EDNEM PRESENTATION

On
Initial Public Offering

BY
Manish Gupta
Definition
• Process of offering shares of a private corporation to
the public in a new stock issuance.
Why IPO?

• New capital
Almost all companies go public primarily because they need
money to expand the business
• Future capital
Once public, firms have greater and easier access to capital in
the future
• Mergers and acquisitions
IPOs are often used to finance acquisitions
Eligibility
• Minimum paid-up capital of Rs 10 Crore
• Post-issue market capitalization ≥ Rs 25 Crore.
• There has to be at least three years track record of either -
Applicant seeking listing
-The promoters/promoting company
Terms associated with IPOs

• Price Band : A price band is the range of the price at which
the stock can be issued for the first time.
• Draft Red Herring Prospectus (DRHP): This is the
document that gets circulated to the public after SEBI gives an
IPO the green signal.
• Undersubscription and Oversubscription: An IPO is
undersubscribed if the bids received are less than the number
of shares offered. Oversubscription happens when the bids
exceed the number of shares on offer.
Process for filing an IPO
• Appoint a merchant banker
• File for the IPO and get SEBI nod
• Application including DRHP, details of the promoters and the
company's annual reports needs to be filed
• Market the IPO: done through advertisements to raise awareness
about the company's offering.
• Fixing the price band and book building: once the price band has
been decided, the merchant banker or underwriter of the share
offer decides the ipo price.
• For three days, the company's shares are open to the public for
subscription.
• Listing day: the company begins trading on the stock exchange at
a listed price, which is based on market demand for the issue.
Advantages
• Transparency
• Attract and retain better management and skilled
employees through liquid stock equity participation 
• Give a company a lower cost of capital for both
equity and debt.
• Increase the company’s exposure, prestige, and public
image, which can help the company’s sales and
profits.
Disadvantages

• IPO is expensive
• Company is required to disclose financial, accounting, tax,
and other business information.
• There is a loss of control, new shareholders who obtain voting
rights and can effectively control company decisions 
Thank You