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An IPO helps a private company raise capital, with intermediaries ensuring smooth execution through approval, pricing, and marketing.
The IPO process involves various intermediaries, each ensuring legal compliance, effective marketing, and minimal risk for the offering.
Role: Investment banks, or underwriters, price the IPO, manage risks, and help set the share price.
Responsibilities:
Pricing the IPO: Investment banks set the share price based on market conditions, company valuation, and investor demand.
Underwriting the Shares: Underwriters buy the shares from the company and sell them to the public. This ensures that the company receives the funds it needs, even if the IPO is undersubscribed.
Conducting Due Diligence: Investment banks conduct thorough due diligence to assess the company’s financial health and ensure that all regulatory requirements are met.
Marketing the IPO: They help promote the IPO through roadshows, where company executives present to institutional investors.
Role: Legal advisors ensure that the IPO complies with all regulatory requirements, including those set by the Securities and Exchange Board of India (SEBI) or other relevant bodies.
Responsibilities:
Drafting the Prospectus: Legal advisors draft the IPO prospectus, a document that provides detailed information about the company, its financials, and the terms of the IPO.
Ensuring Compliance: They ensure that all regulatory requirements are met, including compliance with securities laws, tax regulations, and disclosure requirements.
Handling Legal Disputes: Legal advisors handle any potential legal challenges during the IPO process.
Role: Auditors verify the financial statements of the company to ensure transparency and accuracy before the IPO.
Responsibilities:
Financial Audits: Auditors review and audit the company’s financials to provide an independent and objective opinion on their accuracy.
Ensuring Transparency: They ensure that the financial statements accurately reflect the company’s financial health and that there are no discrepancies.
Providing a Clean Opinion: Auditors issue a clean opinion on the company’s financials, which builds trust with potential investors.
Role: The registrar manages the application process, share allotment, and maintains shareholder records.
Responsibilities:
Processing Applications: The registrar handles the applications from investors, ensuring that they are processed and recorded accurately.
Share Allotment: They manage the allotment of shares to investors and handle refunds in the case of oversubscription.
Maintaining Records: The registrar keeps shareholder records and ensures accurate transaction documentation.
Role: The stock exchanges provide the platform for listing the company’s shares once the IPO is completed. They ensure that the shares are tradable on the open market.
Responsibilities:
Listing Shares: The stock exchanges, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), list the company’s shares, making them available for trading.
Regulatory Compliance: They ensure the company meets the listing requirements and regulations of the exchanges.
Ensuring Liquidity: Stock exchanges ensure that there is sufficient market liquidity to enable investors to buy and sell shares after the IPO.
Role: Promoters are typically the founders or key stakeholders of the company. They play an integral role in driving the IPO process.
Responsibilities:
Leadership: Promoters guide the company through the IPO, making key decisions and ensuring readiness.
Investor Relations: They engage with investors, often presenting the company’s case during roadshows and marketing efforts.
Role: Credit rating agencies assess the company’s creditworthiness and assign a rating, which helps investors evaluate the risk associated with the IPO. They typically play a role in debt IPOs and convertible instrument issues. For pure equity IPOs, credit ratings are not mandatory and not commonly used, unless required for regulatory purposes.
Responsibilities:
Rating the IPO: Credit rating agencies evaluate the company’s financial health and assign a rating based on its ability to meet financial obligations.
Providing Risk Insights: The rating helps investors understand the potential risks and rewards associated with the IPO.
The IPO process involves several key steps, each involving one or more intermediaries:
Pre-IPO Stage
The company selects underwriters and legal advisors, prepares documents, and auditors audit the financials.
Filing the Prospectus
The company submits the prospectus to SEBI for approval. The legal team ensures that the document complies with all regulatory requirements.
Pricing and Marketing the IPO
The underwriters help set the price and conduct roadshows to attract institutional investors.
The Launch
The company offers shares to the public, and the registrar manages the allotment process.
Post-IPO Stage
Shares are listed on the stock exchange, and trading begins. Ongoing compliance is monitored by the stock exchange and regulatory authorities.
The IPO process involves key intermediaries like investment banks, legal advisors, auditors, and stock exchanges, each playing a crucial role in ensuring a successful public offering.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
An IPO is when a company offers its shares to the public for the first time to raise capital.
Investment banks, legal advisors, auditors, stock exchanges, registrars, promoters, and credit rating agencies.
They price, underwrite, and market the IPO, and conduct due diligence.
The registrar manages share allotment and maintains the shareholder registry.
Stock exchanges list the shares, ensure compliance, and facilitate post-IPO trading.
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Posted on 19 Dec
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