Start-up to going IPO

  1. “Net tangible assets” of at-least ₹3 crores in each of the last 3 years, of which not more than 50% is held in monetary assets. The only exemption available to the 50% monetary assets is that a company must have firm commitments to utilize the excessive amount for the business in the future. (Indian laws favor asset heavy businesses).
  2. The total paid up capital shall not be less than ₹10 Cr. and the market capitalization shall not be less than ₹25 crores.
  3. The company must have delivered profits in at-least 3 out of the last 5 years subject to the exclusion of extraordinary items like sale of land or key parts of the business.
  4. It has to have a minimum net worth of at-least ₹1 crore in each of the last 3 years (12 preceding months).
  5. The total issue size should not exceed more than 5 times it’s latest net worth.
  6. If the company’s name has been changed in the last 1 year, at-least 50% of its revenues of the last 1 year should be earned after the name was changed. There are many other rules & regulations to comply with. I suggest you read them directly on NSE websiteBSE website

Entrepreneurs are usually focused on growing their business and when they’re ready to launch an IPO, such rules generally hamper and delay progress. Keep in mind, that these rules are age-old so the effect of inflation has reduced the entry barriers. Since, money has lost it’s value due to inflation, the entry barriers seem small as on today. This is one of the main reasons why the number of listed companies has increased substantially over time. Please note that these rules are subject to change from time to time and I might not be able to update them in real-time.

Qualifications for listing Initial Public Offerings (IPO) are as below:

  1. Paid up Capital
    The paid up equity capital of the applicant shall not be less than 10 crores and the capitalisation of the applicant’s equity shall not be less than 25 crore.
  2. Conditions Precedent to Listing:
    The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.
  3. Atleast three years track record of either:
  • the applicant seeking listing; or
  • the promoters/promoting company, incorporated in or outside India or
  • Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing. The Company subsequently formed would be considered for listing only on fulfillment of conditions stipulated by SEBI in this regard.

For this purpose, the applicant or the promoting company shall submit annual reports of three preceding financial years to NSE and also provide a certificate to the Exchange in respect of the following:

  • The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).
  • The networth of the company has not been wiped out by the accumulated losses resulting in a negative networth
  • The company has not received any winding up petition admitted by a court.
  1. The applicant desirous of listing its securities should satisfy the exchange on the following:
  • No disciplinary action by other stock exchanges and regulatory authorities in past three years
  • Redressal Mechanism of Investor grievance
  • Track Record of Director(s) of the Company
  • Distribution of shareholding
  • Details of Litigation

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