IPO Advisory and consultancy

Post-IPO Support

After the IPO is completed, companies often require ongoing assistance, including:

  1. Investor Relations Management:
  • Helping the company manage relationships with public investors, analysts, and the broader financial community.
  1. Regulatory Compliance:
  • Ensuring that the company remains compliant with SEBI filings and corporate governance standards post-IPO.
  1. Market Performance Monitoring:
  • Monitoring the company’s stock performance and advising on potential actions to manage market perceptions.
  1. Future Capital Raises:
  • Assisting the company with follow-on offerings, convertible securities, or debt issuance if the company seeks additional capital.
  1. Benefits of IPO Advisory and Consultancy
  • Expert Guidance: Professional advisors bring in-depth knowledge of market trends, legal regulations, and financial strategies.
  • Smooth Execution: A well-executed IPO with proper preparation and strategy can generate maximum value for the company and its stakeholders.
  • Regulatory Compliance: Expert consultants help ensure full compliance with securities laws and other regulatory requirements, reducing the risk of legal complications.
  • Increased Visibility: Going public offers significant visibility for the company, boosting brand recognition and attracting potential business opportunities.
  • Access to Capital: An IPO provides access to a large pool of capital that can fund expansion, acquisitions, or R&D projects.

some detailed insights on Mainboard IPOs for 2024:

A Main Board IPO is an initial public offering of large and established companies with a paid-up capital of at least Rs 10 crores. A Main Board IPO is a regular IPO listed and traded on the stock exchange platforms of the NSE/BSE.

Criteria for SEBI IPO Eligibility

  Entry Norm I – Profitability Route

The companies must meet all the following conditions in terms of profit standards to be eligible for an IPO through this route:

The company should have net tangible assets of at least Rs 3 crores in each of the three preceding years.

For fresh issues (not OFS), of the above Rs 3 crores of tangible assets, not more than 50% should be cash or cash equivalent.

The company should have an average operating profit (before tax) of at least Rs 15 crore in any of the three years out of the last five years.

In case of a name change, 50% of the revenue generated in the previous year should be from the business carried on under the new name.

The issue size should not exceed five times the net worth of the company before the issue (pre-issue).

Entry Norm II – QIB Route

The QIB route is an alternative route developed by SEBI for genuine, capable and legitimate companies that are unable to meet strict profitability parameters. The companies going for IPO through the QIB route have to ensure that:

  • IPO through the book-building process.
  • Allocate at least 75% of the net offering to qualified institutional buyers.
  • Refund of IPO subscription money if the minimum allotment requirement is not met.

SEBI requirements for directors/promoters/founders/investors

  • There is no disciplinary action against the company founders/promoters/directors/selling shareholders.
  • The promoters/directors/founders/investors/issuing company should not be barred from accessing the capital markets. The company cannot apply for an IPO until the debarment period has expired.
  • The promoters/managers/founders/investors should not be affiliated with another company that is excluded from access to capital markets.
  • The promoters/directors/founders/investors should not be defaulters.
  • The promoters/directors/founders/investors must not be classified as fugitive offenders as defined in the Fugitive Economic Offenders Act 2018.
  • The promoters should individually or collectively own at least 20% of the equity after the IPO.

Eligibility Criteria – NSE IPO

In addition to the IPO guidelines prescribed by SEBI, the NSE requires that the issuing company meet the following eligibility criteria:

  • At least one promoter should have at least 3 years of experience in the same industry.
  • The issuing company must submit to the NSE the annual reports for the last three fiscal years.
  • The company has a positive net worth. (This clause is applicable to companies with an issue size of less than Rs 500 Cr).
  • The post-issue paid-up equity of the company should be more than Rs 10 Cr.
  • Market capitalization should be more than Rs 25 Cr.
  • The company should provide the Exchange with a certificate confirming that:
  • There are no proceedings pending against the issuer under the Insolvency and Bankruptcy Law.
  • The company has not received a winding-up petition from the NCLT (National Company Law Tribunal)

Eligibility Criteria – BSE IPO

Equity and market capitalization requirements are the same for the NSE and the BSE. According to BSE,

  • The minimum paid-up capital of the issuing company after the issue should be Rs 10 Cr.
  • The minimum issue size should be Rs 10 Cr.
  • The minimum market capitalization of the issuing company should be Rs 25 Cr.
  • One need to follow the BSE Main Board IPO checklists below and submit the required documents and information at each stage.
  • In principle Approval Stage
  • Issue Opening Stage
  • Basis of Allotment Stage
  • Listing & Trading Approval Stage

Other IPO Requirements

  • The company should obtain prior consent from the BSE to use the name of the BSE in its prospectus or offer-for-sale documents.
  • The issuing company should file an application with one or more exchanges and designate one exchange as the Designated Stock Exchange.
  • The issuer should have an arrangement with a depository (CDSL and NSDL) to take care of dematerialization before and after the issue.
  • The promoter’s shares should be in demat form before filing the offer document.
  • The partly paid-up shares should either be fully paid up or forfeited before the filing of the offer document.
  • The issuer should deposit 1% of the issue amount as a deposit with the designated stock exchange before the commencement of the issue

Factors Influencing Market

  1. Market Sentiment: The performance of recent IPOs influences investor sentiment. Positive trends can lead to increased participation in upcoming offerings.

Financial Health of Companies: Prospective investors often consider the financial health and growth potential of the companies planning to go public.

 Pre-IPO Advisory Services

  1. Readiness Assessment
  • Service: A detailed assessment of the company’s readiness for an IPO, including financial health, corporate governance, operational structure, and management capabilities.
  • Details: Consultants evaluate the company’s internal processes, compliance status, and overall readiness to meet the regulatory requirements for a public offering.
  1. Strategic Planning
  • Service: Developing a strategic plan for the IPO, including defining the timing of the offering, pricing strategy, and the company’s long-term vision.
  • Details: Advisors work with the management team to develop a compelling narrative that resonates with potential investors, ensuring that the IPO aligns with the company’s growth objectives.
  1. Corporate Structuring
  • Service: Structuring the company to meet the legal and financial requirements of a public entity.
  • Details: IPO consultants help in organizing the company’s legal structure, ensuring it meets corporate governance standards and advising on potential changes such as board composition or executive compensation.
  1. Financial Audit and Reporting Preparation
  • Service: Ensuring the company’s financial statements are up to IPO standards.
  • Details: Consultants ensure the company’s financial statements are audited and compliant with the regulations set by the Securities and Exchange Board of India (SEBI) and regulatory bodies. This often involves cleaning up financials, implementing proper accounting practices, and preparing a comprehensive financial report.
  1. Valuation
  • Service: Determining the company’s market value in preparation for setting the IPO price.
  • Details: Professional consultants and investment banks perform a thorough valuation, analysing factors such as revenue, profit, industry trends, market potential, and comparable public companies (comps). The goal is to establish an appropriate offering price.

    Legal and Regulatory Compliance
  1. Filing with Regulatory Authorities
  • Service: Filing the necessary paperwork with regulatory bodies, such as the SEBI (in India) , SEC (in the U.S.), to officially initiate the IPO process.
  • Details:  Consultants guide the company through the preparation of the Draft Red Herring Prospectus (DRHP), which includes detailed financial, operational, and business information as required by SEBI under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. This document, a crucial component of the regulatory review process, is filed with SEBI and made public to invite comments from stakeholders. Once approved and finalized, it is converted into the Red Herring Prospectus (RHP) for the IPO.
  1. Regulatory Compliance and Due Diligence
  • Service: Ensuring the company complies with all necessary regulations and undergoes due diligence before filing for the IPO.
  • Details: Legal advisors and IPO consultants ensure the company adheres to all securities regulations, including corporate governance, environmental disclosures, and shareholder rights. This phase also includes due diligence on company operations, litigation history, and market practices.

    Structuring the Offering

  1. Offering Type (Public vs. Private)
  • Service: Advising on the type of offering—whether to go public through a traditional IPO or pursue an alternative method such as a direct listing.
  • Details: Consultants evaluate the company’s goals and market conditions to determine the best approach to going public. A traditional IPO involves issuing new shares, while a direct listing involves listing existing shares without a new issue.
  1. Underwriting Arrangement
  • Service: Selecting and structuring underwriting relationships with investment banks.
  • Details:  Advisors help the company select a syndicate of underwriters to manage the sale of shares. Investment banks underwriting the IPO assume the risk of purchasing and reselling the shares at the offering price.
  1. Pricing Strategy
  • Service: Determining the optimal pricing strategy for the IPO.
  • Details:  Consultants assist in setting the price range and final offer price. This is based on a variety of factors, including investor demand, market conditions, and company valuation.
  1. Marketing and Roadshow
  • Service: Organizing and managing the IPO roadshow to market the offering to institutional investors.
  • Details: Advisors help the company prepare for and execute a roadshow, where company executives meet with potential investors to explain the business, financials, and investment opportunity.

    Investor Relations and Marketing

  1. Investor Communication Strategy
  • Service: Helping the company develop an investor communication strategy.
  • Details: IPO consultants help the company develop its messaging to attract institutional investors, analysts, and retail investors. This includes preparing presentations, press releases, and investor relations materials.
  1. Roadshow Execution
  • Service: Managing and executing the roadshow, which involves meeting institutional investors and promoting the offering.
  • Details: The roadshow is typically led by the company’s management team, with support from the investment bank and consultants. They travel to various cities to meet with investors and communicate the company’s value proposition.

  IPO Process Overview

step-by-step breakdown of the IPO advisory and consultancy process:

  1. Initial Assessment and Strategy Development
  • Evaluate the company’s readiness for the IPO and develop a strategic roadmap.
  1. Due Diligence and Documentation
  • Conduct thorough financial and legal due diligence.
  • Prepare necessary documentation 
  1. Regulatory Filings
  • File with relevant regulatory authorities (SEBI or equivalent).
  • Ensure compliance with securities laws.
  1. Valuation and Pricing Strategy
  • Perform financial modelling and valuation to determine the optimal IPO price.
  • Develop a pricing strategy based on market conditions.
  1. Underwriting and Deal Structuring
  • Select underwriters and structure the terms of the offering.
  • Define the amount of capital to be raised and the offering price.
  1. Roadshow Preparation and Execution
  • Prepare for and execute the investor roadshow.
  • Present the company’s financials and growth story to institutional investors.
  1. Pricing and Launch
  • Set the final IPO price.
  • Begin trading the shares on the public exchange.
  1. Post-IPO Support
  • Offer ongoing support in terms of compliance, investor relations, and market positioning.