2. What is an IPO? The first sale of stock by a private company to the public. Initial Public Offer (IPO) is a process through which an unlisted Company can be listed on the stock exchange by offering its securities to the public in the primary market. The object of an IPO may be relating to expansion of existing activities of the Company or setting up of new projects or any other object as may be specified by the Company in its offer document or just to get its existing equity shares listed by diluting the stake of existing equity shareholders through offer for sale.

3. The IPO’S are often issued by smaller younger companies seeking the capital to expand, but can also be done by large Privately owned companies looking to become publicly traded. In an IPO,the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue( Common or preferred), the best offering price and the time to bring it to the market.

4. Graphical Representation of an IPO Issues shares to the public Public purchases share and give money in return. The deal is done Purpose is to expand and setting up of new projects

5. Advantages of an IPO Enlarging and diversifying equity base Enabling cheaper access to capital Increasing exposure, prestige, and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions (potentially in return for shares of stock) Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.

6. Significant legal, accounting and marketing costs, many of which are ongoing Requirement to disclose financial and business informationMeaningful time, effort and attention required of managementRisk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and customers. Loss of control due to new shareholders Increased risk of litigation, including private securities class actions and shareholder derivative actions Disadvantages of an IPO

7. SEBI guidelines for issue of an IPO An unlisted issuer making a public issue of equity shares or any security convertible at a later date into equity ( making an IPO) is required to satisfy the following provisions : ENTRY NORM I ( PROFITABILITY ROUTE) Net tangible assets of assets of at least Rs 3 Crore in each of the preceding three full years of which not more than 50% are held in monetary assets. If more than 50% of net tangible assets are held in monetary assets, the company should have made firm commitments to deploy such excess monetary assets in its business/projects.

8. Company has a track record of distributable profits in atleast 3 of the 5 immediately preceding 5 years. Net worth of atleast Rs 1 Crore in each of the preceding 3 full years. If the company has changed it’s name within the last one year, atleast 50% revenue for the preceding one year should be from the activity suggested by the new name. The issue size should not exceed 5 times the pre-issue net worth as per the audited balance sheet of the last financial year

9. To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters, SEBI has provided two other alternative routes to the companies not satisfying any of the above conditions for accessing the primary market. ENTRY NORM II Alternative 1 ( Commonly known as “QIB route”) An unlisted company which does not satisfy the requirements specified above can make an offer to the public, of equity or any other security convertible at a later date into equity only through book building process

10. Issue shall be through book building route, with at least 50% of the issue to be mandatory allotted to the Qualified Institutional Buyers otherwise full subscription money is to be refunded. Alternative II ( Commonly known as “Appraisal route”) The project is appraised and participated to the extent of 15% by Financial Institutions/ Commercial Banks of which at least 10% comes from appraiser(s) At least 10% of the issue size shall be allotted to QIB’s otherwise full subscription money received will be refunded.

11. In addition to satisfying the aforesaid both the alternatives above, The issuer company shall also satisfy the following criteria, The minimum post issue face value capital shall be Rs 10 Crores or there shall be a compulsory market making for atleast 2 years subject to the following conditions: a) Market makers undertake to offer buy and sell quotes for minimum depth of 300 shares. b) Market makers undertake to ensure that the bid-ask spread for their quotes shall not at any time exceed 10%

12. c) The inventory of the market makers on each of such stock exchanges as on the date of allotment of securities,shall be at least 5% of the proposed issue of the company. In addition to satisfying the aforesaid both the entry norms, The issuer company shall also satisfy the criteria of having at least 1000 prospective allottees in its issue.

13. A Listed issuer making a public issue ( FPO) is required to satisfy the following requirements: a) If the company has change its name within the last one year, at least 50% revenue for the preceding 1 year should be from the activity suggested by the new name b) The aggregate of the proposed issue size and all the previous issues made in the same financial year, in terms of issue size does not exceed 5 times the pre – issue net worth as per the audited balance sheet of the last financial year If the net worth after the proposed issue of equity shares or any security convertible at a later date into equity becomes more than 5 times the net worth prior to the issue, it is required to satisfy the criteria of book building process and allot 50% of the issue size to QIB’s failing which the subscription money is required to be refunded.

14. Entities Exempted from the entry norms Private Sector BanksPublic Sector Banks An ifrastructure company whose project has bee n appraised by a public Financial Institution or IDFC or IL&FS or a bank which was earlier a PFI and not less than 5% of the project cost is financed by any of these institutions

15. Mandatory Provisions for Issue Minimum Promoter’s contribution and lock in: In a public issue for an unlisted issuer, the promoters shall contribute not less than 20% of the post issue capital which should be locked in for a period of 3 years. IPO GRADING 1. Eligibility norms require credit rating from a credit rating agency registered with Board and it’s disclosure in the offer document. 2. Where credit ratings are obtained from more than one credit rating agency, all the ratings including the unaccepted credit ratings shall be disclosed. 3. It also requires disclosure regarding all the credit ratings obtained during the three year preceding the public issue.

16. Pricing of an issue A) Who fixes the price of the securities in an issue? Indian primary market ushered in an era of free pricing since 1992. SEBI does not play any role in price fixation. The issuer in consultation with the merchant banker on the basis of market demand decides the price. The offer document contains full disclosures of the parameters which are taken into account by the merchant banker and the issuer for deciding the price. The parameters include EPS, PE Multiple, return on net worth and comparison of these parameters with peer group companies.

17. Recent Developments SEBI’S new e-IPO rules allow companies to list in 6 days The Securities and Exchange Board of India (SEBI) has approved norms for companies to launch their initial public offerings (IPOs) in an electronic form, a move that will reduce the time taken between the share sale and the listing, enhance the reach of retail investors in the share sale, and reduce costs. Under the e-IPO norms,,ASBA (Applications Supported by Blocked Amount) will be made mandatory for all categories of investors while applying for an IPO, which will help companies list in only six days compared with 12 days now.

18. ASBA is a facility that allows the money to remain blocked in the applicant’s bank account till the shares are allotted, thereby eliminating delays related to refunds of unallocated shares. The e-IPO norms will come into effect on 1 January 2016. “Under the e-IPO norms, depository participants and RTAs (registrar and transfer agents) will also be able to accept IPO applications both in physical form and electronic form. Right now, only brokers and exchanges can accept applications. So the new rules will help in enhancing the reach of public issues.

19. Companies raise Rs 13,000 crore through IPO in 2015, best in 5 years The total IPO amount expected to be raised for the calendar year is likely to cross Rs 14,000 crore, the highest since 2010 when 64 companies raised about Rs 37,500 crore. In 2014, six IPOs hit the market and collectively raised Rs 1,261 crore while just three got listed through IPOs in 2013 and mobilised Rs 1,284 crore.

21. Many companies with unique businesses such as Team Lease, a provider of staffing services, Infibeam, an online market place, Quick Heal, a maker of antivirus software, Matrix Cellular, international SIM card provider, and Matrimony.com, an online matrimonial service portal, are likely to hit the IPO market in next few months.

22. S Chand and Company plans IPO in 2017 I Textbook-focused, publishing firm S Chand and Company is planning initial public offering next fiscal, says report. Report says that the company plans to ramp up its portfolio of digital and print content and services. The company will continue to focus on inorganic growth, as it expands its presence across the country, according to reports. "We estimate a requirement of about $150 million through external and internal accruals, as we look to reach 1,00,000 institutions over the next five years," Himanshu Gupta, joint managing director, S Chand was quoted as saying.

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