Main Board IPO Listing

Appointment of Lead Merchant Banker

The company appoints one or more SEBI-registered merchant bankers (Lead Managers) to guide the entire IPO process. They handle due diligence, documentation, regulatory compliance, underwriting, and coordination with all stakeholders. For large IPOs, multiple lead managers are commonly appointed.

Draft Red Herring Prospectus (DRHP) Submission to SEBI

The company prepares a DRHP containing detailed financials, business overview, risk factors, and management details. SEBI reviews this document for compliance, which usually takes 2–4 months. (Note: SME IPOs require stock exchange approval but not SEBI approval.)

Submission of IPO Application to Stock Exchanges

The approved DRHP and IPO application are submitted to the stock exchanges for in-principle approval. The exchange verifies the application and grants conditional clearance to proceed.

IPO Pricing Method Determination

The issuer and merchant bankers decide the pricing mechanism:

• Fixed Price Issue: Price is pre-determined and disclosed to investors.

• Book-Building Issue: Investors bid within a price range, and final pricing is based on demand and bids.

Red Herring Prospectus (RHP) Filing

The RHP is an updated version of the DRHP, including the latest financial data and IPO details, helping investors make informed decisions.

IPO Roadshows and Investor Outreach

Merchant bankers, along with PR and advertising agencies, conduct roadshows and investor presentations across cities. Meetings are arranged with journalists, analysts, and other stakeholders to promote the IPO.

Anchor Investor Allocation

The IPO is first offered to anchor investors (institutional buyers investing at least Rs.10 crore), who receive shares one day before the public subscription opens.

Public Subscription

The IPO opens for public investors for 3–10 days. Investors submit applications via brokers or banks and receive a unique IPO application number. Shares are allocated through a lottery or pro-rata system if applications exceed available shares.

Share Allotment and Fund Transfer

Once the subscription closes, the IPO registrar allocates shares, verifies accounts, rejects invalid applications, debits investor accounts, and credits shares to demat accounts.

Listing Date Announcement

The company submits listing documents to the exchange. Upon confirmation from the depository, the exchange issues a listing circular containing share codes, ISIN, and final price.

Commencement of Trading

Trading begins with a pre-open session (9:00–9:45 AM) for price discovery. Orders are matched from 9:45–9:55 AM, and normal trading starts at 10:00 AM.

Post-Listing Compliance

After listing, the company must submit annual reports, board meeting invitations, audit reports, corporate governance reports, and shareholding statements to the exchange to maintain transparency and regulatory compliance.

For established firms seeking to grow and solidify their market position, listing on the Main Board is a preferable alternative due to the many strategic and financial advantages it provides.

Access to a Lot of Money

Companies may generate significant cash from a large pool of investors, including retail and institutional participants, through a Main Board IPO. The money raised might be put to good use for things like business expansion, new product development, acquisitions, debt repayment, and working capital needs. This access to substantial capital is frequently out of the reach of private placements or SME IPOs, enabling businesses to concentrate on long-term development goals.

Improved Market Credibility and Visibility

Listing a company on the Main Board dramatically increases its market exposure. It improves brand awareness, strengthens investor trust, and demonstrates the company's adherence to high standards of corporate governance and strict SEBI rules. In addition to drawing in possible investors, this transparency fosters stronger connections with clients, suppliers, and business partners.

Shareholder liquidity

Main Board-listed shares are freely tradable in the secondary market, giving liquidity to initial investors, promoters, and employees. Shareholders are able to profit from their investments because of this liquidity, and investors have greater faith in the business.

Bringing in Institutional Investors

Because of a company's established financial track record and operational stability, Main Board IPOs frequently draw mutual funds, insurance firms, foreign institutional investors (FIIs), and other big investors. Such investor participation improves market trustworthiness and has the potential to moderate stock price behaviour after listing.

Employee Retention and Incentives

Businesses with a listing are able to provide Employee Stock Options (ESOPs), which are a valuable means of keeping and inspiring staff. Giving employees equity participation promotes loyalty and productivity by aligning their interests with the company's long-term success.

Opportunities for Strategic Acquisitions

Shares from a Main Board IPO can be used as a currency for mergers and acquisitions, allowing the business to grow by making wise investments. Because of this flexibility, firms may expand quickly without depending only on cash resources.

Growth and a Long-Term Presence in the Market

By listing on the Main Board, the firm is established in the public equity market, giving it ongoing access to funding and the chance to raise more money in the future. Additionally, it helps firms establish a reputation for transparency and reliability in the public eye, which can be advantageous for partnerships, credit ratings, and investor relations.

Not all businesses are eligible to list on the Main Board. This platform is designed for well-known, financially stable companies that adhere to stringent standards of transparency, accountability, and governance. SEBI, in collaboration with stock exchanges such as the NSE and BSE, has defined clear eligibility criteria to protect investors and ensure only credible companies raise capital.

Minimum Post-Issue Paid-Up Capital

Following the IPO, the company must have a paid-up equity capital of at least Rs.10 crore. This ensures that only companies with significant size and operational capability can access the Main Board.

Net Worth Requirement

The company must have a minimum net worth of Rs.3 crore over the last three fiscal years. Net worth includes share capital and reserves, excluding revaluation reserves, filtering out companies with weak financial foundations.

Profitability History

Companies should have reported after-tax profits (PAT) in at least three of the last five years, including the most recent fiscal year. A consistent profit history reassures investors of the company’s long-term financial stability and viability.

Promoter’s Share and Commitment

Promoters must retain at least 20% of the post-issue capital for a specified lock-in period. This demonstrates long-term promoter commitment and prevents immediate exit post-listing.

No Defaults in Loan or Interest Payments

Companies must have a clean financial record, with no defaults on loans, interest payments, or other obligations to banks, financial institutions, or debenture holders. This reflects a high level of financial discipline and credibility.

Corporate Governance Standards

Companies must comply with corporate governance regulations, including the appointment of independent directors, audit committees, and proper disclosures. This ensures that the company operates ethically, responsibly, and transparently.

No Pending Legal or Regulatory Concerns

Businesses with pending winding-up petitions, fraud cases, or major regulatory breaches are ineligible. This protects investors from volatile or risky enterprises.

Minimum Public Shareholding Requirement

Post-IPO, companies must maintain minimum public shareholding, usually 25%, to ensure sufficient liquidity and market participation.

Adequate Shareholder Base and Distributable Capital

The company must have enough shareholders after listing to support steady trading volumes and market liquidity, enabling smooth trading of its shares.

Dividend History and Business Track Record

Companies should have a minimum three-year continuous business track record and, ideally, a history of paying dividends in at least two of the last three fiscal years. This indicates financial stability, operational consistency, and shareholder-friendly practices.

Meeting these eligibility criteria assures investors of the company’s financial strength, operational stability, credibility, and readiness to operate under public scrutiny. Companies that do not meet these standards may first explore SME IPOs or alternative funding options before attempting a Main Board IPO

While Main Board IPOs offer significant opportunities for established companies, they also come with several challenges and potential disadvantages that companies and investors need to carefully consider.

Stringent Regulatory Requirements

Companies aiming for a Main Board IPO must comply with extensive SEBI regulations. This includes detailed financial disclosures, corporate governance norms, risk management reporting, and adherence to transparency standards. Preparing the required documents such as the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) involves multiple audits, approvals, and revisions. The regulatory process is time-consuming, often taking several months, which can delay fundraising and strategic business plans.

High Costs Included

The IPO procedure is costly. Companies pay for merchant bankers, attorneys, auditors, SEBI filing expenses, underwriting costs, and marketing initiatives, such as roadshows. These expenses can be a significant financial strain for small and medium-sized enterprises, lowering the net capital raised and impacting near-term profitability.

Risks related to pricing and market volatility

The price of a listed share is determined by market fluctuations. Due to broader market mood, economic circumstances, or industry-specific variables, even firms with solid fundamentals may experience a fall in their stock value. The IPO might also result in under pricing or overpricing, which might have an impact on the market and cause investors to gain or lose money right away. the company's standing in the capital market.

Founders' Loss of Control

A dilution of ownership is an unavoidable consequence of going public. As public shareholders gain voting rights, founders and early advocates may cede some of their authority over decision-making. Furthermore, regulators, investors, analysts, and the media subject public companies to greater scrutiny, which may limit operational flexibility and affect strategic choices.

Overuse and Fierce Competition

Main Board IPOs are frequently oversubscribed, particularly for well-known or well-liked businesses, meaning that there are far more requests for shares than there are available. This causes uncertainty for retail investors about allocation, which may result in some investors receiving partial or no allocation. Businesses can also encounter fierce rivalry for attention in the market, necessitating increased marketing and investor interaction initiatives.

The possibility of overvaluation

The value of a company may be overestimated during the IPO process as a result of excessive market enthusiasm or optimistic forecasts. Excessive pricing can cause price corrections after listing, which can harm the company's reputation and cost investor’s money. This may also have an impact on investor confidence over the long run, making it harder to raise money in the future.

Ongoing Reporting and Compliance Requirements

Following listing, businesses are required to adhere to rigorous continuous compliance, which includes providing quarterly and yearly financial reports, board meeting disclosures, changes to corporate governance, and investor communication. Noncompliance may lead to regulatory actions or penalties, as well as higher expenses and more administrative labour.

In order to guarantee adherence to SEBI and stock exchange regulations, a successful Main Board IPO needs careful planning and submission of several legal, financial, and regulatory papers. Accurate documentation increases investor trust as well as makes it easier to get approvals.

Draft Red Herring Prospectus (DRHP)

The first document given to SEBI for assessment is the DRHP. It covers the company profile, financial statements, business model, risk considerations, management profile, and IPO goals. SEBI can assess the company's eligibility for a public listing using the DRHP. It could take two to four months for SEBI to approve, during which time changes and clarifications might be necessary.

Red Herring Prospectus (RHP)

The DRHP, which has been submitted to stock exchanges after review and recommendations for changes from SEBI, has been updated into the RHP. It includes the most up-to-date financial information, the IPO schedule, pricing information, and the size of the offer. The goal of this document is to educate prospective investors and aid them in making financial choices.

Submission of an application for listing on stock exchanges

The IPO application, along with the RHP, is submitted to the stock exchanges by the company and its merchant banker. After confirming adherence to listing standards, exchanges provide a preliminary assessment and in-principle approval.

The selection of registrars and merchant bankers

The IPO process, which includes due diligence, document preparation, and regulatory filings, is managed by lead managers or merchant bankers. The application process, allocation, investor correspondence, and dematerialization of shares for an IPO are all managed by registrars and transfer agents.

Legal and Auditor Certifications

The firm must show that it is financially sound and compliant with all legal obligations by providing certified financial statements and legal opinions. Balance sheets, profit and loss statements, and net worth estimations are all confirmed by auditors. Lawyers offer certifications regarding a company's regulatory compliance, litigation situation, and organizational structure.

Approvals and Submissions to SEBI

All submitted papers are reviewed by SEBI, and they may ask for more information. Businesses must submit thorough risk disclosures, corporate governance reports, and compliance certificates. The IPO can only proceed once SEBI has granted its approval or no-objection.

Submitting to Depositories and the Registrar of Companies (ROC)

Depositories such as CDSL or NSDL connect shares to demat accounts. After the IPO, the legal listing procedure must be completed by submitting the necessary paperwork to the ROC and stock exchanges.

Marketing and Disclosure Materials

To create market interest, businesses create investor presentations, roadshow materials, and advertisements. All materials must comply with SEBI's disclosure requirements in order to prevent investor confusion.

Submissions Made Following the Listing

The firm must continue to submit quarterly and yearly financial statements, board resolutions, shareholding patterns, corporate governance reports, and compliance certificates following listing. Keeping correct post-listing data maintains investor confidence and continuous regulatory compliance.

In a Main Board IPO, the allocation and pricing of shares are critical processes that have a direct impact on investor interest and the issue's success. The price of shares in an IPO is determined using two main approaches made available by SEBI, which are then followed by a fair allocation procedure to investors.

Approach with a set price

The business, in collaboration with its merchant bank, establishes a set price for shares offered to investors in the fixed price matter. The Red Herring Prospectus (RHP) reveals the issue price in advance. Before submitting an application, investors are aware of the precise cost. Although this approach is straightforward, a high price might discourage investor engagement and price discovery.

The Book Construction Technique

The firm sets a price range during the book construction procedure (for example, Rs.80 to Rs.90 per share) within which investors may make offers. The prices offered by retail, institutional, and non-institutional investors fall within this range. The cut-off price, which is the last price, is calculated on demand after the bidding period ends. In India, this approach is far more popular since it facilitates price discovery and draws a wider investor base.

The Part Played by Anchor Investors

Prior to the IPO being available to the general public, firms can allocate shares to anchor investors, which are qualified institutional purchasers (QIBs) who invest at least 10 crore rupees. Institutional support frequently encourages retail participation, which increases credibility and confidence due to anchor investment.

Once the bidding process is complete, the IPO registrar collects all applications and validates information with banks and depositories.

Allotment occurs in one of two ways:

• On a pro-rata basis (proportional distribution based on demand), or

• If demand exceeds the number of shares available by a large margin, a lottery mechanism will be used.

Retail investors are frequently allocated only a portion of an oversubscribed offering.

Reimbursement and Share Transfer

Excess money is returned to investors for applications that are just partially allotted or unsuccessful. Shares are deposited into the investor's demat account for successful applications. With this method, shares are distributed fairly and openly.

Pricing and Listing on Exchanges

Shares are listed on the BSE and/or NSE on the specified listing date after they have been allocated. The opening price of the IPO is determined by aggregated buy/sell orders in a pre-open session on the day of the listing. Following that, trading resumes as usual, giving investors the freedom to buy and sell stocks.

The Main Board IPO is regarded as the best way for businesses to raise money in the capital markets. In contrast to SME IPOs or private placements, it enables companies to reach a wide investor base and establish nationwide credibility. Both the businesses that issue the IPO and the investors who participate in it gain from it.

Access to Significant Capital for Development

The capacity to generate significant sums of money is one of the key benefits of a Main Board IPO. This capital may be used for a variety of purposes, including funding purchases, paying off outstanding debt, investing in technology, establishing new production facilities, or expanding into new markets. For many businesses, such finance is not readily available through conventional loans, and IPO proceeds offer a less expensive, equity-based alternative.

Enhanced market visibility and corporate image

Businesses that list on well-known stock exchanges, such as the BSE or NSE, immediately gain exposure and improve their brand image. Listed companies are seen by investors, clients, and business partners as more trustworthy and open because of the stringent disclosure and regulatory requirements that they must adhere to. This trustworthiness frequently results in improved business alliances, more solid vendor connections, and increased client trust.

Exit options and liquidity for shareholders

A firm's shares become freely tradable on the stock market after an IPO listing, increasing liquidity. This gives current stockholders, such as venture capitalists, early investors, and promoters, the option to sell their shares in part or in full as necessary. Additionally, workers with stock options benefit from liquidity since they can turn their shares into cash, which aligns their interests with the company's success.

A larger and more varied investor base

Retail investors, high-net-worth individuals (HNIs), institutional investors (mutual funds, insurance companies, pension funds), and other groups of investors are drawn to a Main Board IPO. foreign portfolio investors (FPIs), and investors. In addition to diversifying the ownership structure, this also lessens reliance on a single funding source, which increases the financial stability of the firm.

Reduced Capital Expenses in Relation to Debt

Raising capital through equity lessens the need for borrowing from banks and financial firms, which often carries significant interest rates. The debt-to-equity ratio is enhanced by the equity financing provided by IPO proceeds, which also reduces the total cost of capital. A more robust balance sheet can also assist businesses in raising funds in the future, whether via qualified institutional placements (QIPs) or follow-on public offerings (FPOs).

Increased Transparency and Improved Corporate Governance

In order to be listed on the Main Board, businesses must adhere to SEBI's corporate governance requirements, which include routine audits, open disclosures, and the selection of independent directors. This is a compliance requirement, but it also improves the company's reputation as an ethical, well-run, and investor-friendly business, which increases investor interest.

Benefits for Employees and Promoters

The company's move to a publicly listed entity improves the reputation and visibility of its promoters. Furthermore, Employee Stock Ownership Plans (ESOPs) are frequently used to incentivize employees by giving them a stake in the company's success. This fosters a sense of ownership, allegiance, and dedication among staff members.

Investment Prospects

Main Board IPOs give investors the chance to put money into well-known companies with a history of success. Main Board IPOs typically originate from firms with a history of profitability, good governance, and operational stability, in contrast to the riskier SME IPOs. If the company continues to expand, investors may gain from the listing gains in the short term as well as from long-term capital appreciation.

Enhancing Future Fundraising Capacity

Once a company is listed, it has easier access to future funding options like rights offerings, preferential distributions, and qualified institutional placements. A listed firm with a proven track record can access the market several times, which improves its financial position.