IPO Listing Advisory: Taking Your Company Public in India

An Initial Public Offering (IPO) is the process by which a private company offers its shares to the general public for the first time and gets listed on a recognised stock exchange (NSE or BSE) in India. It is regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).

Going public provides access to large capital, increases brand visibility, and gives liquidity to existing shareholders — but it also brings significant ongoing compliance obligations.

Under SEBI ICDR Regulations, for a Main Board IPO (NSE/BSE), the company must meet at least one of these criteria:

Track Record Requirements (Option I)

• Net tangible assets of ≥ ₹3 crore in each of the last 3 years
• Distributable profits in at least 3 of the last 5 years
• Net worth of ≥ ₹1 crore in each of the last 3 years
• Issue size ≤ 5× net worth

QIB Route (Option II)

• 75% of issue size allocated to Qualified Institutional Buyers (QIBs)
• Minimum post-issue paid-up capital of ₹10 crore
• Compulsory market making for 3 years post-listing

For **SME IPO** (NSE Emerge / BSE SME):

• Net tangible assets ≥ ₹1.5 crore
• Positive net worth for at least 2 of the last 3 years
• Track record of operations for ≥ 3 years (or promoter track record)
• Post-issue paid-up capital ≤ ₹25 crore

SME IPOs are a popular and faster route for mid-sized companies.

Phase 1: IPO Readiness (3–6 months before filing)

Corporate Restructuring:

• Convert private limited company to public limited company
• Review and clean up share capital (ESOPs, convertibles, warrants)
• Resolve related party transactions
• Strengthen board composition — appoint independent directors
• Form mandatory committees: Audit Committee, NRC, SRC, Risk Management

Financial Preparation:

• Restate financials for 3 years under Ind AS
• Appoint statutory auditor acceptable to SEBI
• Address all audit qualifications

Legal Due Diligence:

• Clear all pending litigations
• Ensure all regulatory approvals are in place
• Intellectual property registration

Phase 2: DRHP Filing

The Draft Red Herring Prospectus (DRHP) is the detailed disclosure document filed with SEBI. It contains:

• Business overview and strategy
• Risk factors
• Financial statements (restated — 3 years + stub period)
• Objects of the issue (how IPO proceeds will be used)
• Promoter background and holding structure
• Management discussion and analysis
• Legal proceedings
• Related party transactions

SEBI reviews the DRHP and issues observations (typically within 30 days). SEBI may raise queries — BRLM and CS manage the responses.

Phase 3: Roadshows and Price Band

After SEBI approval, the company and BRLM conduct investor roadshows (institutional investors, HNIs). Based on investor appetite, the price band is fixed and the Red Herring Prospectus (RHP) is filed.

Phase 4: IPO Open — Book Building

The IPO is open for subscription typically for 3 working days. Investor categories:

• QIB: (Qualified Institutional Buyers): 50% of issue (75% for Option II)
• Non-Institutional Investors (NII/HNI): 15%
• Retail Individual Investors (RII): 35%

Employees and shareholders of the promoter company may have a reserved portion.

Phase 5: Allotment, Listing and Trading

• Allotment: 6th day after IPO closes (T+6 basis)
• Listing: Typically 6 working days after IPO close
• Lock-up: Promoters are locked up for 18 months (minimum promoter contribution); anchor investor lock-up for 90 days

This is where many companies underestimate the burden. Once listed, SEBI (LODR) Regulations 2015 apply comprehensively:

Quarterly Obligations

• Quarterly financial results (within 45 days of quarter end)
• Corporate governance report
• Share holding pattern
• Related party transaction disclosure

Annual Obligations

• Annual Report (within 21 days of AGM)
• Annual General Meeting within 6 months of financial year end
• Annual Secretarial Compliance Report (from Practising CS)
• Business Responsibility and Sustainability Report (BRSR) — for top 1000 listed companies

Continuous Disclosure

• Board meetings: All material information must be disclosed within 30 minutes of board meeting
• Material events: 24-hour disclosure for major events (mergers, key management changes, contracts, litigations)
• Insider Trading: Structured Digital Database (SDD) maintenance, trading windows, declarations

Board Composition Requirements

• Minimum 50% independent directors (if chairperson is executive)
• At least 1 woman independent director
• Separate Chairperson and MD/CEO (for top 500 by market cap)

A listed company must have a Whole-Time Company Secretary (ACS/FCS). The CS is the compliance officer responsible for:

• All SEBI communications and filings
• Stock exchange submissions (through NEAPS/BSE Listing Centre)
• Maintaining statutory registers
• Insider trading compliance
• Investor grievance management (SCORES portal)
• Secretarial Audit (mandatory)

For companies with post-issue capital between ₹1 crore and ₹25 crore, the SME IPO route offers:

• Faster approval (SEBI approval not required — exchange-level approval)
• Lower disclosure requirements
• Lower listing compliance
• Migration to Main Board once paid-up capital crosses ₹25 crore

Many successful companies have used the SME IPO as a stepping stone before migrating to the Main Board.

Going public is one of the most significant milestones in a company's journey. The key to a successful IPO is starting preparation early, building a strong governance framework, and working with experienced advisors who understand both the regulatory landscape and investor expectations.