Advantages of Initial Public Offer

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You need to give better market value. But value of public listed company must higher than private company. This can help to find out value of company. To improve company image. You need to give right marketing and plans. So once it is listed on public. Your company image will pick up greatly.

However, confidence will increase too many shareholders. So you can attract and hold good employees. You can increase public awareness of company. Because, IPOs generate publicity by making their products branded. This may lead to increase in market share for company.

It gets more respect from broker and customers. Also, it becomes easier to attract companies. Moreover, banks will be willing to give loan to listed companies. In case of public firms, it is easy to motivate your employees. Check guidelines of initial public offer.

General conditions for Public Issue and Right Issue.

As issuer cannot make public issue or right issue of shares. Because, there are some rules and regulation given by SEBI. If any issuer offering securities through public or right issue. Therefore, issuer must satisfy at time of filling offer document with Board. If any of promoters, directors or person in control of any company. Due to which they lose accessing capital market under any order made by broard.

Common condition for Public issue and Right issue

If issuer of convertible debt instrument are in list of nonpayment. If you not pay interest or repayment of principal amount with Six month to public. Therefore, you will lose access for capital market by Board. You make application in stock exchanges. This can be in one or more exchanges. However, it is for listing of equity shares. And it is also for convertible securities.

However, in case of an initial public offer. You must made application for listing of equity shares and convertible securities. Such stock exchanges have chosen as known stock exchange. Moreover, you need to choose at least one standard stock exchange. Hence, you can trade nationwide.

Similarly, you need to enter into an agreement with depository. So that you can dematerialize your equity shares.  And these share will transfer into demat account. You can check how it works in public issues.

Conditions of Initial Public Offer

You must have net asset at least Rs 3 crores for past three years. And also capital of equity must not less than 50 per cent. Therefore, if you have more than 50 percent or net. Then you can make promise to use assets in its business. Check on pre issue management advertising and marketing.

However, you need to maintain three years record. So that you can distribute profits.  For this, you must give annual report of past three years. And also provide certificate to exchanges. Therefore, it has net worth at least one crore rupees in each three years. Process of Initial public offer.

Similarly, you need to make all past issues in same financial year. And it issue size does not go above five times. Because, it pre issue net worth as per balance sheet do not go above. Since if you have changed name by Issuer Company within one year. At least 50 percent of revenue you need earned for past one year. Hence, it activity shown as new name.

If you are not satisfy with any of fixed rule. You can invest through book building process. And it also start to allot at least fifty per cent of net to public. To qualify institutional buyer and to refund full payment.  Therefore you cannot make an initial public offer if there are outstanding.

Probably, you may make an IPO of debt instrument without making public issue. But you cannot make allotment to public. If number of prospective allot tees is less than one thousand. Moreover, account must be managed by any institute of chartered accountant. Hence, your financial statement must be true and fair.  And it also certified by Chartered accountant.

What is Merchant Banker

Merchant banker is combination of banking and consultancy services. It provides consultancy to its clients for financial matters. Because, it gives advice, guidance and service for fee. Therefore it helps businessman to start business. See list of Merchant banks in India.

However, it also helps to raise finance. Probably. It helps to expand and restructuring business. Moreover, it restores business units. And it also helps companies to register. To buy and sell shares at stock exchange. Hence Merchant bank do all this work for their client.

Appointment of merchant banker and other intermediaries

Every Issuer shall appoint one or more merchant bankers. At least one must be lead merchant banker. Therefore these merchant bankers carry responsibility of issue. And you need to consult with lead merchant banker. However, you need to appoint intermediaries which are registered with Board.

You need to manage by more than one merchant banker. Therefore you need reveal. Such as allotment, refund and underwriting obligations in offer document. Probably, you shall enter into an agreement with lead merchant banker. Hence, you need to appoint bankers to any other issues.

However, you must appoint registrar. And it also has connectivity with all depositories. But merchant banker shall not act as registrar. Because, there will handle post issue responsibilities. In case of book build issue lead merchant banker appointed by issuer. They will act as lead book runner. You can read scope of merchant banker.


You may decide price of specified securities. But with lead merchant banker through book building process. Therefore you may find out coupon rate. And also conversion price of convertible debt instruments. By consulting with lead merchant banker through book building process.

Differential Pricing

However, issuer may offer equity shares. And convertible securities at different prices. Therefore retail investor may go for free reservation. You can do an application for equity shares and debt securities. Because, these application value will not be more than Rs 2 Lakh.

Therefore, you will offer equity and convertible securities at lower price. So this price is lower than net offer price. Probably, such difference for other categories is not more than 10 percent. In case of book building issue. Such offer price to an anchor investor cannot be lower.

Similarly, you can see price offered in public issue may be different. Such as price of equity shares and convertible securities. It will different from price offered in right issue. And such price difference will be given in offer documents.

You can opt for alternate method of book building. And you may offer specified securities at lower price than floor price. However, difference between floor price and offer price to employees. It must not be more than 10 per cent of floor price.

Price and price band

You have to mention price or price band in prospectus. And it also in case of fixed price. Therefore if you decide the price at later date. But before registering prospectus with Registrar of company. Hence, you must provide only one price in prospectus. See price and price band definition.

If floor price or price band is not mentioned in prospectus. You shall announce floor price at least two working days. Before opening of bid. Otherwise at least one working day before opening of bid. It must release before advertisement in newspapers. And it price band shall be less than 20 per cent of floor price. Find book building method.

Finally, exchange must be set down with minimum price. And it is in bid and ask price. Because there will not be more than five market makers for scrip. Moreover, merchant bankers shall be responsible for market making for minimum three years.

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