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Discussion > Corporate Law > Others >

IPO procedure

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Raza (CA Final)


[ Scorecard : 3655]
Posted On 18 February 2010 at 12:50 Report Abuse

 

Appointment Procedure
1. Meeting of Board of Directors
2. Appointing of Merchant Bankers- Specialized financial Consultancy who looks after Initial Public Offering
3. Apponting of Registrar and transfer agent done by Merchant Bankers
4. Banks- Appointed by Merchant Bankers
5. Appointing of Lawyer

Real Procedure
6. Book issued by Merchant bankers and submit it to SEBI which includes Reason of Issuing, no of Shares, Financial Condition of the company, current Business, Management, Growth in Sectors and Risk factor 
7. Prospectus- Issued to stock Market and registrars
8. Printing Of Forms
9. appointment of Brokers
10. Marketing & Advertising
11. Brokers Meeting in a Company
12. Road Shows or meetings
13. IPO starts 3-7 days opened
14. IPO closed

Post IPO
15. collection of Forms
16. Oversubscripttion or Undersubscripttion
17. Allotement Of shares
a. Pro data allotement
b. lottery system
18. Issue of share certificate
a. Letter of allotement
b. regret Leter
19. Refund cheque
20. Listing Of shares in NSE or BSe

Book Building 

About Book Building 

Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. 

The Process: 

>>The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. 
>>The Issuer specifies the number of securities to be issued and the price band for orders. 
>>The Issuer also appoints syndicate members with whom orders can be placed by the investors. 
>>Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. 
>>A Book should remain open for a minimum of 5 days. 
>>Bids cannot be entered less than the floor price. 
>>Bids can be revised by the bidder before the issue closes. 
>>On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include - 
-Price Aggression 
-Investor quality 
-Earliness of bids, etc. 
>>The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. 
>>Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. 
>>Allocation of securities is made to the successful bidders. 
>>Book Building is a good concept and represents a capital market which is in the process of maturing. 

Initial Public Offerings
Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. 
In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner: 

100% of the net offer to the public through the book building route. 
75% of the net offer to the public through the book building process and 25% through the fixed price portion. 
Under the 90% scheme, this percentage would be 90 and 10 respectively. 


Difference between shares offered through book building and offer of shares through normal public issue:

Features
Fixed Price process (FPP)
Book Building process (BBP)

Pricing
(FPP)--> Price at which the securities are offered/allotted is known in advance to the investor.
(BBP) --> Price at which securities will be offered/allotted is not known in advance to the investor. Only an indicative price range is known.

Demand
(FPP)--> Demand for the securities offered is known only after the closure of the issue
(BBP)--> Demand for the securities offered can be known everyday as the book is built.

Payment
(FPP)---> Payment if made at the time of subscripttion wherein refund is given after allocation.
(BBP)--> Payment only after allocation.


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