After deciding to issue an IPO, the firm must take several steps to ensure a successful launch. Prioritizing this objective, it is essential to hire a merchant banker. Also known as Book Running Lead Managers (BRLM) or Lead Managers (LM), their primary function is to guide the organization through the multiple facets of the IPO such as:
IPO sequence of events
The Securities and Exchange Board of India (SEBI) provides a clear framework for executing an Initial Public Offering (IPO). The steps should follow accordingly to ensure the successful completion of the offering. Generally, the sequence is like this:
– Appoint a merchant banker, or for large public issues, multiple may be necessary.
– Submit a registration statement to SEBI with information pertaining to the business’s nature, its IPO’s purposes, and all relevant financial data.
– Once SEBI has obtained the registration statement, it decides whether to grant approval for the IPO or not.
– If the company receives the first approval from SEBI, it must compile a DRHP document. This document needs to be disseminated to the public and includes numerous details, such as:
– Market the IPO- One can go with TV and print advertising to create recognition of the business and its public offering. This procedure is also referred to as the IPO roadshow.
– Set a reasonable price range – Carefully consider the appropriate cost of the Initial Public Offering (IPO) so that both the company and potential investors benefit. An unrealistic asking rate will put off purchasers, so it is important to establish a sensible rate.
– Book Building- Once the roadshow is over and the price band is set, collecting all price points along with various quantities begins, known as Book Building.
This process has been seen as an effective way of determining the appropriate price for an IPO. Investors can then choose the price they feel best suits them within this range.
– Closure- Once the book building window is shut (normally open for a few days), the price point at which the issue is listed can be determined. It usually corresponds to where the greatest number of bids have been placed.
– Listing Day- On Listing Day, the company’s stock is made available on the stock exchange. The listing cost is determined according to market forces of supply and demand, signifying whether the security will be listed at a premium, par, or discount to its cut-off rate.