Procedure for Initial Public Offer on Main Board

CS Debolina Karmakar

CS Debolina Karmakar

Published on: Jun 10, 2025

Khushboo Sharma

Updated on: Jun 10, 2025

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Introduction:

An Initial Public Offering (IPO) is a pathway to raise funds by transforming a privately held entity to a publicly traded one. This process involves offering shares to the general public for the first time, allowing the company to raise capital from investor in exchange for equity. When a company decides to go public through an IPO, it must prepare and file a detailed offer document with the Securities and Exchange Board of India (SEBI), Stock exchanges in India, such as the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE), which plays a pivotal role in the listing process. These exchanges, equipped with nationwide trading terminals, evaluate the company’s compliance with regulatory requirements and grant the necessary approval for listing its shares.

A private company has to convert its status to unlisted public company prior to filing of offer documents with SEBI. However, the transition also comes with regulatory responsibilities, increased scrutiny, Understanding the advantages and challenges of an IPO is crucial for any company considering this transformative step marks a significant milestone in a company’s journey.

Conditions prohibiting public offer:

1. If Issuer/promoters/directors/selling shareholders are debarred by SEBI from accessing capital markets
2. If any of such promoters or directors are involved in other SEBI debarred company
3. If the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower or a fugitive economic offender
4. Presence of any outstanding convertible securities or any other rights to receive equity shares of the issue.

Intermediaries involved in the IPO:

Applicable Provisions:

1. Section 23, 26, 32, 39, 40, 62, 96, 100, 173 of Companies Act, 2013
2. Rule 12 of Companies (Prospectus and Allotment of Securities) Rules, 2014
3. Regulation 5, 6, 7, 8, 14, 16, 17, 23, 25, 26, 29, 32, 34, 35, 39, 40, 42, 43, 44, 45, 46, 47, 49, 50, 51, 54, 55 of SEBI (ICDR) Regulations, 2018

Mandatory Requirements:

1. Issuer Company intending to make public offer shall have:
   • Net tangible assets ≥ Rs. 3 crore in each of the last 3 full years (consolidated & restated), with ≤ 50% in monetary assets
   • Average operating profit ≥ Rs. 15 crore over the last 3 full years, with profit in each year (restated & consolidated basis)
   • Net worth ≥ Rs. 1 crore in each of the last 3 full years (restated & consolidated basis)
   • If name changed in last 1 year, then ≥ 50% of revenue (restated & consolidated) in that year must be from activity linked to new name
   • All its specified securities held by the promoters are in dematerialised form prior to filing of the offer document
   • All its existing partly paid-up equity shares have either been fully paid-up or have been forfeited
   • Only fully paid-up equity shares held by sellers for at least 1 year before filing draft offer document are eligible for sale.
2. Have verifiable firm financial arrangements for ≥ 75% of project funding, excluding proposed issue and identifiable internal accruals.
3. Allocation for:
   • General corporate purposes ≤ 25% of total issue proceeds (as per draft and final offer documents)
   • General corporate purposes and unspecified acquisition/investment targets ≤ 35% of total funds raised (per draft & final offer documents).
4. Promoters shall hold at least 20% of the post-issue capital.
5. Minimum Promoters’ Contribution (MPC) Locked-in for 18 months from allotment date and Promoters’ holding beyond the Minimum Contribution Locked-in, is for 6 months from allotment date.
6. Entire pre-issue non-promoter shareholding locked-in for 6 months from IPO allotment date.

Procedure:

1. Convene a Meeting of Board of Directors:
   Company shall convene a Meeting of its Board of Directors to pass a Board resolution for the following:
   • To consider and approve the public offer subject to Members’ Approval of the Company
   • To consider conversion into a public company (Applicable, in case of Private limited company)/ in-principal approval for going public, including that of alterations in articles of association (AoA) and memorandum of association (MoA), if required.
   • To delegate authority to Company Secretary or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to issue such public offer.
   [Please refer to the Procedure for Conducting Board Meeting for further details.]
2. Convene General Meeting:
   Company shall pass special resolution for bringing public offer, in a duly convened meeting of its members.
   [Please Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
3. File Form MGT-14 with ROC:
   Company shall file a copy of Board Resolution and Special Resolution passed in its duly convened Board meeting and General meeting in Form MGT-14 within 30 days of passing such resolution along with the requisite documents and fees, with the Registrar of Companies (ROC).
4. Appointment of Lead Managers, Other Intermediaries and Compliance Officers:
   Issuing company shall make following appointments for the purposes of bringing Initial Public Offer (IPO):
   • One or more Merchant Bankers which are registered with the Board as lead manager(s) to the issue
   • Other SEBI-registered intermediaries may be appointed after lead manager independently assesses their capability to fulfil obligations
   • Syndicate member(s) (In case of IPO) and bankers to issue (In case of any other issue)
   • Registrar to the issue which is registered with the Board, and has connectivity with all the depositories
   • Qualified Company Secretary appointed as Compliance Officer.
5. Enter into Agreement with Intermediaries:
   • Issuing Company shall enter into agreement with:
     • Depository for dematerialization of the specified securities already issued and proposed to be issued
     • Lead manager(s) in the format specified in Schedule II and with other intermediaries as required under the respective regulations applicable to the intermediary concerned
   • Issuing company shall enter into an underwriting agreement with the lead manager(s) and syndicate manager(s), prior to the filing of prospectus.
6. Filing of Draft Offer Document:
   
   • Submission to SEBI:
     • File 3 copies of the draft offer document through the lead manager(s), along with the applicable fees as specified in Schedule III (Fees to be Paid) of the ICDR Regulations.
     • These documents should also be furnished in soft copy as well.
   • Submission to Stock Exchanges:
     • File draft offer document with the stock exchange(s) where the specified securities are proposed to be listed, along with Permanent Account Number (PAN), bank account number, and passport number of its promoters if they are individuals.
     • If the promoter is a body corporate, the company must provide PAN, bank account number, company registration number or equivalent, and address of the ROC with which such promoter company is registered.
7. Public Availability and Communication of Draft Offer Document:
   • Public Comments on Draft Offer Document:
     Make the draft offer document filed with SEBI available for public comments for a period of at least 21 days from the filing date, which can be achieved by hosting the document on the websites of:
     • SEBI
     • Stock exchanges where the specified securities are proposed to be listed
     • Lead manager(s) associated with the issue.
   • Public Announcement
     Within 2 days of filing the draft offer document with SEBI, the issuing company must make a public announcement in:
     • One English national daily newspaper with wide circulation
     • One Hindi national daily newspaper with wide circulation
     disclosing the fact of filing the draft offer document with SEBI and inviting the public to provide their comments to SEBI, such issuer, or the lead manager(s) regarding the disclosures made in the draft offer document.
8. Filing Updated Draft Offer Document:
   • After considering public comments and incorporating necessary changes, the issuing company must file an updated draft offer document with SEBI through the lead manager(s), highlighting all changes made, before filing the offer document with the Registrar of Companies (ROC).
   • Such updated draft offer document should also be filed with the stock exchanges.
9. File Red Herring Prospectus with ROC:
   File the red herring prospectus in Form GNL-2 with the Registrar, at least 3 days prior to the opening of the subscription list and the offer.
   Note:
   • Any variation between the red herring prospectus and the final prospectus shall be highlighted as variations in the prospectus.
   • Price may be determined at a later date before filing the prospectus with the ROC, wherein:
     • Issue price or a price band must be mentioned in the offer document (In case of Fixed Price Issue)
     • Floor price or a price band must be mentioned in the red herring prospectus (In case of Book Built Issue). If the floor price or price band is not disclosed in the red herring prospectus, then the issuing company must announce it at least 2 working days prior to the opening of issue, in the same newspapers in which the pre-issue advertisement was released or together with such pre-issue advertisement.
10. Filing of Offer Document with SEBI and Stock Exchanges:
    • File a copy of the final offer document with SEBI and the stock exchange(s) through the lead manager(s), after filing the offer document with the ROC.
    • In case of any change(s) in the final offer document concerning matters specified in Schedule XVI of the ICDR Regulations, an updated offer document must be filed with SEBI along with the applicable fees as specified in Schedule III.
11. Obtain In-Principal Listing Approval from the Stock Exchanges:
    Company shall make an application to one or more stock exchanges for the listing of its specified securities on such stock exchanges, to obtain in-principal approval and choose one of them as the designated stock exchange.
12. Allocation and Allotment of Securities:
    
    • Minimum Offer to Public:
      For an IPO, at least 25% of each class or kind of equity shares or debentures convertible into equity shares issued by the company must be offered and allotted to the public in terms of the offer document.
    • Opening of the Issue:
      Issue must be opened within 12 months from the date of issuance of observations by SEBI and/or be opened after at least 3 working days from the date of filing the prospectus with the ROC. Issue shall not be open for more than 10 working days.
    • Application Process:
      Every application form related to the issue must be accompanied by a copy of the abridged prospectus and bids should be accepted only using the Application Supported by Blocked Amount (ASBA) facility.
    • Allocation of Securities:
      Allocation in the issue shall be as follows:
      • At least 35% to retail individual investors
      • At least 15% to non-institutional investors
      • Remaining 50% to qualified institutional buyers, with at least 5% of this portion allocated to mutual funds.
    • Other Requirements:
      • Obtain grading for the IPO from one or more CRA registered with SEBI.
      • Abstain from releasing any advertisement that gives an impression that the issue has been fully subscribed or oversubscribed or indicating investor’s response to the issue.
      • Ensure that the specified securities are allotted and/or application monies are refunded or unblocked within the timelines specified by SEBI.
      • Report transactions in securities by promoters and promoter group during the period between the filing date of the draft offer document or offer document and the closure date of the issue, to the stock exchange(s) within 24 hours of such transactions.
      • Any proposed pre-IPO placement disclosed in the draft offer document must be reported to the stock exchange(s), within 24 hours of such pre-IPO transactions (in part or in entirety).
      Note: If the issue is made through book building process, allocation shall be as under:
      1. At least 10% to retail individual investors
      2. At least 15% to non-institutional investors
      3. At least 75% to qualified institutional buyers, with at least 5% of this portion allocated to mutual funds.
13. Obtain Listing and Trading Approval from Stock Exchange:
    Issuer shall obtain listing and trading approval from stock exchanges and commence trading of the securities (mandatory listing within 3 days of issue closure date).
14. Filing Form PAS-3 with the Registrar:
    File return of allotment in Form PAS-3, within 30 days of passing of the resolution for allotment of shares with following attachments:
    • Copy of special resolution passed in the general meeting of the company
    • Copy of Board Resolution for Allotment of Shares
    • List of Allottees stating their names, addresses, occupation and number securities allotted to each of allottees
    • Valuation Report of Registered Valuer
    • PAS-5 (Record of allottees) within 15 days from the date of allotment
    • Any other mandatory attachment if necessary.
15. Filing of the Form CRF with the respective ROC:
    Issuer shall file Form CRF with the respective ROC, for change of the CIN number of the company from “U” to “L”.
16. Post Issue Compliances:
    • Post-Issue Advertisements:
      • Lead manager(s) must ensure that an advertisement is released within 10 days from the completion of various activities, providing details such as:
        • Subscription details
        • Basis of allotment
        • Number, value, and percentage of all applications, including ASBA
        • Number, value, and percentage of successful allottees
        • Date of completion of dispatch of refund orders or instructions to self-certified syndicate banks by the registrar
        • Date of credit of specified securities
        • Date of filing of listing application
      • This advertisement must be published in:
        • At least one English national daily newspaper with wide circulation
        • At least one Hindi national daily newspaper with wide circulation
        • At least one regional language daily newspaper with wide circulation at the place where the registered office of the issuer is situated
        • Additionally, the details specified above must also be placed on the websites of the stock exchange(s).
    • Final Post-Issue Report:
      Lead manager(s) must submit a final post-issue report in the format specified in Part A of Schedule XVII (Formats of Post Issue Reports) of the ICDR Regulations, including a due diligence certificate as per Form F of Schedule V(Formats of Due Diligence Certificates), within:
      • Seven days of the finalization of the basis of allotment or
      • Seven days of refund of money in case of failure of the issue
    • Continuous Disclosure Requirements:
      Issuing company must comply with continuous disclosure requirements as specified by SEBI, which includes reporting any material developments or changes that may affect the investors’ decision-making process, and also, ensure that all information disclosed is accurate, timely, and in accordance with SEBI’s guidelines.

Abbreviation used:

1. IPO – Initial Public Offering
2. SEBI – Securities and Exchange Board of India
3. NSDL – National Securities and Depositories Limited
4. CDSL – Central Depository Securities Limited
5. ROC – Registrar of Companies
6. BRLM – Book Running Lead Managers
7. CIN – Corporate Identification Number
8. ICDR Regulations – Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018
9. BSE – BSE Limited
10. NSE – National Stock Exchange of India Limited
11. CRA – Credit Rating Agency
12. AoA – Articles of Association
13. MoA – Memorandum of Association