Overview

 

• The IPO process begins with the filing of the Draft Red Herring Prospectus (DRHP).

• Ends with the listing of the stock on the stock exchanges.

• Major steps include: determining issue size, setting a price band, marketing the issue, pricing, and allotment.

Laying the Groundwork

• Appoint Book Running Lead Managers (BRLMs)—typically investment banks.

• BRLMs handle DRHP filing, coordination with SEBI, and strategic planning.

• After DRHP approval, planning begins: pricing strategy, investor outreach, and marketing.

5 Key Steps in the IPO Process

1. Filing the DRHP

• Company files the Draft Red Herring Prospectus with SEBI.

• After SEBI’s approval, BRLMs move ahead with:

  • Printing forms

  • Planning marketing campaigns

  • Gauging investor interest

2. Marketing the IPO

• Tailored outreach for:

  • HNIs & Institutions: through roadshows in cities like New York, London, Singapore

  • Retail Investors: via broker networks, media, and ads

• Purpose: create demand and visibility across investor segments.

3. Pricing the Issue

• IPO price range is set after demand assessment.

• A balance is struck:

  • Attract investor interest

  • Leave some upside for listing gains

4. Price Discovery

• Happens while the issue is open for subscription.

• BRLMs monitor demand and work to build oversubscription.

• Final price is discovered based on investor bids—often at the upper end of the price band.

5. Listing the Stock

• Listing is marked by the bell-ringing ceremony on the exchange.

• Once listed, the stock begins trading in the secondary market.

• Post-listing performance affects the reputation of the company and BRLMs.

3 Silent but Critical Players in an IPO

1. Marketing Network

• Includes brokers, sub-brokers, agents, and distributors.

• Operate on commission but are essential to build retail investor demand.

2. Registrar & Transfer Agent (RTA)

• Examples: Karvy, In-Time.

• Roles include:

  • Allotment of shares

  • Transferring shares to investor DP accounts

  • Generating MIS reports for the company and BRLMs

3. Company Secretary

• Ensures legal compliance and manages regulatory documentation.

• Prevents future issues with SEBI or stock exchanges.