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Open in new tab The basics of bringing an IPO
Mahak Agarwal | corplaw@vinodkothari.com
The Indian IPO market is currently booming. The performance of the Indian markets is a testament to the growth potential that it has for investors as well as the issuers. The markets are at an all time high in almost all sectors hitting new peaks everyday, giving companies an opportunity to hit the ‘jackpot’ with their issues. A 2023 Report by EY[1] on IPO trends in India bears witness to the impressive positive outlook for IPO activity in India. The India Stock Exchanges have ranked 1st in the world in terms of the number of IPOs during 2023 and in the times to come, a fresh and significant momentum is anticipated in the Indian IPO markets encompassing both, the Main Board and the SME Board.
Having discussed the above, companies looking to bring an IPO may often find themselves bogged down by several basic questions including the ‘what’ of everything. This article proposes to answer such questions and capture the basics of bringing an IPO.
Read more →SEBI approves changes in SSE framework – Eases registration & listing of NPOs
– Payal Agarwal, Senior Manager | corplaw@vinodkothari.com
(Updated as on November 28, 2023)
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Deferred public disclosure of RHP in IPO/filing of pre DRHP in confidential mode
– Anushka Vohra, Manager | corplaw@vinodkothari.com
SEBI vide its notification dated November 21, 2022 has come up with SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2022 (“Amendment”), effective immediately, making changes in the existing SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR”) w.r.t. Initial Public Offer (“IPO”). The Amendment has introduced an alternate method for filing the draft IPO document, known as draft Red Herring Prospectus (DRHP).
Pursuant to this alternate method, the issuer will have the option to keep the information-rich DRHP confidential from the public at large until the issuer is sure to proceed with IPO i.e after receiving observation from SEBI on the draft RHP (“DRHP”) filed. Until such time, the issuer can interact with the QIBs only to gauge the market. Any kind of marketing of IPO apart from interacting with the QIBs is prohibited during this period.
Read more →Amendments in ICDR – Public issues | Preferential allotments
Our write-ups:
- SEBI approves amendments – Public issues | Preferential allotments | Appointment of shareholder-rejected directors – click here
- A Regulatory Affair: Fair Value Discovery in Preferential Share Issues – click here
- Other write-up on Corporate Law matters – click here
FAQs on IPO Financing
- Ajay Kumar KV, Manager ( finserv@vinodkothari.com)
IPO Financing, as the name suggests, is providing finance for the purpose of subscribing to initial public offers done by companies. In case of IPO Financing, the exposure is based on the borrower, and the securities/ shares, if allotted, are taken as collateral for securing the obligations under the loan. The investor will realise the shares so allotted in the IPO and pay-off the loan taken from the Banks/NBFCs.
How does IPO Financing work?
IPO Financing is widely used by High Networth Individuals (HNIs) as a tool to leverage the funds available with an intent to make profits from the IPO allotment price and the price at the time of listing. Typically, the lender would provide a short-term loan to the borrower at a certain interest rate, till the shares are listed. The transaction forces the investor to sell the shares once listed. Out of the proceeds, the lender would retain the repayment of loan and payment of interest plus other charges, as may be levied; and the balance is taken home by the investor as profits. Hence, the idea is not to “invest” in an IPO and eventually earn investment rewards; rather, the intent usually is to “enter” and “exit” by booking possible gains in the shortest time span.
Recently, the RBI has released Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs (SBR) on October 22, 2021. While the SBR provides for broad contours of the revised framework, concrete regulations in the form of ‘Directions’ are awaited from RBI. SBR fixes a ceiling of Rs. 1 crore per borrower in case of IPO financing by any NBFC.
We have tried to figure out the probable questions arising out of the aforesaid proposal and respond to the same in the form of these FAQs. However, these are subject to final directions yet to be issued by RBI in this regard. We shall update this FAQ once there are clear directions in this regard. These FAQs shall be read accordingly.
A layered approach to NBFC Regulation:
Special Purpose Acquisition Company
Special Purpose Acquisition Company
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Creating regulatory eco-system for SPACs in India
– Ajay Kumar KV, Manager & Himanshu Dubey, Executive
From a little-known word and a preserve of a select few finance professionals, the term Special Purpose Acquisition Companies (SPACs) is today a buzzword. The regulators across the globe are taking necessary actions to enable SPACs to raise money from investors – jurisdictions like the US, UK and Malaysia lead from the front. Having a sound regulatory framework is important because if investors are keen towards SPACs, and the regulators do not enable it, it is quite likely that the country will not be a friendly destination for SPACs. Hence, India’s securities regulator SEBI has recently constituted an Expert Group for examining the feasibility of SPACs in India, and the International Financial Services Center Authority (IFSCA) has issued IFSCA (Issuance and Listing of Securities) Regulations, 2021[1] which provides a regulatory framework for listing of SPACs within its jurisdiction.
In this write up, the authors take a look at the global legislative measures, and also outline the various changes in the regulations that may be needed in India to enable to make India a SPAC-friendly jurisdiction.
Contents
Important regulatory concerns. 3
- Sponsor’s contribution. 4
- Safekeeping of IPO proceeds. 4
- Acquisition Process. 4
- Managing conflict of interest 5
- Exit mechanism… 5
- Speculation on shares. 5
- Celebrity endorsements. 6
Regulatory framework in India. 6
Exploring some scenarios and the concomitant regulatory ramifications. 13
SPACs – Value Proposition & Regulatory Framework
– Megha Mittal
The concept of Special Purpose Acquisition Companies (‘SPACs’) has gained significant attention and importance in India in recent times – from a subject preserved to select classes, the surge in transactions over 2020, has made it pave its way to every investor’s dictionary. And with all the spotlight that SPACs have attracted, the numbers seem to only lend to the hype. To begin with, the global SPAC IPO proceeds in 2020 alone is estimated to be $83 billion USD[1] with a total of 251 listings. This figure is further projected to grow to a massive 711 listings in 2021 with an average IPO size of USD 294.5 Million as on 15th August, 2021[2].
Globally, SPACs have become the investment vehicle of choice, more-so by startups looking for funding; and the US has been the flag bearer of the SPAC industry, leading from the front. Following shortly behind are economies like UK, Malaysia and Canada; and while India is playing catch-up, it seems to be speeding up quick enough, at least on the regulatory front.
For the uninitiated, a SPAC, often referred to as a Blank-check Company or a Shell Company, is a non-operating company with the admitted intent (read: special purpose) of acquiring of a potential target within a stipulated timeline[3].
In this article, while dealing with the basic regulatory framework via-a-vis SPACs, the author seeks to analyse the motivation(s) behind such transactions from all perspectives – the acquirer’s, the acquiree’s and the investors’.