A Roadmap to Initial Public Offer

A ROADMAP TO INITIAL PUBLIC OFFER

04/10/2023

Corporate Professionals: Privileged Document, for discussion purpose only

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AGENDA

1. Eligibility Criteria for IPO & Listing …………………………………. 3-7

2. Corporate Governance & Approvals ……………….……………… 8-14

3. Key Decisions ………………………………………………………….. 15-23

4. Major Activities & Timeline ………………………………………… 24-28

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Eligibility Criteria for IPO & Listing

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Eligibility Criteria for Public Issue

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Book- Built Issue

Scenario 1•Applicable in case the issuer company meets the eligibility criteria of distributable profits

•Minimum dilution to be 25% of the post issue capital

Scenario 2•Applicable in case the issuer company does not meets the eligibility criteria of distributable profits

•Minimum dilution to be 25% of the post issue capital

Scenario 3•Issue made under Rule 19(2)(b) of the Securities Contract (Regulation) Rules, 1957

•Minimum issue size INR 1000 mn and minimum 2mn securities offered to public

•Dilution to be between 10% to 25% of the post issue capital

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Eligibility Criteria for Listing (BSE)

Classification of

Companies

• A large cap company is a company with a minimum issue size of Rs. 10 crore and market

capitalization of not less than Rs. 25 crore.

• A small cap company is a company other than a large cap company

Large Cap Companies • The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as

"the Company") shall be Rs. 3 crore; and

• The minimum issue size shall be Rs. 10 crore; and

• The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization

shall be calculated by multiplying the post-issue paid-up number of equity shares with the

issue price).

Small Cap Companies • The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore; and

• The minimum issue size shall be Rs. 3 crore; and

• The minimum market capitalization of the Company shall be Rs. 5 crore (market

capitalization shall be calculated by multiplying the post-issue paid-up number of

equity shares with the issue price); and The minimum income/turnover of the

Company shall be Rs. 3 crore in each of the preceding three 12-months period; and

• The minimum number of public shareholders after the issue shall be 1000.

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Eligibility Criteria for Listing (NSE)

Classification of

Companies

• No Concept for Small Cap & Large Cap Company

Eligibility for Listing at

NSE

• The minimum post-issue paid-up capital of the applicant company shall be Rs. 10 crore; and

• Market Capitalization of Rs. 25 Crore (min.). Provided that if market capitalization (at issue

price) is Rs. 100 crores or more, paid up capital can be Rs. 5 Crores (min.)

Track Record •Three year track records of either of following:

•Applicant Company seeking listing,

•Promoters, Promoting Company (incorporated in or outside /India), or

•Partnership firm and subsequently converted into Company and approaches

for the listing.

• The applicant Company shall submit three year annual report and provide a

certificate to exchange in respect of following:

• The Company has not been referred to BIFR,

• Networth not negative,

• Company has not received any winding up petition.

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Corporate Governance & Approvals

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Corporate Governance NormsCorporate Governance

Clause 49 of the Listing Agreement

Board Composition Board to have optimum number of executive and non executive directors with at least 50%

being non-executive. If the chairman, has executive powers then 50% of Board comprises of

Independent directors. While if Chairman has non-executive powers then 1/3 of the Board

comprises of Independent directors

Audit Committee Mandatory constitution of Audit Committee with minimum three directors and

headed by an Independent director

The audit committee should meet at least four times in a year and not more than

four months shall elapse between two meetings

Key Responsibilities

• Oversight of the company’s financial reporting process and the disclosure of

its financial information to ensure that the financial statement is correct,

sufficient and credible

• Recommending appointment and remuneration of statutory auditors

• Reviewing annual and quarterly financial statements, management

discussion and analysis and results of operations of the company

• Reviewing the internal audit function

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Corporate Governance Norms …cont

Corporate Governance

Clause 49 of the Listing Agreement

Subsidiary Company • At least one director on the Board of the holding company shall be a director on the Board of a

material non listed Indian subsidiary Company

• Audit committee of the listed holding company shall also review the financial statements, in

particular, the investments by the unlisted subsidiary Company

Report on CorporateGovernance

• A separate section on Corporate Governance to be included in the Annual Reports with

disclosures on compliance of mandatory and non-mandatory requirements

• Submission of quarterly compliance report to the stock exchanges

CEO/CFO • CEO/CFO to certify the financial statements and cash flow statements

Investor Committee Shareholder/Investor Grievances Committee to be formed under the chairmanship of

a non executive director to look into the redressing of shareholder and investor

complaints like transfer of shares, non-receipt of balance sheet, non-receipt of

declared dividends

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Promoters to be Defined in DRHP

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Promoters’ Contribution & Lock-in

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Approvals at Company Level

Authorities Approvals

Board of Directors • Fresh issue of shares under Section 81(1A) of the Companies Act (including

reservations, green shoe etc.)

• Offer for sale, if applicable;

• Increase in authorised capital, if any

• Amendment in the Articles of Association of the Company

• Constitution of the IPO Committee

• Increase the number of directors to comply with Corporate Governance Norms

• Finalization of Offer Price based on demand

• Approve the basis of allotment as passing of allotment resolution

Shareholders Approval• Fresh issue of shares under Section 81(1A) of the Companies Act

(including reservations, green shoe etc.)

• Offer for sale, if applicable;

• Increase in authorised capital, if any

• Amendment in the Articles of Association of the Company

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Approvals from Regulatory Bodies

Authorities Approvals

SEBI • Filing of the draft offer document (DRHP) with SEBI

• Observations on the offer documents filed with the SEBI

• Modifications and corrections in DRHP & Re-submission

• Final approval from SEBI post the release of observations and prior to filing the Red Herring

Prospectus with ROC

FIPB/ RBI • Key Approvals required from FIPB or any other industry regulator

• Approval may be required for the participation by FII and NRI in the Issue

• Post the allotment filing of the report with RBI for final allotment/subscription by FIIs and NRIs

Stock Exchanges • In-Principle Approval for putting names in DRHP

• Post Issue Decisions and Actions along with the Company

• Finalization of the basis of allotment with the Designated Stock Exchanges

• Approval for listing and trading from the Stock Exchange

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Key Decisions

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Objects and Requirement of Funds

• Requirement of funds need to be specifically identified

• Detailed activity-wise breakup to be provided

• Raising funds for unidentified purposes are restricted

• Firm arrangement for 75% of requirement after excluding issue proceeds to be in place

• Memorandum of Association should allow for proposed use

Offer for Sale in IPO • If there is any plan for Offer for Sale or Sale of existing capital

• This generally to give exist opportunity to PE investor etc.

Selection of Intermediaries

Selection of various intermediaries in consultation with the Merchant Banker

Timing for appointments

Pre-IPO Placement & Anchor Investor

• Whether there is a plan for placement of certain portion of shares as Pre-IPO Placement

• Whether there will be some Anchor Investor

Auditors • There are several certifications required from Auditors as per of the offer

Documents

• In case of a listed Company the role of Auditors increases manifold as the audit

works need to be on quarterly basis (Limited Review Report)

• So if the existing auditors would be capable to mange the things

Key Desiscions

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FINANCIAL INFORMATION

• Financial performance statement for last five

years (recast as per SEBI (ICDR) Regulations,

2009

• Management discussion and analysis of the

Financial Statements

• Statement of tax benefits

OTHER INFORMATION

• Government Approvals

• Legal & Litigations

• Related Party Transactions

• Legal and Secretarial matters

COMPANY BASED INFORMATION

• Industry Overview

• Business Overview & Strategies

• Risk factors

• Promoter and Group company disclosures

• Capital Structure

• Management & Managerial Persons

ISSUE RELATED INFORMATION

• Objects of the issue

• Basis of issue price

• Terms of issue

• Issue process

• IPO Grading

Offer Document: Contents

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Marketing Considerations

Attractive Issue Price

Right Timing

Identifying Potential Investors

Developing Quality Retail

Demands

Adopting Credible Pricing Range IPO

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Shares Eligible for

Offer for Sale

• Offer for sale can be done by any existing shareholder, including the Promoters,

through an offer document

• Post offer Promoters’ shareholding to not decline below 20% of the post issue capital

• Only pre-issue shares held for a period of at-least 1 year at the time of filing of the

DRHP with SEBI can be offered for sale

• Exemption available for shares acquired during the last 1 year in lieu of invested

capital which had been in existence for a period of more than 1 year prior to the

restructuring through a scheme of amalgamation or merger approved by the High

Court

• In case equity shares, received on conversion of fully paid compulsorily convertible

securities, including depository receipts, the holding period of such convertible

securities and that of resultant equity shares together shall be considered for the

purpose of calculation of the eligibility period

Other Major Considerations

• Selling shareholders to authorize the sale through a corporate resolution

and share in the Issue expenses

• Selling shareholders to be party to all offer related agreements/ documents

and sign the offer documents

• Selling shareholder to transfer the shares offered to an escrow demat

account

• Authorize Registrar to transfer these shares to public issue investors on

receipt of consideration in public issue account

Offer For Sale

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Issue Marketing: Anchor Investors

Anchor Investors • Out of the portion available for allocation to QIBs, up to 30% may be allocated

to Anchor Investors

• The minimum application size shall be Rs.10 crore

• One-third of the Anchor Investor portion shall be reserved for domestic

mutual funds

• The bidding for Anchor Investors shall open one day before the issue opens

and shall be completed on the same day

• Allocation shall be on a discretionary basis subject to minimum number of 2

investors for allocation of upto Rs.250 crore and 5 investors for allocation of

more than Rs.250 crore

• The number of shares allocated to Anchor Investors and the price at which

the allocation is made, shall be made available in public domain before

opening of the issue

• Anchor Investors shall pay a margin of at least 25% on application with the

balance to be paid within two days of the date of closure of the issue

• Lock-in of 30 days on the shares allotted to the Anchor Investors

• No person related to the book running lead managers/ promoters/promoter

group can apply under Anchor Investor category

• If the price fixed for the public issue through book building process is higher

than the price at which the allocation is made to Anchor Investors, the

additional amount shall be paid by the Anchor Investors

• If the price fixed for public issue is lower than the price at which the

allocation is made to Anchor Investors, difference shall not be payable to the

Anchor Investors

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Key IntermediariesIntermediaries Role Timing

Legal Counsels • Participation in due diligence & drafting

• Advisory on Indian legal/ regulatory issues

• Provision of legal opinion

• Participation in due diligence & drafting

• Advisory on Indian legal/ regulatory issues

• Provision of legal opinion

Immediately upon decision to go ahead with

the IPO

Registrar (RTA) • Co-ordination with the Issuer and Bankers

regarding

• collections, reconciliation, refunds etc

• Post issue co-ordination, collation and

reconciliation of information

2-3 weeks prior to filing DRHP with SEBI

IPO Grading Agency • Issuer is required to appoint one IPO Grader

to assign an IPO grade

• Disclose the grades obtained, along with the

rationale in the Red Herring Prospectus

Around the time of filing DRHP with

SEBI

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Intermediaries Role Timing

Advertising/PR agency • Assist the company and BRLM on formulation

and execution of the Media and PR Strategy

• Organizing the Road Shows

• Ensure adequate coverage of IPO & positive

news flow

2-3 weeks prior to filing DRHP with SEBI

Bankers to the Issue • Collection of funds raised in the IPO.

• Issue provisional and final certificates to aid

in the post issue process

• Issue of Refund cheques

1-2 weeks prior to filing RHP with SEBI

Printers • Bulk printing of the Red herring Prospectus

and final Prospectus

• Printing of share application forms

• Ensure timely dispatch & distribution of

stationery

Prior to filing DRHP with SEBI

Key Intermediaries

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Role of Auditors

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Major Activities & Timeline

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Critical Activities

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Critical Activities …cont.

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Major Steps in IPO

Kick Off Meeting

Due Diligence and Documentation

Filing with SEBI and SE

Pre-IPO Structuring

Pre-MarketingSEBI

Approval &RoC Filing

Roadshows & Price Band Discovery

RoC filing of finalProspectus

Book building and Pricing

Closing andAllotment

Listing and trading

Marketing Phase of Issue

Preparatory Phase of

Issue

Final Phase

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Critical Timeline in IPO

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