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SLIDE 1 INTRO
SLIDE 2 -
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the
public in a new stock issuance for the first time. An IPO allows a company to raise equity capital
from public investors.
The transition from a private to a public company can be an important time for private investors to
fully realize gains from their investment as it typically includes a share premium for current
private investors. Meanwhile, it also allows public investors to participate in the offering.
SLIDE 3 -
Certain requirements must be fulfilled to go public. These include having a minimum of seven
shareholders, minimum share capital of Rs 500,000, and at least 3 years of profit. Also, it must be
registered with the Securities and Exchange Board of India.
Once these requirements are fulfilled, they can file for an initial public offering. This process can be
done through an investment bank or stockbroker.
The conditions for the public offering may vary depending on the country. For example, in India, a
company must have a minimum paid-up capital of Rs. 50 lakhs and a net worth of at least Rs. 10
crores.
When going public, there are some things to be followed in order to ensure success. The company's
financial statements should be accurate and have a solid management team. Also, it is essential to
ensure that it has the sufficient cash flow to repay debt and meet its operating expenses.
SLIDE 4 -
1. Appointment of merchant bankers: The Company appoints one or more merchant bankers
to act as its lead manager(s).
2. Filing of Draft Red Herring Prospectus (DRHP) with SEBI: The DRHP is filed with the
Securities and Exchange Board of India.
3. Obtaining SEBI approval: Once the DRHP is filed, SEBI will review it and provide
comments/suggestions within 60 days. The company then needs to address any concerns
raised by SEBI and file a revised DRHP, if required.
4. Finalising the offer size and price band: Once SEBI has given its comments, the company
can finalise the offer size and price band.
5. The launch of the IPO: After the finalisation of the issue details, the company announces to
the public its intention to launch an IPO. The lead merchant banker(s) then contacts
potential investors and provides them with a copy of the draft Red Herring Prospectus
(DRHP).
6. The Pricing of the IPO: The lead merchant banker(s) decide on the price at which they will
launch the IPO. However, it must be within the specified range. They decide on this basis of
how well the issue is expected to perform and in view of prevailing market conditions.
7. The book opening and allotment: The IPO is open for subscription by eligible investors for a
specified period of time. The lead merchant banker(s) will arrange for the opening of the
issue on behalf of the company as per SEBI guidelines.
SLIDE 5 -
MERCHANT BANKERS
the company issuing the IPO appoints a merchant banker. The job of a merchant banker can be
split into two segments:
● Pre-Issue - The Pre-Issue responsibility of the merchant banker includes compliance with
the regulations of SEBI and other authorities and finishing the requirements necessary for
listing shares on the Stock Exchange.
● Post Issue - The Post Issue role involves handling escrow accounts, confirming that failed
applicants get a full refund, issuing share allotments, and making sure that agencies are
following the laws created by SEBI for the IPO process.
Merchant Bankers are also known as Book Running Lead Managers. Some of the world’s leading
merchant banks are J.P. Morgan, Goldman Sachs, and Citigroup.
Bankers to the Issue
Bankers to the issue are financial intermediaries who are responsible for banking-related
processes like:-
● Acceptance of application and application amount
● Transfer of funds to the promoters of the company
● Managing refunds for rejected applications

● Payment of dividend
In the IPO process, the bankers play a critical role by enabling the movement of funds and making
clear funds status available to the registrars to finalize the basis of allotment.
SLIDE 6-
REGISTRARS TO ISSUE
Registrars to the issue, on the other hand, are involved in finalising the basis of allotment in an
issue and for sending refunds and allotment details, etc. These Sebi-registered entities
electronically process all the applications and carry out the allotment process as per the
prospectus. They are responsible for complying with the time deadlines of updating the electronic
credit of shares to the successful applicants.
Underwriters
Underwriters are intermediaries who agree to purchase the shares issued by the company if some
shares of the company don’t get sold. They work with the issuing body, determine the price of the
securities, purchase them from the issuer, and sell them through their network. Underwriters earn
by taking underwriting fees from the issuers and also by selling the underwritten shares at a profit.
Having said that, they also carry the risk of losses if they are unable to sell all the shares at the
specified price.
SLIDE 7 -
Increased transparency on objective of the issue -

According to the new rule, companies raising money for inorganic growth objectives will have to
specify acquisition or investment targets clearly, if they are unable to specify the targets, the
amount reserved for acquisitions/ investments cannot exceed 25% of the total amount raised.
In addition to this, combined total for inorganic growth and general corporate spending cannot
exceed 35% of the total amount raised.
Increased lock in period for anchor investors -

Anchor investors can sell only 50% of the investments after 30-day lock-in, for selling remaining
50% anchor investors will have to wait 90 days.
Separate sub-categories within NII category -

One-third of the portion available to NIIs will be reserved for application size between Rs.2-10
lakhs. Rationale for this is to create a sub-category for investors who are not small enough but
doesn’t fit the tag of HNI either.
With NII category oversubscription ranging upto 900X, it was nearly impossible for investors in the
category INR 2-10 lacs to receive any allotment. This move will reduce the edge that big HNIs due
to their ability to borrow heavily and bid.
Restriction on Offer for Sale -

According to new SEBI rule, existing shareholders owning more than 20% of pre-issue cannot sale
more than 50% of their holding and shareholders with less than 20% pre-issue holding cannot sale
more than 10% of their holding. It was observed that, many IPO bound companies were not in
requirement of funds for business reasons, but it was more of an exit opportunity for promoters and
existing shareholders, especially private equity and venture capital funds. These IPOs were being
offered at very high valuations; early investors were gaining at the cost of IPO investors.
Minimum price band for book-built issues -

Going forward, upper price band has to be minimum 105% of the lower price band, which means if
the lower price band is Rs.1,000 upper price band has to be minimum Rs.2,050. SEBI’s aim here is to
ensure proper price discovery. Till now, price discovery rules were being followed only on paper not
in practice, most of the IPOs, even the ones which listed at a discount were allotted at upper price
band.
Paytm had a price band of Rs.2,080-2,150 but shares were allotted at Rs.2,150; Paytm got listed at
27.25% discount at a listing price of Rs.1,564. A wider price band will ensure proper price discovery
and companies will be forced to price their issues more realistically.
Pricing of preferential share issue -

Floor price for preferential share issue will be maximum of volume weighted average price (VWAP)
for past 10 trading days and past 90 trading days. Major reason for this amendment is to ensure
companies do not issue cheap shares to preferred investors in quid pro quo arrangements which is
often at the cost of minority shareholders.
Monitoring and reporting on utilisation of IPO proceeds -
Credit rating agencies registered with the board, will now be permitted to act as monitoring agency
instead of Scheduled Commercial Banks and Public Financial Institutions.
This monitoring will continue till 100% utilisation of the fund, also amount raise for general
corporate spending will be in the purview of monitoring agency report. This move is aimed to curb
the misuse of funds raised for IPOs
All these amendments passed during SEBI’s board meeting on 28-Dec have been welcomed by
market analysts and is expected to benefit retail and minority shareholders.
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SLIDE 1 INTRO

Bankers to the Issue

● Acceptance of application and application amount

● Transfer of funds to the promoters of the company

● Managing refunds for rejected applications

Increased transparency on objective of the issue -

Increased lock in period for anchor investors -

Separate sub-categories within NII category -

Restriction on Offer for Sale -

Minimum price band for book-built issues -

Pricing of preferential share issue -

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