Outline of IPO

1. Select an underwriter
a. An underwriter is an investment banking firm that acts as an intermediary between a
company selling securities and the investing public
b. The underwriter is the principal player in the IPO
c. Underwriters buys the securities from the company and guarantees minimum
subscription
d. Criteria in choosing investment banker
i. Reputation
ii. Existing mix of institutional and retail clients
iii. Reputation of analyst covering the stock
2. Types of underwriting
a. Firm commitment underwriting
i. The underwriter buys the entire issue, assuming full financial responsibility for
any unsold shares.
b. Best efforts underwriting
i. The underwriter sells as much of the issue as possible, but can return the unsold
shares to the issuer without the financial responsibility
3. The IPO Process, Part – 1, The pitch
a. The company selects banks for book runner roles and picks other banks to be co-
managers, based on its relationship with them, their pitches and what the banks have
done for them in the past.
4. The Kick-Off Meeting, Part -2
a. Everyone involved in the IPO – company management, auditors, accountants, the
underwriting banks, and lawyers from all sides – attends this meeting
5. Ongoing Due Diligence
a. Common tasks here include:
i. Customer calls
ii. Industry/Market due diligence
iii. Legal and IP Due Diligence – reviewing contracts, registrations and other
documents
iv. Financial and Tax Due Diligence
6. Register IPO with SEBI
a. The firm must prepare a registration statement and file it with the SEBI
b. The registration statement discloses all material information concerning the corporation
making a pubic offering.
7. Pre selling the offering – Part -4
a. Pre-IPO analyst meeting – educate bankers and analyst on the company and teach them
how to sell it to investors,
b. Red herring (Preliminary Prospectus)
8. Present road-show
a. The road-show is presented to institutional investors around the country
b. The road-show allows firms to raise interest in the company and thus the price
c. Allows the firm and its underwriters to gather information rom potential purchasers
9. Why are road shows important?
a. Roadshows are considers critical to the success of an IPO, as companies need to impress
institutional investors so that at least a few of them are willing to invest
10. Part-7 Allocation
a. Once the deal is priced, the syndicate team of the banks will allocate shares to investors.
11. Sell the securities