REGULATORY RESTRICTIONS�FOR IPO ISSUE AND IPO STATISTICS

Group - 11

Group Members:

Vishal Kumar Reddy (20QE30001)

Ritam Pradhan (20QE30002)

Upendra Mohan Sarkar (20QE30004)

Shiv Shankar Kanaujiya (20QE30009)

WHAT IS AN IPO?

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The process of releasing fresh shares of stock to the public for the first time in a private firm is defined as an initial public offering (IPO). Equity funding can be raised from the general public through an IPO by a corporation.

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IPO PROCESS: STEPS

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1. Proposals�

Proposals and valuations are presented forward by the underwriters discussing their services, the best type of security to issue, offering price, amount of shares, and estimated time frame for the market offering.

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2. Underwriter�

They are chosen by the company. The company formally agrees to underwrite terms through an underwriting agreement.

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3. Team�

Underwriters, lawyers, certified public accountants (CPAs) experts form the IPO teams.

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4. Documentation�

For required IPO documentation, information regarding the company is gathered. The Registration Statement is considered to be the primary IPO filing document. It comprises of the prospectus and the privately held filing information. The preliminary information about the expected date of the filing are included in the same. The pre-IPO process revises it often. It also revise continuously the included prospectus.

IPO PROCESS: STEPS

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5. Marketing & Updates�

For pre-marketing of the new stock issuance, Marketing materials are being created. The share issuance is marketed in order to estimate demand and a final offering price is established by the underwriters and executives. Underwriters’ financial analysis are revised throughout the marketing process. This includes changing the IPO price or issuance date as deemed correct. The necessary steps are taken by the companies for meeting specific public share offering requirements. Both exchange listing requirements and SEBI requirements for public companies must be followed by the company.

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6. Board & Processes�

Form a board of directors and ensure processes for reporting auditable financial and accounting information every quarter.

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7. Shares Issued�

The company’s shares are issued on an IPO date. Primary issuance provide cash as capital to shareholders which is recorded on the balance sheet as stockholders' equity. Subsequently, the company’s stockholders' equity per share valuation becomes dependent on the balance sheet share value comprehensively.

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8. Post IPO�

There might be institutions of some post-IPO provisions. There might be a specified time frame for the underwriters to buy an additional amount of shares post the initial public offering (IPO) date. Meanwhile, some5 of the investors might choose quiet periods.

IPO: PROS & CONS

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Secondary offerings can raise additional funds in the future

Liquid stock equity participation (e.g., ESOPs) attracts and retains better management and skilled employees

Loss of control and stronger agency problems exists

Various costs arises such as significant legal, accounting, and marketing cost, many of which are running based

Management requires increased time, effort, and attention for reporting

For both equity and debt, a lower cost of capital can be ensured to the company by the IPO

SEBI: ROLE IN AN ISSUE

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Following the introduction of disclosure based regime under the aegis of SEBI, companies can now determine issue price of securities freely without any regulatory interference, with the flexibility to take advantage of market forces.

The primary issuances are governed by SEBI in terms of SEBI (ICDR) Regulations, 2009. SEBI framed its Disclosures and Investor Protection (DIP) guidelines. It provides a comprehensive framework for issuing of securities by the companies.

A company has to make sure that it is in compliance with all the requirements of SEBI (ICDR) Regulations, 2009. The Merchant Banker are those specialised intermediaries registered with SEBI, who perform the due diligence and ensures compliance with ICDR Regulations before the document is filed with SEBI.

Officials of SEBI at various levels examine the compliance with ICDR Regulations and Page 27 of 32 ensure that all necessary material information is disclosed in the draft offer documents.

NO. OF IPO ISSUES YEAR-WISE

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REVENUE GENERATED YEAR-WISE

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SUCCESS – FAILURE COMPARISON

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RETURN % TIMELINE

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STUDY OF IPO PROCESS: AETHER INDUSTRIES LTD

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Aether, which generated around 85-90% of business from the pharmaceuticals and agrochemicals sector is one of the fastest growing specialty chemical companies in India, growing at 49.5% CAGR between FY19-21. It is a specialty chemical manufacturer, focusing on producing advanced intermediates and specialty chemicals involving complex & differentiated chemistry and technology core competencies.

HIGHLIGHTS

STUDY OF IPO PROCESS: AETHER INDUSTRIES LTD

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The company’s business was started in 2013, while revenue generation operations commenced from FY17. Aether has three operating business models i.e. large scale manufacturing of its own intermediates & specialty chemicals; crams and contract/exclusive manufacturing. in FY21, these business verticals contributed 72.2%, 19.4% and 8%, respectively, to the consolidated revenue.

HIGHLIGHTS

STUDY OF IPO PROCESS: AETHER INDUSTRIES LTD

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Aether’s products occupy a position between commodity chemicals and final actives. with focus on developing high value products, average selling price of its products has increased by to grow by 6.8% CAGR between FY16-21. Further, majority of its products are exported to countries like Italy, Spain, Germany, the United States and other parts of the world. Over FY19-21, its export revenue increased by 58.6% CAGR, while it contributed around 56% to the total revenue in FY21.

HIGHLIGHTS

STUDY OF IPO PROCESS: AETHER INDUSTRIES LTD

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In a short period of five years since the commencement of commercial manufacturing, Aether has reached annual revenue of around Rs. 560cr. the company has demonstrated a strong and consistent financial performance over FY19-21, which is characterized by profitable growth in the business. On the back of higher demand of its products, the company reported a 49.5% CAGR rise in consolidated top-line to Rs. 449.8cr in FY21. Total operating expenditure increased by 48.2% CAGR.

HIGHLIGHTS

STUDY OF IPO PROCESS: AETHER INDUSTRIES LTD

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Aether reported a positive cash flow from operations over FY19-21. average operating cash flow during the period stood at Rs. 21.2cr. financial liabilities increased by 29.7% CAGR, however, debt-to-equity ratio improved from 3.3x in FY19 to 1.2x in FY21. pre-issue average ROIC and ROE stood at 26.2% and 50.8%, respectively.

HIGHLIGHTS

INDICATIVE IPO PROCESS TIME-LINE

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TRENDS IN FUNDRAISES

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TRENDS IN FUNDRAISES

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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After record high-levels of IPO activity in 2021, volatile market conditions have resulted in a significant slowdown during the first quarter of 2022.

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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In first quarter of 2022 market introduced to only 16 IPOs funds raised through main markets equated to $995m whereas 23 IPOs in 2021 first quarter raised funds equated to $2.57 billion which is a decline of 60% in proceeds raised and decline of 82% in number of deals.

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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The sudden reversal can be attributed to a range of issues, both emerging and residual. These include the rise in geopolitical tensions; stock market volatility; price correction in over-valued stocks from recent IPOs; growing concerns about a rise in the commodity and energy prices; the impact of inflation and potential interest rate hikes; as well as the Covid-19 pandemic risk continuing to hold back full economic recovery.

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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Issuance and proceeds are well off last year's pace, as geopolitical uncertainty along with other macro factors continues to affect investor sentiment . We are witnessing the largest IPO (of LIC) in Indian capital markets and the successful closure of other recent IPOs. The backlog of IPOs could lead to a strong upswing in volumes if volatility does moderate and earnings are robust

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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Continued regulatory developments aimed at enhancing disclosures and market practices, amendments such as change in disclosures for objects of the issue, revised norms for credit rating agencies (monitoring proceeds), revised norms for price band (wherein now 5 per cent cap is to be maintained between the floor price and upper price)

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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In addition, SEBI issued a consultation paper on ‘Basis Of Issue Price' covering additional parameters such as Key Performance Indicators(KPI) to be disclosed, particularly for loss making companies basis for arriving at the issue price

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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In line with the sharp decline in global IPO activity, there was a considerable fall in cross-border, unicorn, mega (proceeds above US$1b) and SPAC IPOs. There were also several IPO launches postponed due to market uncertainty and instability

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STUDY OF DECLINE IN FUNDRAISE IN 2022

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Continued regulatory developments aimed at enhancing disclosures and market practices, amendments such as change in disclosures for objects of the issue, revised norms for credit rating agencies (monitoring proceeds), revised norms for price We can witness the robust activity in the private market with more than 10 companies gaining Unicorn status in first quarter of 2022. PE/VC investments in 2022 continue good momentum, with Jan-Feb 2022 investments (US$10.3bn) being more than twice that of Jan-Feb 2021 (US$4.1bn) but 7.6 per cent lesser than the previous two-month period November-December 2021 band (wherein now 5 per cent cap is to be maintained between the floor price and upper price)

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SUGGESTIONS

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SEBI create some regulations which would guarantee the safety of investment.

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SEBI create some guidelines for companies to reduce failure rate.

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CONCLUSIONS

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IPO is an important financial process for generating capital and listing the companies in the stock market.

CONCLUSIONS

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Under SEBI guidelines, we understood the role of SEBI to maintain safety net and profitability to both issuers and investors.

CONCLUSIONS

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From the number of IPO issues graph, we conclude that there has been a decline in the number of IPO being issued due to increase in time complexity and low return to investors.

CONCLUSIONS

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From the revenue generated graph, we observe there have been a positive impact on the issuers to raise capital and a major factor in this success is due to the big financial lenders showing interests in IPOs.

CONCLUSIONS

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From the success-failure ratio graph, we interpret that the failure rate has been significantly less and the major reason for this has been the underwriter which has ensured the minimum capital to be raised by the issuers through this process.

CONCLUSIONS

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Now from the return % graph, we observe there is a negative impact on the investors over the last few years where the investors’ capital have depreciated with majority of IPOs.

CONCLUSIONS

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Finally we reported the overall performance of the IPOs during the 2017 to 2019 period.

THANK YOU!