A private company can sell shares to the general public through an initial public offering (IPO). A company gets qualified to raise equity capital through IPO. The transformation period of a company from private limited to the public is crucial for investors to fully investigate the returns from their investment as it consists of a share premium for current investors.
Alternatives of IPO
Direct Listing
A direct listing is done when an IPO is conducted without underwriters.
In a direct listing, the underwriting process is skipped which means the issuer is at risk if IPO doesn't go well.
Dutch Action
The MSME IPO price is not fixed in this. The bidders will place bids for the shares they desire and enter the price they are prepared to pay for the shares. Shares are then allocated to the bidders who made the highest bid.
How pricing of IPO is done?
When a company decides to go for an IPO, they need to list an initial value for its shares. This pricing process is processed by underwriting investment banks delhi that are going to market the deal. Since IPOs come from new businesses without a track record of profitability, the true worth of the companies is decided by their fundamentals and growth prospects.
For the majority of small and medium-sized businesses is to getting access to equity capital is their top concern. Although bank claims that payments made to small and medium-sized enterprises have increased dramatically in recent years, the reality is very different. The SEBI has proposed revised SME listing norms, which may provide much-needed respite in this situation.
SEBI declared that companies whose paid-up capital is below 25 crores can get listed on a new platform. The issue should be underwritten by merchant bankers who are also responsible for acting as an intermediary for buying or selling stocks. They are responsible for a minimum period of 3 years.
The minimum trading lot is 1 lakh which is required for participation as it would be restricted to shareholders who are well-researched investors with risk-taking ability. Companies that are listed on the SME platform are required to disclose their financials on a basis of half yearly.
As per clause 49 of SEBI, for a company with an executive chairman, at least 50% of the company board should be independent directors. In case the company doesn't have an executive chairman, at least one-third of the company board should be independent directors
The norms declared by SEBI have simplified many things for small- medium-sized enterprises but on the contrary, it can affect small businesses.
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