IPO Readiness Advisory

When a business discovers that it needs more money for operations and cannot raise it through other avenues of investment, it chooses to “go public” and make its initial public offer (IPO). The decision to simply go public and raise funds through an IPO, however, necessitates a thorough evaluation of the company’s readiness for an IPO. In order to analyse the company’s status, a readiness assessment of the company is conducted. This is where a CFO’s IPO Readiness Consulting Services can help the business determine its level of readiness prior to going public.

Meaning of IPO or Going Public

Simply put, going public refers to the sale of a company’s shares to the general public. It alludes to the process of a firm acquiring funds by making its securities available to the general public for purchase. The first public offering, or IPO, is the term used when a public offering is made for the first time.

A corporation can trade its shares in a regulated stock market through an initial public offering (IPO), which also enables it to generate new equity capital for its working capital needs and expansion.

An important turning point in a company’s transformation from a private to a public entity is the Initial Public Offering. Doing an Initial Public Offering enables a business to grow its customer base, enhance its offerings, and scale up its operations.

Advantages of Initial Public Offer

The following are the main benefits of listing a company and making its Initial Public Offer:

Capital raising: The main advantage of an IPO is that it allows a business to raise a significant amount of money for purposes such as scaling up plans, plant and equipment purchases, increased research and development, the creation of new goods or services, etc.

Market Value: As compared to the market value of the company when it was a private company, the initial public offering increases the company’s market value. This is as a result of its increased liquidity, increased openness, and simplified value assessment.

Initial Public Offering also boosts a company’s capacity to purchase a small business or combine with another business in order to grow its operations.

Liquidity of the Company Increases: When a firm makes a public offer, it directly improves its liquidity since shareholders can purchase or sell their company shares with more ease.

Internal Management: The company’s internal management is enhanced by the initial public offering because it is able to retain staff thanks to programmes like ESOPs. This enables the business to guarantee staff motivation to work in accordance with and devoted to the business’s goals.

Enhancing Company’s Public Image: Listing a business through an Initial Public Offer also enables it to market its brand, promote its operations to the public, and enhance its reputation.

Many businesses prefer to begin the process of becoming a public company well before the actual procedure of the initial public offering (IPO) even begins. A company can execute the initial public offer more efficiently and in compliance with all the requirements and regulations by making early preparations for it. The simplest method to achieve this is to evaluate the company’s readiness for an initial public offering (IPO) by speaking with CFO Consultants, who can identify any gaps and problems with the business well in advance of the actual IPO.

Concept of IPO Readiness

Investors who are interested in investing their money in a company anticipate that it will be prepared for the market before it launches its Initial Public Offer. Before going through the formal IPO stage, investors expect a company to assess a number of operational factors, including internal systems, control management, financial management, governance, and regulatory compliance. Pre-IPO preparation of a firm is a key consideration for many investors when deciding whether to invest in it or not.

An in-depth analysis of a company’s capabilities and operations is made possible by an assessment of its IPO preparedness. Also, it aids in locating any flaws or discrepancies between the company’s current status and potential investor expectations. Yet, determining IPO preparedness is a difficult procedure.

It entails highlighting the company’s potential as well as current limitations and critically analysing them in order to create an exact blueprint of the company’s capabilities. The market’s erratic behaviour and volatility have made IPO preparedness assessments more important in recent years.

Company executives can learn more about the steps required for a successful firm IPO by conducting an IPO readiness assessment. A firm can get assistance from CFO Consultants in developing a thorough plan of action for its path to going public, including defining the expenses, phases, schedule, requirements, and management needed before reaching the final stage.

At least 6 to 12 months before to the scheduled date of the company’s Initial Public Offering, the IPO readiness assessment process must be initiated. While the examination requirements for each firm and each market are different, the fundamentals of IPO readiness assessment remain the same.

What IPO Readiness Requires

IPO readiness assessment requires a company to evaluate the gaps and issues relating to the following:

IPO Readiness Assessment of Corporate Governance

A key component in evaluating IPO preparation is the board of directors’ qualifications. A firm considering an IPO must evaluate the capability of its executive management team, i.e., if they are able to live up to market expectations and the compliance standards established by the relevant legal frameworks.

This involves determining if the Directors are qualified to manage the IPO and whether they have the necessary skill set. To make sure that the executive managers are accurately representing the company’s operations, it also entails evaluating the applicable laws, rules, and guidelines.

For instance, the Companies Act, 2013, and SEBI regulations provide the minimum standards for independent directors, resident directors, and women directors in India. These laws and regulations also outline the many types of Committees that the firm must appoint for its various purposes.

As a result, a firm preparing for its initial public offering must thoroughly evaluate its Board of Directors and decide on any changes or deletions to the Board’s membership.

IPO Readiness Assessment of Financial Processes

Evaluation of the company’s current financial reporting, financial management, budget management, and financial modelling systems is part of the IPO readiness evaluation process. In order to make the necessary modifications before the firm proceeds towards an IPO, it requires identifying the current vulnerabilities and prospective dangers in the existing models and finding the best remedies.

To determine if a company is already adhering to the proper accounting standards or not, it is also necessary to evaluate its financial operations. A corporation needs the help of CFO Advisers to convert its accounting standards because they can evaluate the company’s current capabilities and identify prospective areas for financial department modifications.

A company’s financial operations must be evaluated during the pre-IPO preparedness stage because adjustments cannot be made only before the IPO process is about to close. The company’s financial procedures can only be changed with time and approval from the government.

For instance, the Securities and Exchange Board of India (SEBI) recently released a circular regarding the applicability of Indian Accounting Standards for businesses looking to obtain capital by listing on reputable stock exchanges.

Assessment of Applicable Compliances for IPO Readiness

Before making an initial public offering, a company must adhere to a number of compliance criteria. This covers legal requirements for firm internal control management and documentation. Despite the fact that different industries may have varied internal control needs, the fundamental standards for all companies planning an IPO are the same.

Before a company may be listed, it must handle its internal financial controls properly, according to the Companies Act of 2013. This comprises the Directors submitting a report stating that the organisation has internal controls that are correctly implemented and compliant. Also, a report from the company’s auditor must attest to the internal control of the business.

As part of their IPO readiness advising services, companies must also make sure that their internal controls are carefully followed and continually monitored. This entails evaluating the anti-money-laundering controls, whistleblower measures, application of the code of conduct, internal audits, and appropriate internal reporting mechanisms in accordance with the demands of the regulatory authorities, auditors, shareholders, etc.

Risk Management Assessment for IPO Readiness

A firm will always encounter certain hazards during the course of its existence. Yet, listed firms that are responsible for protecting the interests of their shareholders require a stronger risk management framework. So, a company must make sure that strong risk management and planning systems are implemented before considering an IPO to reduce potential hazards.

In order to provide investors with additional transparency, it also entails describing the types of risks to which the company is exposed as well as the risk mitigation plan the company would use to address such risks. Determining the duties and responsibilities of the Board of Directors for the discovery, evaluation, and mitigation of all risks is part of the IPO preparation assessment process. A company must also perform an evaluation of its IPO preparation to make sure that the reports and documents it has at its disposal are adequate for the Directors to use in making decisions concerning the company’s risk management. It also specifies the method through which the Board of Directors must approve any modifications to the company’s operations.

IPO Readiness Assessment of IT System

The company’s current IT systems are also evaluated as part of the advising services for IPO preparedness. This involves, among other things, evaluating the IT-based financial reporting systems, internal control, and communication systems, and data security measures. Before going public, a company must evaluate its IT systems to find any gaps in its technology framework, determine whether to restructure the systems for greater security and efficiency, and determine whether it has a disaster recovery strategy and data backup system.

Financial Forecasting for IPO Readiness

Investors who are considering investing in a company during its initial public offering search for financial forecasts and anticipated changes in the company’s financial position from its current state. They need a comprehensive understanding of the company’s present financial performance as well as the benchmarks it is using to measure its future performance.

For this, the establishment of a thorough business plan for the organisation is necessary, including the anticipated financial outcomes, the company’s financial history, and its approach to achieving its financial objectives. Also, this entails creating a thorough financial model of the organisation based on the relevant accounting standards and an examination of its financial performance.

Additionally, a listed company must choose IPO readiness advisory services to guarantee that all standards and requirements are met before the final IPO step because its financial statements, including its Balance Sheet, Profit and Loss Statement, and Cash Flow Statement, must be independently audited.

IPO Readiness Advisory Services 

A team of seasoned business professionals known as KRA, which includes Chartered Accountants, CPAs, Company Secretaries, Attorneys, and other experts, evaluates a company’s suitability for an initial public offering (IPO). A corporation can get assistance from our financial and business professionals with internal control evaluation, accounting standard evaluation, financial report, risk assessment and management, business process formulation, tax consulting, compliance management, auditing, and much more.

The IPO readiness advisory services offered by us include:

Financial Statement Preparation: We offer complete support for the Securities and Exchange Board of India’s (SEBI) financial statement preparation requirements for the IPO process.

Business Plan and Financial Modeling: Before a company goes public, our professionals offer assistance with the comprehensive business plan drafting and financial modelling of the company.

Corporate Governance Compliance: When companies proceed to the final step of the IPO process, we offer guidance to help them ensure total conformity to the applicable corporate governance rules.

IPO Planning: The IPO application procedure is difficult and necessitates the skills and knowledge of subject matter specialists. We offers comprehensive support for financial management, risk analysis, application authoring, resolution passing, SEBI approval, and IPO strategy and planning.

Tax Compliance: As part of our advising services for companies getting ready to go public, we also help them get their financial systems and tax-related compliance needs in order. This entails a thorough examination of the company’s tax compliance needs, the identification of necessary adjustments, and the establishment of post-IPO compliance procedures.

Company valuation: We additionally offers consultancy services for IPO readiness for the company’s valuation in accordance with the demands and evaluation by investors.

Documentation: We also assist the business with the development of the necessary papers, including the draught red herring prospectus (DRHP).

For a successful road show, our professionals assist businesses in preparing their investor presentation, which includes the pitch, code of conduct, action plan, etc.

IPO Readiness is the key to a successful Initial Public Offer. Our IPO Readiness Advisory Service Package includes:

Financial Reporting and Compliance Assistance for End-to-End Readiness Assessment

Assessment of Internal Controls and IT System Full Help for Compliance Assessment Planning and Documentation Assistance

Frequently Asked Questions

What is an Initial Public Offer – IPO?

The offer made by a firm to the general public to sell its securities is known as a public offer, or PO. A business issues equity to the public through an IPO in order to raise capital. Initial Public Offering, or IPO, refers to the first offer made to the public by a company that has never been listed previously.

Is IPO Different from Further Public Offer (FPO)?

Yes, an IPO differs from a further public offering (FPO), which takes the form of a firm that is already listed on a stock exchange issuing new securities or making a public offer to buy them. Since it comes after a company’s initial public offering, it is sometimes referred to as a follow-on offer.

What are the Benefits of Initial Public Offer or Going Public?

For a variety of reasons, including business growth, product development, debt repayment, entering a new market, etc., a firm may decide to make an initial public offering or go public. Initial public offerings for businesses have a number of advantages, including expanding the company’s equity base, giving directors liquidity and an exit option, benefiting employees and pre-IPO investors, and improving the company’s access to the equity market. They can also help a business improve its reputation and credibility in the public eye.

What are the Laws relating to IPO?

The main source of the regulations governing Initial Public Offer in India is the SEBI – Securities Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, also referred to as the SEBI ICDR. The Securities Contract (Regulation) Act, 1957, the Securities Contract (Regulation) Regulations, 1957, and the Companies Act, 2013 also set forth the legal requirements and procedure to be followed while launching an initial public offering (IPO) in India. Before launching an IPO, a firm must make sure that it is in compliance with these rules by choosing IPO Readiness Consultation services.

What are the Routes available to a company to make its Initial Public Offer?

A company in India has three options for launching its initial public offering. These IPO routes are: Appraisal Route – Entry Norm III; Profitability Route – Entry Norm 1; QIB Route – Entry Norm II.

Which Entities are exempted from making an IPO?

A few organisations have been exempted by the SEBI from the requirements for launching an initial public offering. These organisations include both private and public sector banks, as well as infrastructure firms whose projects have been evaluated by PFIs, IDFC, IL&FS, or banks that were once PFIs, and at least 5% of the firm’s project expenditures have been supported by one of these organisations.

What are Primary and Secondary Markets?

Investors can purchase securities from the issuer firm directly on the primary market. A corporation registers its securities for the first time on this exchange.

After securities are initially offered to investors in the primary market via an IPO and are listed to a stock exchange, they are traded in the secondary market. Equity and debt markets make up the secondary market. A primary market is a venue through which a corporation might enter the secondary market, whereas the secondary market is thought of as an outlet for the trade of listed equities.

What is meant by Underwriting in IPO?

The initial public offering (IPO) process begins with the choice of an investment banker to handle it. A firm seeking to go public receives offers from investment bankers that are based on how much money the company expects to raise through an initial public offering (IPO). Underwriting refers to the procedure by which an investment banker oversees the IPO and serves as a middleman between the firm and the general public.

What is Draft Offer Document?

The business preparing the IPO and the Book Building Lead Manager of the public offering develop the draught offer document. The SEBI receives the draught offer document for review. After reviewing this document, the SEBI either instructs the lead managers to make changes to it or accepts it for the following stage of the IPO processing. In determining if the firm is ready for an IPO, the Book Building Lead Manager is crucial.

What is Offer Document?

The Offer Document, which is the revised and approved version of the Draft Offer document containing the SEBI’s suggestions, is created once the Draft Offer document has been accepted by the SEBI. Further submission of the offer document is made to the Registrar of the Stock Exchanges the company wishes to list its securities on.

What is Red Herring Prospectus?

The company includes the issue size and price in the document and makes it public once the Registrar of the Stock Exchanges has approved the offer document. The company’s issuing prospectus is known as the Red Herring Prospectus.

What is the best time for a company to opt for IPO?

The market, macroeconomics, a company’s financial needs, and the readiness of the company for an IPO are just a few of the variables that influence when a company should launch its initial public offering.

Which stock exchange should a company choose for its IPO?

A business that intends to go public must choose a market, region, and stock exchange that will suit its needs for capital raising. Every stock exchange has varied admission requirements, including those related to corporate governance, market capitalization, estimated number of shareholders, and shareholders’ equity. Another justification for a company choosing IPO preparedness advising services is this. An evaluation of the company’s preparation for an IPO guarantees that it is selecting the appropriate stock market for its needs.

Why should a company choose us for its IPO Readiness Advisory Services?

By assisting them in carrying out a failproof IPO process and preparing the company for its whole life as a listed company, our goal is to help our clients maximise the value of their business. In addition to assisting companies with post-IPO compliance needs, We offers firms specialised IPO Preparation Advising services that help them reduce the risks associated with any delays, legal obstacles, and compliance difficulties before they reach the final stage of their IPO.