IPO IN INDIA

~AN OVERVIEW
 Eligibility Norms
The Issuer shall be eligible to make an IPO, only if -
 Net tangible assets – at-least Rs. 3 crores in each of the preceding 3 full years of which not more
than 50% are held in monetary assets. If monetary assets are > 50% of the net tangible assets,
utilize such excess in its business or project. This limit shall not be applicable in case IPO is
entirely through OFS.
 Average Operating profits – Minimum of Rs. 15 crores during the preceding 3 years
 Net worth – at-least Rs. 1 crore in each of the preceding 3 full years.
 Change in name during the last one year – Minimum of 50% of revenue for the preceding one full
year from the new activity denoted by the new name.
The above parameters are calculated on restated and consolidated financial statements.
The Issuer not satisfying the above conditions shall:
 Make an IPO through BB process only; and
 Minimum 75% of net offer to QIB’s.
• Net Tangible Assets: mean the sum of all net assets of the issuer, excluding intangible assets.
General Conditions
Minimum Promoters Contribution:
 Promoters to hold atleast 20% of the post issue capital.
 Any shortfall can be met by AIF or Foreign VC Investors or Scheduled Commercial banks or PFI or Insurance
Companies to a maximum of 10%.
Securities ineligible for minimum contribution:
Acquired during the preceding 3 years
• for consideration other than cash and revaluation of assets
• Acquired as capitalization of intangible assets is involved.
Acquired during the preceding 1 year:
• at a price lower than the Issue price, unless promoters pay the difference price.
Exception in both cases above made for shares acquired pursuant to scheme of merger in lieu of business and
invested capital that had been in existence for a period of more than 1 year prior to such approval
• Pledged securities held by the Promoters.
Note: A professionally managed company is not required to meet the minimum promoter contribution
requirements.
General Conditions– cont…
Lock-in of promoter shares:
 Minimum promoters contribution to be Lock-in for 18 months.
 Excess promoters contribution to be lock in for 6 months.
From the date of allotment in the IPO.
Lock-in of shares of other shareholders:
 Pre issue capital locked in for a period of 6 months from the date of allotment, except:
• Shares held by a venture capital fund or a foreign venture capital investor or AIF Category I and II
shall be locked in for at-least six month from the date of purchase by them.
• Equity shares allotted to employees under ESOP scheme subject to disclosure under offer document.
Relaxation of Lock-in:
• Inter-se transfer of shares among Promoters or pre-IPO holders subject to continuation of residual
lock-in period with the new holders.
General Conditions– cont…
Offer for Sale:
 Only Shares held for > 1 year as of DRHP filing date qualify for OFS.
 Bonus shares issued < 1 year out of free reserves/ share premium, however, are eligible for
OFS.
 For OFS portion from shares arising out of compulsory convertible securities, such conversion
required prior to RHP filing.
 OFS by a shareholder along with PAC > 25% of the pre-issue shareholding, shall not exceed
more than 50% of their pre-issue shareholding.
 OFS by a shareholder along with PAC < 25% of the pre-issue shareholding, shall not exceed
more than 10% of pre-issue shareholding of the issuer.
Other Conditions:
 Financials cannot be older than 6 months from DRHP — Financials not to be older than 135
days from auditor’s comfort letter perspective.
Other Relevant Provisions
RESERVATIONS:
 If all the eligibility criteria is met by Issuer:
Net offer shall be as follows:
• Min 35% - RII.
• Min 15% - Non-Institutional investors.
• Max 15% - QIB, out of which 5% to MFs.
 If the eligibility criteria is not met and issue through BB Process:
Net offer shall be distributed as follows:
• Min 75% - QIB, out of which 5% to MFs.
• Max 15% - Non institutional investors.
• Max 10% - RII.
 Through BB process:
•60% of portion available for QIB to anchor investors, subject to conditions specified.
•1/3rd of the portion available to non-institutional investors shall be reserved for application size of more than 2 lakhs and upto 10 lakhs.
•2/3rd of the portion available to non-institutional investors shall be reserved for application size of more than 10 lakhs.
 Other than through BB process:
Net offer shall be as follows:
• Min 50% - RII.
• Remaining to individual applicants and other corporate bodies.
Other Relevant Provisions – Cont…
RESERVATIONS ON A COMPETITIVE BASIS:
 Reservation on competitive basis for following categories allowed in a Book Build IPO:
• Employees of the issuer including employees of promoter companies in case of a new issuer.
• Value of allotment in pursuance to reservation in employee reservation portion shall not exceed two
lakhs.
• Shareholders (other than promoters) of: Listed promoter companies or listed subsidiaries.
• Business associates including depositors, bondholders or subscribers to services of the company.
• In a non book-built IPO, reservation is not allowed for business associates.
RESTRICTIONS:
• The aggregate of reservations for employees shall not exceed 5% of the post issue capital.
• Reservations for shareholders shall not exceed 10% of the issue size.
• Reservations for business associates shall not exceed 5% of the issue size.
• No further application in the net offer to the public category from applicants in the reserved category
(other than employees or retail shareholders) shall be entertained.
Key Activities Involved
 Capital Structure:
sufficient authorized capital of the company.
 Restatement of Financials:
For a period of preceding three financial years and stub period not older than 6 months.
 Board composition and committee constitution:
One-third of the Board to be Independent Directors in case of a non-executive Chairman;
One-half to be independent Directors in case of an executive Chairman.
One-half to be independent Directors in case where a promoter or a person related to
promoters is the non-executive Chairman.
Create Audit, Nomination and Remuneration, Risk Management and Stakeholders
committees, with appropriate independent representation.
Key Activities Involved– Cont…
 Conversion of issuer from private limited to public limited.
 Amendment of Articles of Association of the issuer.
 Obtaining Board and shareholders approval for IPO and constitution of IPO committee.
 Obtaining electronic connectivity with both CDSL and NSDL.
 Pre-due diligence and Creation of Data room for external due diligence.
 Formulation of mandatory policies applicable to listed entities.
 Identification of objects in line with business plan ideally for next 2-3 years for use of IPO
proceeds.
Road Map
 Data room setup.
 Pre- Due Diligence.
 Kick –off Meeting.
 Negotiation and Appointment of various agencies to be involved in process.
 Due diligence and approval from various regulators, if any.
 Initiating the process of drafting of DRHP.
 Restatement of financials.
 Approval of the Board for IPO.
 Approval of shareholders for IPO.
 Finalization and filing of DRHP with SEBI and Stock Exchanges.
 In principle approval from Stock Exchanges.
 Receipt of comments from SEBI.
 Incorporating changes in DRHP.
 Filing of revised RHP with SEBI and getting approval.
Road Map – Cont..
 Filing of RHP with ROC and getting approval.
 Advertisement in newspapers regarding upcoming issue.
 Management road shows and marketing.
 Issue opening.
 Issue close.
 Post issue advertisements in newspapers.
 Finalization for Basis of Allotment.
 Allotment and credit of shares to investors.
 Listing and trading approvals.
Various Agencies Involved
AGENCY RO L E A N D R ES P O S I B I L I T I ES

Securities Exchange Board of India (SEBI) SEBI monitors the securities market. The RHP is to approved by SEBI.

The stock exchanges is a platform for listing and trading of securities. Issuer to
Stock Exchanges
appoint one of them as a designated stock exchange.

Depository Company to make agreement with depositories for holding shares in de-mat.

Processing applications forms.

Registrar and Share transfer Agent
Prepare documents for finalization of basis of allotment and listing application.

Lead Manager(s) Assist in entire IPO process including filing of prospectus with SEBI.

to accept bids, applications and place orders with respect to the issue and carry on
Syndicate Members
the activity as an underwriter

Collection of application moneys

Escrow collection Bank and Bankers to Issue
Provide provisional and final certificates.

Registrar of Companies To approve prospectus of the Issuer.

Various Agencies Involved – cont..
AGENCY RO L E A N D R ES P O S I B I L I T I ES

To provide various certificates.

Practicing Company Secretary
Assist in complying with provisions of Companies Act and filing.

Restatement of Financials of the Issuer.

Chartered Accountants
Issue of various provisional and final certificates.

To conduct due diligence

Legal Counsels
Drafting of non- business sections of offer documents.

Corporate and Issue advertising / PR

Advertising /PR agency
Managing logistics of domestic road shows

IPO Grading Agency (optional) Provides IPO grading (grading is voluntary)

For an issue size exceeding Rs. 100 Crores

Monitoring Agency Monitors use of proceeds after the closure of the Issue and receipt of funds by the
Company

Printers To print prospectus, abridged prospectus, advertisements and other stationery.

Critical aspects
 Issuer/ promoter/ promoter Group/ Directors/ Selling Shareholders/ Promoters or Directors of
issuer is a promoter or director of any other company is not debarred from accessing capital
market.
 Issuer/promoters/directors is not a willful defaulter, fraudulent borrower or economic offender.
 Issuer to be in compliance with the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, to the extent applicable prior to listing.
 Issuer to compound for critical non-compliances if any in the applicable laws.
 All the existing shares of the promoter/ promoter group are in dematerialized form prior to IPO.
 Employees Stock Option Scheme, if any shall be in compliance with SEBI regulations to the extent
applicable.
 Issuer to make arrangements for receipt of original consents from the relevant persons residing
outside India.
 Issuer to comply with minimum promoters contribution (i.e., 25% of the post issue capital).
 Issuer to ensure the authorized capital of the Company is sufficient for the present issue.
Thank you