft Offer document filed with SEBI
Negotiate the deal
Investment Bankers
SEBI Guidelines Regarding IPO

1. Eligibility Norms of the Issuer:
The company shall meet the following requirements –
* Net Tangible Assets≥ ` 3 crores (for 3 full years)
* Should have track record of profitability in 3 out of previous years * Net worth ≥ ` 1 crore in three years
* If change in name, atleast 50% revenue for preceding 1 year should be from the activity under new name 2. Size of the Public Issue:
a. Issue of shares to public ≥ 25% of the total issue, b. The issue size should not be more that five times the pre-issue net worth 3. Promoter Contribution:
c. Minimum Promoters contribution is 20-25% of the public issue. d. Minimum Lock in period for promoters contribution is 5 years 4. Prospectus:
e. Abridged prospectus must be attached with every application form. f. Risk factors must be highlighted
g. Objectives of the issue and the cost of the project should be disclosed h. Company’s management, past history and present business of the firm should be disclosed i. Particulars of the company and other listed companies under the same management who have made public issues during the past 3 years are to be disclosed

5. IPO Grading:
A company which has filed the draft offer document for its IPO with SEBI is required to obtain a grade from at least one CRA registered with SEBI like - CARE
- FITCH Ratings
6. Collection centres for receiving applications: There should be at least 30 mandatory collection centers j. The 4 metropolitan centres viz. Bombay, Delhi, Calcutta, Madras; k. At all such centres where stock exchanges are located in the region in which the registered office of the company is situated.

7. Regarding allotment of shares:
l. In an Issue of more than ` 25 croresthe issuer is allowed to place the whole issue by Book-building m. Minimum of 50% of the Net offer to the Public has to be reserved for Investors applying for less than 1000 shares. n. There should be atleast 5 investors for every 1 lakh of equity offered

8. Timeframes for the Issue and Post- Issue formalities:
o. The min. period = 3 working days and the max. = 10 working days. p. A public issue is affected if the issue is able to procure 90% of the Total issue size within 60 days from the date of earliest closure of the Public Issue. q. In case of over-subscription the company may have the right to retain the excess application money and allot shares more than the proposed issue, which is referred to as the ‘green-shoe’ option. r. Allotment has to be made within 30 days of the closure of the Public Issue. s. All the listing formalities for a public Issue has to be completed within 70 days from the date of closure of the subscription list. 9. Dispatch of Refund Orders:

t. Refund orders have to be dispatched within 30 days of the closure of the Public Issue. u. Refunds of excess application money i.e. for un-allotted shares have to be made within 30 days of the closure of the Public Issue.

10. Other regulations pertaining to IPO:
v. Underwriting is not mandatory but 90% subscription is mandatory for each issue of capital to public except in disinvestment. w. If the issue is undersubscribed then the collected amount should be returned back. x. If the issue size is more than ` 500 Crores , voluntary...
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