What is an IPO?
The term “Initial Public Offer” refers to an unlisted issuer’s offer to the public for the subscription of defined securities, as well as any existing holders of such specified securities in an unlisted issuer’s offer to sell such specified securities to the public.
Eligibility requirements for an IPO?
Eligibility Requirements for IPO prescribed by Regulation 6 of the Securities Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulation, 2018 are enumerated below:
(1) An issuer may conduct an initial public offering only if and only if the following conditions are met:
a) It has net tangible assets of at least three crore rupees in each of the previous three full years (of twelve months each), of which not more than fifty percent are kept in monetary assets:
If more than half of the net tangible assets are held in monetary assets, the issuer has used or made solid promises to use such surplus monetary assets in its company or project.
Provided further that the limit of fifty percent. If the initial public offer is made fully through an offer for sale, the tax on monetary assets is not relevant.
b) it has an average operating profit of at least fifteen crore rupees for the previous three years (of twelve months each), calculated restated and consolidated, with operating profit in each of these three years;
c) it has a restated and consolidated net worth of at least one crore rupees in each of the three prior full years (of twelve months each);
d) if it has changed its name within the last year, at least fifty percent. of the revenue, calculated on a restated and consolidated basis, for the preceding full year has been earned by it from the activity indicated by its new name.
(2) An issuer who does not meet the condition specified in sub-regulation (1) may make an initial public offering only if the issue is made through the book-building process and the issuer agrees to allocate at least 75% of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to do so.
If the Company satisfies the eligibility criteria mentioned above then it can go with Initial Public Offering by Chapter II of the Securities Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulation, 2018.
What Comes Next?
Now that you have a basic understanding of what is an IPO & its Eligibility Requirements. You need to comprehend how the stock market operates and how you can invest in it. To know more about it check out other Blogs.
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