Taking your company off the public market?
When a private company wants to raise capital to expand its business, it decides to take its business to the public market and become a publicly traded and owned business entity.
Thus the company needs to raise money through initial public offer (IPO). The public market will be particularly interested in the company’s financial results, share price, management and company performance.
Why go public?
1. A value for securities can be established
2. Increased access to capital-raising opportunities (both public and private financings) and expansion of investor base
3. Liquidity for investors is enhanced since securities can be traded through public
What is an IPO?
IPO refers to the process when a company offers its securities to the public for the first time. The entire IPO process is regulated by SEBI(Securities and Exchange Board of India). After an IPO, the issuing company becomes a publicly listed company on a recognized stock exchange. Thus, an IPO is also commonly known as “going public”.
A company issues an IPO when it has exhausted all its avenues for raising capital and needs to dilutes equity holdings of initial investors and bring in public investors. The NSE and BSE have different criteria’s for a company to issue its IPO.
What are the rules specified by NSE/ BSE?
1. Paid-up Capital: The paid-up equity capital of the applicant shall not be less than Rs. 10 crores and the capitalisation of the applicant’s equity shall not be less than Rs. 25 crores.
2. Conditions for Listing: The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.
3. Records required to be submitted: The applicant or the promoting company shall submit annual reports of three preceding financial years to NSE. Along with the certificate provided the following:
- The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).
- The net worth of the company has not been wiped out by the accumulated losses resulting in a negative net worth
- The company has not received any winding up petition admitted by a court.
What are the steps for listing on the exchange?
- Appointment of merchant banker
- Due diligence and documentation
- Register with exchange
- Draft the red herring document
- Go on roadshow
- IPO is priced
- IPO is made available to the public
By Legex.in
