Listing a company on stock exchange & IPO application process

The year 2021 so far has been the best year for the initial public offerings (IPOs) and listings. Almost Thirty eight companies have already made their maiden offers till July 2021 which includes some of biggest business giants like Zomato, Paytm etc. While More than half of these IPOs did well only on the very first listing day, others (like Paytm) have gone into negative or remained flat.

One of the questions that generally arises in the mind of young entrepreneurs are how to list your business in Bombay Stock Exchange (BSE) or National Stock Exchange (NSE? Let us understand in depth about how to list your business in a recognised stock exchange.

Eligibility Requirement to be complied for IPO

• Company must be registered as a Public Company under Companies Act 1956 or Companies Act 2013
• The issuer has net tangible assets of at least Rs. 3 crores, calculated on a restated and consolidated basis, in each of the preceding three full years
• The issuer has an average operating profit of at least Rs.15 crores, calculated on a restated and consolidated basis, during the three preceding 3 years, with operating profit in each of the three preceding years;
• The issuer has a net worth of at least Rs.1 crore in each of the preceding three full years, calculated on a restated and consolidated basis.

ENTITIES NOT ELIGIBLE TO MAKE AN IPO

1. If the issuer or any of its promoters or promoter group are debarred from accessing the capital market by the SEBI.
2. If any of the promoters or directors of the issuer is a promoter or a director of any other company
3. If the issuer or any of its promoters or directors is a willful defaulter.
4. If any of the promoters or directors of the issuer is a fugitive offender.
5. If there are any outstanding convertible securities or any other right which would entitled any person with any option to receive equity shares of the issuer.

PROCEDURE

Step 1: Hiring Of An Underwriter Or Investment Bank

To start with the process, the company shall first one or more underwriters, investment banks. The underwriters assure the company about the capital being raised and act as intermediaries between the company and its investors.

Step 2: Registration For IPO

This next step is to prepare registration statement along with the Red Herring Prospectus (RHP). Submission of RHP is mandatory, as per the Companies Act.

Step 3: Verification by SEBI

Then, after submission of documents SEBI verifies the disclosure of facts by the company. If the application is approved, the company can announce a date for its IPO.

Step 4: Making An Application To The Stock Exchange

The company now has to make an application to the stock exchange for approval of its initial issue.

Step 5: Creating a Buzz in the market

Before an IPO opens to the public, the company endeavors to create a buzz in the market about the IPO. Over a period of two weeks, the company will advertise the impending IPO across the country. This move will create awareness among the masses and thus create a demand for its shares.

Step 6: Pricing

The company will have fix the prices of each shares either through Fixed Price IPO or by Book Binding Offering. In the case of Fixed Price Offering, the price of the company’s stocks is announced in advanced. Whereas in Book Binding Offering, a price range of 20% is announced, following which investors can place their bids within the maximum price cap. Accordingly, The investors have to place their bids as per the company’s quoted Lot price, which is the minimum number of shares to be purchased.

Step 7: Allotment of Shares

Once the IPO price is finalised, the company and the underwriters decides the number of shares to be allotted to each investor. In the case of over-subscription, partial allotments will be made. The shares are usually being allotted within 7 days of successful bidding.

Also Read:

• 7 Steps to Analyse an IPO
• SPAC: A New way of getting an IPO for Private Companies