An Initial Public Offering (IPO) in India is the process through which a private company raises capital by offering its shares to the public for the first time. This process helps businesses access funds to expand operations or meet financial goals. It involves several steps, including appointing underwriters, filing necessary documents with SEBI, and obtaining regulatory approvals. After the approval, shares are listed on stock exchanges for trading. The IPO process enables companies to become publicly traded entities, allowing investors to purchase shares and participate in their growth.
What is the need for IPO process
The IPO process is crucial for companies looking to raise capital and transition from private to public ownership. It allows businesses to obtain the funds needed for expansion, debt repayment, or other corporate objectives. By going public, companies can access a wider pool of investors and increase their market credibility. For investors, the IPO offers an opportunity to invest in a growing company from the early stages, potentially earning significant returns based on market performance.
How to launch IPO in India?
The process of launching an IPO in India involves several regulatory and legal procedures. Here’s a step by step guide:
Step1: Hire an investment bank
The first step in launching an IPO in India is to hire an investment bank, which is either a merchant banker, lead manager, or an underwriter. They are responsible for assessing the company and detailing the requirements for preparing an agreement.
The investment bank can also opt for IPO subscription if it wants. Additionally, it creates a draft prospectus for the company with all the details that the investors must be aware of. This step is mandatory when the company aspires to raise more than Rs. 50 lakhs in the IPO.
Step 2: Prepare RHP and register with the SEBI
The next step in the IPO process in India is to fill out the SEBI regulatory as soon as the daft prospectus is ready. Once this is approved, SEBI will upload the company prospectus on their website for public view.
Step 3: Application to Stock Exchange
Once SEBI has given the green signal, the next step is to approach stock exchanges to list your company. There are 24 stock exchanges in India, the two most popular of which are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
You can choose whichever stock exchange you want to list your company on, keeping in mind the IPO listing time. You can even be listed on multiple stock exchanges at once.
Step 4: Promote the listing
Once everything is set up, it's time to promote your company listing. Marketing agencies help make the promotion simpler. SEBI also controls the marketing agencies responsible for promoting the company listing, so ensure you reach out to a SEBI-approved agency.
Step 5: IPO is priced
Setting up the share price is one of the most important steps in the process of launching an IPO in India. You can do it in two ways.
One is a fixed-price offer. For example, the company can sell 500 shares at a fixed price of Rs. 10 per share. If the company wants to have fixed-price share offers, it must be listed in the company’s prospectus.
The other way is the book-building offer, in which the company can set up a maximum and a minimum bid price called the price band.
Step 6: Going through with the IPO
The final step in the journey is to launch the IPO by making it go live on the date mentioned in the prospectus. It will be available for the general public for 3-6 days. After the IPO is closed, the shares will be allotted to the shareholders.
Conclusion
The steps outlined above describe the IPO process in India and the steps involved. It is an extensive and lengthy process that can span up to 12 months, as SEBI’s approval takes around 4-8 weeks (2 months). However tedious the IPO process in India may be, it gives the issuing company access to vital funds, which it can use to grow, expand, or fulfil its debt obligations.
