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Steps in an IPO Process:

The entire IPO process in India is regulated by the 'Securities and Exchange Board of India (SEBI)', to prevent the possibility of a fraud and safeguard investor interest.

Selection of Investment Bank

The first thing that company management must do when they have taken a unanimous decision to go public is to find an investment bank or a conglomerate of investment banks that will act as underwriters on behalf of the company. Underwriter's buy the shares of the company and resell them to the general public. The company must also hire lawyers that can guide them through the legal maze that an IPO setup can be. It must be ready with detailed financial records for intensive fiscal health scrutiny that SEBI would perform. Some companies may also opt to directly sell their shares through the Stock Market, but most prefer going through the underwriters.

Step 1: Preparation of Registration Statement

To begin an IPO process, the company involved must submit a registration statement to the SEBI, which includes a detailed report of its fiscal health and business plans. SEBI scrutinizes this report and does its own background check of the company. It must also see that registration statement fulfils all the mandatory requirements and satisfies all rules and regulations.

Step 2: Getting the Prospectus Ready

While awaiting the approval, the company, with assistance from the underwriters, must create a preliminary 'Red Herring' prospectus. It includes detailed financial records, future plans and the specification of expected share price range. This prospectus is meant for prospective investors who would be interested in buying the stock. It also has a legal warning about the IPO pending SEBI approval.

Step 3: The Roadshow

Once the prospectus is ready, underwriters and company officials go on countrywide 'roadshows', visiting the major trade hubs and promote the company's IPO among select few private buyers (Usually corporates or HNIs). They are fed with detailed information regarding company's future plans and growth potential. They get a feel of investor response through these tours and try to woo big investors.

Step 4: SEBI Approval & Go Ahead

Once SEBI is satisfied with the registration statement, it declares the statement to be effective, giving a go ahead for the IPO to happen and a date to be fixed for the same. Sometimes it asks for amendments to be made before giving its approval. The prospectus cannot be given to the public without the amendments suggested by SEBI. The company needs to select a stock exchange where it intends to sell its shares and get listed.

Step 5: Deciding On Price Band & Share Number

After the SEBI approval, the company, with assistance from the underwriters decide on the final price band of the shares and also decide the number of shares to be sold.

There are two types of issues: Fixed Price and Book Building

Fixed Price - In a Fixed price issue - the company decides the price of the share issue and the number of shares being sold. Ex: ABC Ltd public issue of 10 lakh shares of face value Rs. 10/- each at a premium of Rs. 55/- each is available to the public thereby generating Rs. 6.5 Crores.

Book Building - A Book building issue helps the company discover the price of the issue. The company decides a price band and it gives the investor an option to choose the price at which he/she wishes to bid for the company shares. Ex: ABC Ltd issue of 10 lakh shares of face value Rs. 10/- each at a price band of Rs. 60 to 70 is available to the public thereby generating upto Rs. 7 Crores. Here the amount generated through the issue would depend on the highest amount bid by most investors.

Step 6: Available to Public for Purchase

On the dates mentioned in the prospectus, the shares are available to public. Investors can fill out the IPO form and specify the price at which they wish to make the purchase and submit the application. This open period usually lasts for 5 working days which is a SEBI requirement.

Step 7: Issue Price Determination & Share Allotment

Once the subscription period is over, members of the underwriting banks, share issuing company etc will meet and determine the price at which shares are to be allotted to the prospective investors. The price would be directly determined by the demand and the bid price quoted by investors. Once the price is finalized, shares are allotted to investors based on the bid amounts and the shares available.

Note: In case of oversubscribed issues, shares are not allotted to all applicants.

Step 8: Listing & Refund

The last step is the listing in the stock exchange. Investors to whom shares were allotted would get the shares credited to their DEMAT accounts and for the remaining the money would be refunded.

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Related questions

Who gets the money in an IPO?

The money raised in an IPO goes to the company issuing the shares, minus underwriting fees and other expenses related to the offering. This capital can then be used by the company for many reasons.

What is an IPO?

An Initial Public Offering (IPO) is the process through which a private company becomes a public company by offering its shares to the general public for the first time. This involves the company issuing new shares to raise capital and allowing existing shareholders to sell their shares to the public. The IPO marks the transition from a privately held company to a publicly traded one, and the shares are typically listed on a stock exchange. Investors can then buy and sell these shares on the open market.

What is an IPO negotiated deal?

An IPO-negotiated deal is a type of initial public offering where the terms and conditions of the suggestion are negotiated directly between the company and the underwriters. In this situation, the issuing company and the underwriters work together to decide the offering price, the number of shares to be issued, and other vital details of the IPO. This varies from a firm-commitment offering, where the underwriters purchase the shares from the company at a fixed price and then sell them to the public.

What is aPrivate limited company?

Private limited company is a company which can not raise capital for business by issuing shares, preference shares, debenture in public and also can not go for IPO. The company's directors and promoters are not liable to pay liabilities in case of insolvency.

For the company who had already have IPO mif they want to issue the new shares are they need to make another IPO?

No. A company can issue an IPO only once. They can issue new shares through bonus shares or through rights issues.

Who are IPO's offered to?

The Public. Everyone can buy shares in an IPO. The types of investors who can purchase shares in a IPO are:Retail InvestorsHNIs (High Networth Individuals)CorporatesFII (Foreign Institutional Investors)

How do you benefit from an IPO such as the Facebook IPO and how much money is needed?

Well, IPO means, that now everyone can buy Facebook shares using NASDAQ stock market and if the company will grow up you may have benefit from the higher prices for your shares.

Is sanomedics a scam IPO?

It is as legit as the paper my stock shares are printed on.

How shares are allotted in IPO?

Pre IPO is product by Planify which brings "Private Equity for Retail investors". One can invest in companies before it get listed on stock market. Why invest in Pre IPO Share? When was the last time you have invested money in a good IPO and get shares worth more than 50,000 Rs. Probably one needs to run the time back to get an answer. Want to know more about Pre IPO shares then contact Planify at - +91 706 55 60002

In what year did General Motors Company - GM - have its IPO?

General Motors Company (GM)had its IPO in 2010.

In what year did General Cable Corporation - BGC - have its IPO?

General Cable Corporation (BGC)had its IPO in 1997.

In what year did Dollar General Corporation - DG - have its IPO?

Dollar General Corporation (DG)had its IPO in 2009.