1/24/2018 What is an IPO Process?

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WHAT IS AN IPO
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Companies typically go public to raise huge amount of capital in
exchange for securi es. Once a private company is convinced about
theMobile
need toNo
become a public company, it kick-starts the process of
IPO. Companies which want to go public follow a process that
exchanges adhere to. The IPO process is quite complicated.
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So, what are steps to tread to make an ini al public offer? One
should note that the en re IPO process is regulated by the
Nearest
'Securi CityExchange Board of India (SEBI)'. This is to check the
es and
likelihood of a scam and protect investor interest.
Step 1: Hire an investment bank
Get Started
Step 2: Register with SEC
Step 3: Draft the Red Herring document
CA
Step 4: Go on road show
Step 5:De
IPO is priced
StepAcco
6: Available to public
Step 7:Tra
Going through with the IPO
Acco
Step 1: Hire an investment bank
On
Shar
Trad seeks guidance from a team of under-writers or
A company
Int
investment banks to start the process of IPO. More o en than not,
Trad
they take services from more than one bank. The team will study
Sha
the Mar
company's current financial situa on, work with their assets and
liabiliIPO
es and then they plan to cater to the financial needs. An
underwri ng agreement will be signed which will have all the
details
Deriof the deal and the amount that will be raised, the securi es
that will
Re be issued. Though the under-writers assure on the capital
they will raise, they won't make promises. Even the investment
banks will not shoulder all the risks involved in the money
movement.

Step 2: Register with SEC

The Company and the under-writers together file the registra on
statement which comprises of every fiscal data and business plans
of the company. It will also have to declare how the Company is
going to u lize the funds it will raise from the IPO and about
the securi es of public investment.
If the registra on statement has compliance to the stringent
guidelines set by the SEC, which ensures that the company has
disclosed every detail a poten al investor should know, then it gets
a green signal.
Else it is sent back with comments. The company should then work
on theOpen An and
comments Account
file for registra on again.
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1/24/2018 What is an IPO Process? - Angel Broking

Step 3: Draft the Red Herring

document
An ini al prospectus which contains the probable price es mate per
share and other details regarding the IPO is shared with the people
who are involved with the IPO. It is called a red herring document
because the first page of the prospectus contains a warning which
states that this is not a final prospectus. This phase tests waters for
the IPO among the poten al investors.

Step 4: Go on road show

Name
Before the IPO goes public, this phase happens over an ac on-
packed two week. The execu ves of the Company travel around the
country marke
Mobile No ng the upcoming IPO to the poten al investors,
mostly QIBs. The agenda of the marke ng includes presenta on of
facts and figures, which will drum up the most posi ve interest.
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5: IPO is priced
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Based on whether company wants to float a fixed price IPO or Book
Building Issue, the price or price band is fixed. A fixed price IPO will
haveGet
a fixed price in the order document, and the book building
Started
issue will have a price band within which an investor can bid.
CA
Number of shares that will be sold is decided. The Company should
also decide the stock exchange where it be going to list their shares.
De
The Company asks the SEC to announce the registra on statement
Acco
effectual so that purchases can be made.
Tra
Acco
Step 6: Available to public
On
Shar
On aTrad
planned date, the prospectus and applica on forms are made
Int to public online and offline. People can get a form from
available
any Trad
designated banks or broker firms. Once they fill in the details,
Sha submit them with a cheque. Or they can submit it online as
they can
Mar
well. SEBI has fixed the period of availability of an IPO to public,
IPO
which is usually 5 working days.
Deri
Step 7: Going through with the IPO
Re

A er the IPO price is finalized, the stakeholders and under-writers

work together to decide how many shares will every investor
receive. Investors will usually get full securi es unless it is
oversubscribed. The shares are credited to their demat account. The
refund is given if the shares are oversubscribed. Once the securi es
are allo ed, the stock market will start trading the Company’s IPO.

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