The process of IPO begins with the filling of the Draft Red Herring process and ends with the listing of the stocks on the stock exchanges. In between, it goes through IPO pricing, determination of the issue size, determination of the price band and the actual price management and marketing of the upcoming IPO issue. By the end of the process, the bell ringing ceremony is done along with the listing and trading of the stock. You need to have an online share trading account to buy any IPO.
Getting groundwork done for IPO
The work begins with identifying the investment bankers. They serve as a Book Running Lead Managers (BRLM) that begin the process of filling DRHP. One of the DRHP is approved by SEBI the planning of the issue in terms of pricing and demand estimation, marketing is worked out. Once this is done, the company is ready to issue an IPO.
5 key steps involved in an IPO
Filling the DRHP
The first step is to file the DRHP and get it approved by SEBI. Once SEBI approves of it, the BRLMs of the company start doing their job about printing form, publicity of the issue, IPO price gauging, marketing, and other work.
Marketing the issue:
The second and most important step in the procedure is marketing. The issue has to be marketed separately to the HNIs and the institutions. Retail has to be approached through broking networks and media campaigns.
Pricing of the IPO
Once the demand for the forthcoming IPO is gauged the company and the BRLMs get down on deciding how to price the IPO. There are two types of pricing methods, the most common of which is the IPO price range to get a trade-off between the best price and as per the demands of investors. Here they also leave some returns for the investors all to make it a profitable investment for them on the listing.
Now we have entered the fourth stage, where the issue opens. The demand patterns of the IPO are monitored regularly and the company along with the BRLMs make sure the networks are active to push the issue towards a higher level of oversubscription. Once the final price is discovered, the basis of allotment is finalized in consultation with the stock exchanges.
Listing of the issue
The final step in the entire procedure is to actualize the listing of the stock. Once the listing is complete, the stock is available on secondary markets for trading. Post listing, the performance of the stock is a very critical step for the image of the company and the BRLMs.
What are the key players in the entire IPO process?
The success of the IPO depends on the quality of the issue and the aggression of the investment bankers. But other players in the whole cycle play a critical role in an IPO success.
Rigorous marketing is needed for new IPO success. The huge network of brokers, sub-brokers, franchises and individual agents play an important role in the whole journey. They work on a commission basis and it is very difficult for any IPO to succeed without the support of the agents and distributors.
Registrar and Transfer Agents
The registrar is important in the whole procedure as the task of the IPO registrar is to register an IPO. One of the most prominent registrars and transfer agents is Karvy, which manages the share records, work out the actual allotment of share and ensure that the shares are transferred into the respective DP accounts. The work also includes conveying MIS to the company and to that of BRLMs. They work as an administrative unit of an IPO.
Finally, the company secretary of the issuer plays a critical role in handling all the legal and compliance matters about the issue avoided at any regulatory hassles or questions in the future. Each one of them forms an important part of the IPO loop.