IPO rules may change
Do you also want to take your company public and list it on the stock exchange? Do you want to raise money by launching an IPO? Is the process of launching an IPO in India that easy? All these questions may also arise in your mind when you hear that a company with just 8 permanent employees has received bids worth Rs 4,800 crore for its Rs 12 crore IPO i.e. directly 400 times the subscription. Just a few days after this IPO, SEBI is also talking about tightening the IPO process for small companies.
Profit of only 1.5 crore and the offer received 4.8 billion rupees
Here we are talking about the recent IPO of Resourceful Automobile which was worth just Rs 11.99 crore. But in total it has been subscribed 400 times. What was surprising was that the bids from the retail sector in the IPO of this company were 500 times higher. Thus the company got bids worth Rs 4,800 crore in IPU while the profit of the company itself is just Rs 1.52 crore.
The most interesting thing about this company is that it has only 2 Yamaha showrooms in Delhi named ‘Sahni Automobile’ and the number of permanent employees of the company is only 8. In such a situation, the IPO of such a small and highly subscribed company becomes a matter of concern for the regulators. Therefore, now the rules for launching IPOs of small enterprises (SME) may become stricter, market regulator SEBI has said.
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Getting SMEs to go public will not be easy
Ashwini Bhatia, a permanent member of market regulator Securities and Exchange Board of India (SEBI), said at the recently concluded Global Fintech Fest that SEBI will further tighten rules monitoring SME IPOs in the coming days. Her statement is significant because just a few days earlier, SEBI had warned common investors about misleading business projections by many small and medium enterprises (SMEs).
Ashwini Bhatia said SEBI may publish a consultation paper on this issue later this year. These changes may include better monitoring and stricter scrutiny of audit reports of companies. She said if the country’s Chartered Accountants (CAs) do their job diligently, many problems can be avoided.
Is it easy to launch an IPO now?
There is a detailed process for launching an IPO in India. A company launching an initial public offering (IPO) must appoint at least one merchant banker. For large-sized IPOs, the company can appoint more than one merchant banker. The merchant banker decides the valuation of the company and based on that, decides the size and price range of the IPO shares.
As a part of the IPO process, the company prepares a comprehensive draft, which contains detailed information related to the company and the use of the money received from the IPO, etc. SEBI investigates it thoroughly and then, on the basis of this, approves the company to launch an Initial Public Offering (IPO).
As part of the fundraising process through IPO, the company first tries to raise some money from anchor investors. After that, the company’s initial public offering is open to the general public. In order to get listed on the stock market after the IPO, the company’s IPO size must be at least Rs 10 crore.
