Initial Public offering (IPO) is one of the key way corporations and companies raise capital for various uses. It gives an opportunity for private company to go public by offering its shares to public by listing its own shares on exchanges. Many companies use this way of using funding to boost the capital, for expansion of business, debt reduction, working capital, etc. Further, it also establishes companies name in the economy on getting listed in the share market. However, offering a public stake is not an easy process and requires diligent efforts and many regulatory requirements to be fulfilled to get the company listed on the exchanges.

We at LAWgical & Legal Associates provide a one stop solution for companies on the journey of getting listed on the exchanges or planning for an initial public offering soon. The journey starts from getting prepared for public issue to get listed as public company on the exchanges. It includes all kind of advisory services from meeting regulatory requirements, seeking institutional investors projecting future prospects of the growth and presenting it to the potential investors. Our wide reach of branches across India helps in getting better exposure to the public offering of Client Company. Further, our research team provides an in-depth analysis and insights on the potentials of the company to give investors more understanding about the company making them convinced about the company which helps in getting more subscription for the issue.

Why SME IPO?

1. Dive into the SME Playground at BSE and NSE!Calling all fresh-faced, up-and-coming companies—now’s your chance to strut your stuff on the big stage of the stock market.
2. Unlock Your Entry Ticket with Ease!Say goodbye to the red tape—both BSE and NSE offer a breezy, stress-free path to eligibility.
3. Supercharge Your Valuation!Ready to turn the dial up on your company’s worth? Prepare for a valuation makeover that’ll make your head spin.
4. Ignite Explosive Growth and Fortune!Brace yourself for a business boom like never before—skyrocket your enterprise and watch wealth sprout like wildflowers.
5. Tap into Interest-Free Funding!Picture this: funds pouring in without the looming specter of refunds or interest rates—now that’s the dream!
6. Turn Your Equity Shares into Currency!Transform your company’s shares into the ultimate currency, with liquidity as smooth as silk.
7. Bask in the Limelight for Free!Get ready to shine under the spotlight with a publicity bonanza that’ll send your brand value soaring and cement your credibility in the market.

Benefits of getting company listed on Exchanges

Brand Awareness

Company’s name gets highlighted in the economic and business circles of the country leading to mouth publicity of the business and company automatically.

Stability

Once the issue is subscribed and shares get allotted the company can plan the allocation of capital towards its growth projects or can reduce the debt making the company more stable and sustainable.

Potential of more capital raising

Once the shares are listed and the business and fundamentals are out in public domain it becomes easier to raise more funds via rights issue, QIP’s, fund raising through debt, etc.

Rise in business

Listed companies and their share performance automatically gets a marketing about the growth of the company through media channels, business papers, etc. This leads to increase in customer base, investors, financial institutions, etc. Further, it also helps in rise in business prospects and financial growth of the company.

IPO Advisory Services which include:

• Advising corporates on raising funds by way of equity shares/preference shares, fully/optional convertible/non-convertible debentures. Also advising them quantum and timing of such offers.
• Assisting clients in arranging under-writing from banks, institutions, corporates and stock brokers.

We have a comprehensive and proven approach to help companies establish the right public- company infrastructure and ongoing communications programs.

How our IPO Services help you for IPO Listing:

• Create a true and precise investment proposition and strategic rationale for the IPO listing
• Develop an IPO preparation rollout plan that identifies communications-related activities and responsibilities
• Establish an investor relations infrastructure, including website content and protocols for handling inquiries
• Create and refine disclosure and reporting practices
• Prepare for the first earnings call
• Arrange listing day media and event support

What Is IPO (Initial Public Offering)?

IPO stands for Initial Public Offering. It refers to a procedure whereby any business which wants to raise Interest free, collateral free capital from the market and for the same a private company becomes public and gets its name listed on the stock exchange. In simplest terms, it is the selling of shares, by an entity, to the public, for the first time. Without going public or having an IPO, a company remains privately owned where they have only a few shareholders, which may include, their friends, family members, acquaintances or even the company’s promoters. An IPO allows a company to raise capital by offering equity to investors in the public sector domain where not only the public, but professional or strategic investors, such as angel investors, venture capitalists, and private equity investors, may also hold shares in a private company.

LAWgical & Legal Associates is an India-based Business and IPO Service Portal for Indian Companies, offering comprehensive services for Initial Public Offerings PAN India. We provide end-to-end IPO services, from the initial stage to a successful subscription. Henceforth, LAWgical & Legal Associates is one stop solution for education and execution of a successful IPO.

WHAT IS THE ROLE OF SMEs IN AN ECONOMY?

Globally, Small and Medium-sized businesses, or SMEs, are the foundation of many economies. They greatly enhance a country’s overall economic well-being by promoting growth, innovation, and the creation of jobs. 4,00,42,875 MSMEs were registered on India’s Udyam site in March 2024. Bank financing to SMEs climbed by 22.8% and 11.8% in October 2023, totaling US$279.18 billion. Here’s a closer look at the specific ways SMEs make a positive impact:

• Innovation and Entrepreneurship:SMEs drive innovation by experimenting with new ideas and technologies, bringing fresh perspectives to established industries, fostering a dynamic and competitive business environment.
• Economic Diversification:SMEs enhance economic diversification by addressing niche markets and local needs, filling market gaps, and providing a wider range of goods and services.
• Regional Development:SMEs, often located geographically dispersed, stimulate economic activity beyond major cities, promoting balanced development and fostering community within these regions.
• Supply Chain Integration:SMEs play a crucial role in larger supply chains, providing essential goods and services to larger corporations, enhancing the overall production ecosystem and promoting efficiency.

IPO Eligibility

A company wishing to go public must comply with the regulations laid down by the government authorities (SEBI) and the stock exchanges (BSE and NSE). There are certain IPO approval norms in India that a company must meet before it can go public.

BSE SME IPO Eligibility

SMEs must meet the following criteria set by the BSE SME platform for issuing SME IPO.

Eligibility Requirement for BSE SME IPO

BSE SME IPO Eligibility Requirements in Detail

• The company should have net worth of at least Rs. 1.5 crore for 2 preceding full financial years. If the formed company is the result of conversion of partnership firm, proprietorship or LLP, then the previous firm should have the required net worth of Rs 1.5 crore for 2 preceding financial years.
• The Net Tangible Assets of the company should be Rs. 3 crores in the last preceding financial year.
• The company should have a track record (operations) of at least three years. If not, the project for which IPO is being proposed should be appraised and funded by NABARD, SIDBI, Banks (other than co-operative banks), Financial Institutions.
• The company should have operating profit (i.e. Earnings before Interest, depreciation and tax) for 2 out of 3 latest financial years, of which the latest financial year should be mandatorily profitable. If the IPO project is funded by NABARD, SIDBI, Banks (other than cooperative banks), the company should have positive operating profit in the one last financial year.
• The leverage ratio of the company should not be more than 3:1. Note: The finance companies may get certain relaxation.
• There should not be any regulatory action of suspension of trading against any promoters or companies promoted by promoters.
• The company directors and promoters should not be the promoters or directors (other than independent directors) of the compulsory delisted companies or suspended from trading on account of non-compliance.
• The company director should not be debarred or disqualified by any of the regulatory authorities.
• There should be no pending defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the Applicant Company, promoters/ promoting companies, or subsidiary companies.
• In case of name change of the company in the last 1 year, 50% of the revenue for preceding full FY should be earned from the activity indicated by the new name. The revenue calculated should be based on a restated and consolidated basis.
• The company should have a website.
• The company should have an agreement with both Indian depositories CDSL and NSDL.
• The company should facilitate trading in Demat form.
• The list of promoters should not have changed in the preceding year from the date of applying to BSE for listing under the SME segment.
• The company should submit a certificate to BSE stating that the company is currently not under any Board for Industrial and Financial Reconstruction (BIFR) matter nor received any winding up petition against the company.

Comparison Of Stock Exchange Board

Additional Eligibility Criteria for Broking Companies

If the applicant company is a broking company, it needs to satisfy below additional criteria apart from the above.

Additional Eligibility Criteria for Micro Finance Companies

If the applicant company is a micro finance company, it needs to satisfy below additional criteria apart from the above.

NSE SME IPO Eligibility

NSE Emerge platform lists the following eligibility criteria for a company to issue SME IPO:

• The company should be incorporated under the Companies Act 1956 / 2013 in India.
• The company should have a track record (operations) of at least three years.
• The promoters should individually or jointly hold at least 20% of the share capital after the issue.
• One of the promoters should have at least three years of experience in the same industry.
• The company should have operating profit and positive net worth in at least 2 out of 3 fiscal years .
• There should be no pending Board for Industrial and Financial Reconstruction (BIFR), insolvency or bankruptcy proceedings against the company or promoters.
• The company should not have received any winding-up petition from NCLT/Court.
• No material regulatory or disciplinary action has been taken against the applicant company by any stock exchange or regulatory agency in the last three years.

CHALLENGES IN SME IPO LISTING

Listing a SME for an IPO can be a very daunting procedure. Notwithstanding certain difficulties, SMEs can obtain money and spur expansion through IPO market, which presents intriguing potential. SMEs can improve their chances of a successful IPO journey by comprehending the obstacles and being aware of consultancy services provided by different companies.

• Investor’s trust:Due to lack of historical profitability many SMEs, it gets difficult for investors to forecast their future potential. In addition, the financial pressure of listing costs, which include legal, auditing, and merchant banker fees, is also borne by the SMEs.
• Post listing liquidity:SME stocks run the risk of having lower trading volumes following their listing, which would make it more challenging for investors to buy or sell their shares.
• Lack of expertise:SMEs lack the seasoned management team needed to manage the intricacies of the IPO procedure and investor interactions after listing.

HOW WE CAN HELP YOU?

At LAWgical & Legal Associates, we understand the aspirations of SMEs to achieve public listing and the challenges they face navigating the IPO process. That’s why we offer a comprehensive suite of financial services specifically designed to empower SMEs throughout their IPO journey. Here’s how we can help you:

1.   Pre-IPO Planning and Preparation:

We will assess your company’s financial health, governance structure, and readiness for public markets. Our team will provide guidance on the most suitable structure for your IPO, including the type of securities to be offered and the target offering size. We’ll assist you in determining a fair market value for your shares to ensure a successful IPO. LAWgical & Legal Associates’s team can identify experienced underwriters for SME IPOs, and their affiliation with anchor investors simplifies the funding process.

2.   Expert Guidance and Documentation:

Our team will collaborate on creating a compelling prospectus, guiding you through filings to SEBI, and navigating due diligence to ensure a smooth and efficient review by potential investors.

3.   Strategic Support for Launch and Listing:

Our team manages book building, investor placement, and stock exchange listing, attracting qualified investors and ensuring successful IPO shares placement. They also assist in organizing investor roadshows and meetings, ensuring smooth transition to the public market.

4.   Beyond Listing: Building Long-Term Value

We can equip you with the tools and strategies to maintain positive relationships with investors after your IPO, fostering long-term success.

What is the process of filing for an IPO?

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PROCESS OF LISTING SME IPO AND ITS TIMELINE

At LAWgical & Legal Associates, we understand the complexities involved in an SME IPO listing. We’re here to guide you through each stage, ensuring a smooth and successful journey. Here’s a breakdown of the typical SME IPO listing process and its timeline:

1.   Pre-IPO Stage (1-2 Months):

The company’s board approves an SME IPO, appoints intermediaries, and conducts a thorough review of its financial records, legal standing, and business operations.

2.   Draft Red Herring Prospectus (DRHP) Filing (1-2 Months):

The DRHP, a draft financial statement, is prepared and submitted to a stock exchange for review and approval.

3.   Approval Process (1-2 Months):

The stock exchange reviews the DRHP to ensure compliance with regulatory requirements, possibly involving company visits and management interviews, and grants in-principle approval for the IPO.

4.   Red Herring Prospectus (RHP) Filing and Issue Launch (1 Month):

The Red Herring Prospectus (RHP) is finalized with additional details, filed with the Registrar of Companies, and officially launched for subscription by investors.

5.   Listing and Post-IPO (1-2 Weeks):

Investors subscribe for shares in the IPO, which are allotted to successful investors and begin trading on the chosen stock exchange platform (BSE SME or NSE Emerge).

LAWGICAL & LEGAL ASSOCIATES’S ROLE IN YOUR TIMELINE:

The listing process can take 4-6 months, depending on the case’s complexity and SEBI approvals. Our team’s expertise and experience can help streamline the process, potentially expediting your IPO journey. We’ll work diligently to keep you informed and manage all aspects efficiently, allowing you to focus on your core business operations.

SME SUCCESS AFTER LISTING

At L&L, our commitment to your success extends far beyond the IPO itself. We understand that a successful listing is just the beginning of your journey as a public company. Here’s how we can help you navigate the exciting yet demanding post-listing landscape and achieve long-term growth:

1.   Building Strong Investor Relations:

We will develop a comprehensive communication strategy to keep investors informed about your company’s performance, future plans, and key developments, maintain transparency, and offer training on effective investor communication.

2.   Enhancing Corporate Governance:

We provide guidance on board composition, committee structures, and governance, ensuring responsible leadership, navigating regulatory compliance, and maintaining good standing with the stock exchange and SEBI.

3.   Optimizing Capital Structure: 

• Mergers & Acquisitions (M&A) Advisory:As your company grows, we can advise on potential strategic M&A opportunities to expand your market reach and unlock new growth avenues.
• Debt Financing Solutions:We can connect you with potential lenders to explore debt financing options that complement your equity capital and support your long-term investment plans.
• Investor Relations for Secondary Offerings:If you seek to raise additional capital through secondary offerings, we can assist with investor communication and placement strategies.

4.   Getting Market Visibility:

• Analyst Relations:We can help you build relationships with financial analysts who cover your industry, potentially leading to increased market awareness and analyst coverage.
• Media Relations Support:We can develop a media outreach strategy to generate positive media attention and enhance your company’s public image.
• Investor Conferences & Events:We can connect you with relevant investor conferences and events to showcase your company to a wider audience of potential investors.

By partnering with LAWgical & Legal Associates, you gain a dedicated team committed to your long-term success. We’ll provide ongoing guidance, support, and access to valuable resources to navigate the post-listing environment and ensure your company thrives as a public entity.

PRE -IPO SERVICES

At LAWgical & Legal Associates, we recognize the immense potential within SMEs, and we’re dedicated to helping you achieve your dream of going public. Our comprehensive pre-IPO services provide the strategic foundation for a successful IPO listing. Here’s how we can equip your SME for the exciting journey ahead:

1.   IPO Readiness Assessment:

We’ll conduct a comprehensive evaluation of your company’s financial health, governance, and preparedness for public markets, identifying potential gaps and devising a roadmap for the IPO process.

2.   Expert IPO Structuring:

Our team will work with you to create the optimal IPO structure, ensuring it aligns with your company’s long-term goals and provides a compelling offering for investors.

3.   Fair Market Valuation Support:

Accurately determining your company’s value is crucial for a successful IPO. We leverage our expertise and market knowledge to assist you in obtaining a fair market valuation. This valuation will serve as the benchmark for your IPO share price and attract qualified investors.

4.   Investor Targeting & Pre-Marketing Strategy:

We assist in developing a pre-marketing strategy to identify potential investors aligned with your company’s growth story, establishing relationships early on for a strong IPO launch foundation.

Additionally, LAWgical & Legal Associates can assist you with:

• Pre-IPO Funding Exploration:We can connect you with potential sources of pre-IPO funding, such as venture capital or private equity firms, to strengthen your financial position before the IPO.
• Developing a Robust Investor Relations Strategy:Building a strong foundation for investor communication is essential. We’ll guide you in developing a comprehensive investor relations strategy to ensure transparency and trust with your future investors.

LAWgical & Legal Associates offers pre-IPO services to SME entrepreneurs, providing expert guidance and strategies to navigate the pre-IPO phase confidently and secure a successful public listing.

POST – IPO SERVICES

At LAWgical & Legal Associates, we understand that a successful IPO is just the beginning of your journey as a public company. We are committed to being your long-term partner and offer a comprehensive suite of post-IPO services to help you navigate the exciting new landscape:

1.   Investor Relations Management:

We’ll create a communication plan for your company, ensuring investors are informed about your company’s progress, financial performance, and future prospects, and utilizing effective investor relations tools.

2.   Continued Strategic Guidance:

We offer expert advice on M&A opportunities, corporate governance best practices, and regulatory compliance for growing companies, ensuring transparency, accountability, and accurate financial reporting.

3.   Building Long-Term Value:

We offer market research, sustainable practices, and media relations strategies to stay informed, identify growth opportunities, and enhance company value and attract environmentally conscious investors.

4.   Partnering for Long-Term Success:

By leveraging our post-IPO services, you can ensure a smooth transition into the public market, build strong relationships with investors, and achieve your long-term growth objectives. We’ll continue to be your trusted advisor, providing the expertise and support you need to navigate the ever-evolving market landscape

By purchasing all or a portion of the IPO shares and selling them to the public, a merchant banker or book-running lead manager (BRLM) underwrites the company’s shares. The bank assists the company during the DRHP, IPO roadshow, and due diligence phases of the IPO process. The transactional risk is assumed by the underwriters.

Companies must submit an IPO application to SEBI, the market regulator. The specified documents must be included in the application for the IPO vetting process. It contains the company’s annual reports, the DRHP, and information about the promoters. Rs 50,000 is the initial listing charge. The paid-up share capital determines the subsequent annual listing.

The IPO is then promoted by the underwriters. Prices are frequently lowered from their actual value to pique investor interest. Advertising is often used in marketing to inform consumers about a company’s product or service. The IPO roadshow is another name for this procedure. Following the selection of the price range, the merchant banker or share offer underwriter determines the IPO price.

The public may subscribe to the company’s shares for a period of three days. The firm starts trading on the stock exchange at a posted price on the day of the IPO, which is determined by the level of interest in the issue in the market. The procedure through which a private company becomes public and has its name listed on the stock exchange is known as an initial public offering, or IPO. We are a business consultant and IPO industry leader. We do assist businesses in overcoming obstacles that lead to greater revenue or business expansion. An investment bank is hired by a firm to conduct its initial public offering (IPO). In the underwriting agreement, the investment bank and the company hash out the IPO’s financial specifics before filing the registration statement with the regulatory body. After carefully examining the material provided, SEBI assigns a date for the IPO announcement.

Key Objectives

Objectives of IPO

To meet the challenging needs of desired working capital.

            To set up a new plant, factory, manufacturing unit etc.

 To takeover other businesses as a part of acquisition.

 To disburse debts, liabilities, current loans, etc.

 To establish a network of new Dealers & Distributors Pan India.

  To buy back sold equities.

 To open new offices or branches overseas of a business.

 For recruiting HR, manpower, staff, etc.

 To improvise the infrastructure.

 For merging of existing businesses.

 For the purposes of research and development.

 To meet IPO issue expenditures.

Understanding IPOs in India: A Comprehensive Guide

Initial Public Offerings (IPOs) are a significant part of the financial landscape in India, allowing companies to raise capital by offering shares to the public for the first time. This article delves into the meaning of an IPO, the process involved, and who can participate in this lucrative opportunity.

What is an IPO in India?

An **Initial Public Offering (IPO)** is the process through which a private company offers its shares to the public for the first time. This move transforms a private entity into a publicly traded company, enabling it to raise substantial capital for expansion, debt repayment, or other corporate purposes. By listing on a stock exchange, the company gains access to a broader base of investors.

Who Can Issue an IPO in India?

In India, any company that meets the regulatory requirements set forth by the Securities and Exchange Board of India (SEBI) can issue an IPO. These requirements include:

1. **Company Structure**: The entity must be a public limited company.
2. **Minimum Net Worth**: A minimum net worth of ₹1 crore is necessary.
3. **Profitability**: Companies typically need to have a track record of profitability, although there are provisions for new ventures.
4. **Compliance**: The company must comply with SEBI regulations and disclosures to ensure transparency and investor protection.

IPO Process in India

The **IPO process** in India can be broken down into several key steps:

1. **Board Approval**

The first step involves obtaining approval from the company’s board of directors to move forward with the IPO. This includes deciding on the number of shares to be issued and the price band.

2. **Appointment of Intermediaries**

The company must appoint various intermediaries, such as merchant bankers, legal advisors, and auditors, who will help in preparing the necessary documents and ensure compliance with regulations.

3. **Drafting the Red Herring Prospectus (RHP)**

The **Red Herring Prospectus** is a preliminary document that provides details about the company, including its business model, financial performance, and risk factors. This document is filed with SEBI for review.

4. **SEBI Approval**

After submitting the RHP, SEBI reviews it to ensure that all regulations are met. Once approved, the company can move to the next steps.

5. **Marketing the IPO**

The company and its intermediaries engage in roadshows and marketing campaigns to generate interest among potential investors.

6. **Book Building Process**

The IPO may follow a book-building process where the price range is set, and institutional investors can place bids for shares within that range. This helps determine the final issue price.

7. **Opening of the IPO**

Once the pricing is finalized, the IPO opens for subscription. Investors can apply for shares within the specified period.

8. **Allotment of Shares**

After the subscription period ends, shares are allocated based on demand and the allocation method (e.g., proportionate basis).

9. **Listing on Stock Exchanges**

Upon successful allocation, the shares are listed on the stock exchanges, allowing investors to buy and sell them in the secondary market.

Who Can Apply for IPO in India?

Anyone can apply for an IPO in India, provided they meet specific criteria. This includes:

– **Retail Investors**: Individual investors can apply for IPOs through demat accounts.

– **Qualified Institutional Buyers (QIBs)**: These include institutional investors like banks, insurance companies, and mutual funds.

– **Non-Institutional Investors (NIIs)**: High-net-worth individuals (HNIs) and corporates can also apply, typically with a higher investment amount than retail investors.

How to Apply for an IPO in India

Investors can apply for an IPO through several methods:

1. **Online Applications**: Most brokerages and banks offer online platforms where investors can apply for IPOs through their demat accounts.
2. **ASBA (Application Supported by Blocked Amount)**: Investors can use this method, which allows the amount to be blocked in their bank accounts while applying for the IPO.
3. **Physical Application Forms**: Investors can also submit physical forms at designated banks or brokerage firms.

Steps to Issue an IPO in India

For companies considering an IPO, the steps include:

1. **Planning and Strategy**: Assess the need for capital and define the objectives for going public.
2. **Regulatory Compliance**: Ensure compliance with SEBI regulations and gather necessary documents.
3. **Engaging Advisors**: Hire financial and legal advisors to navigate the IPO process.
4. **Drafting the Prospectus**: Prepare the RHP and get it approved by SEBI.
5. **Marketing and Roadshows**: Promote the IPO to potential investors.
6. **Subscription and Allotment**: Open the IPO for subscription, allot shares, and list on stock exchanges.

Conclusion

IPOs are a pivotal aspect of India’s capital markets, offering companies a pathway to raise capital and investors an opportunity to share in their growth. By understanding the IPO process, eligibility, and application methods, both companies and investors can navigate this complex but rewarding financial landscape. Whether you are a potential investor looking to dive into the stock market or a company contemplating going public, being informed about the IPO issue service in India is crucial for success.

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