For many business owners in India, the dream of going public is not only connected to raising money but also to building a respected name in the market where investors will recognise the company and trust in its growth. But before a private business can move into the public domain, certain conditions and eligibility rules are needing to be followed. Many times entrepreneurs are asking the same question – when can a company go for IPO in India – and the answer lies in understanding the checklist that regulators and exchanges are looking for.
Minimum Net Worth and Capital
The first and most important condition is regarding the financial strength. A company must have a positive net worth for the past years and also maintain the minimum tangible assets required by the rules. Post-issue paid-up capital also has to be inside the prescribed range. If these numbers are not satisfied, then the company will not be allowed to move forward in IPO journey.
Track Record of Profits
Another important eligibility condition is profit-making. For main board IPO, companies are expected to have distributable profits for a minimum of three years out of last five. This is being checked so that only stable businesses are allowed in the market. However, in case of SME IPO, these rules are more flexible because the intention is to encourage small and medium enterprises.
Corporate Governance and Compliance
It is not only about financials, the company’s governance system is also looked at. Proper board of directors, independent directors, audit committee and company secretary are expected to be in place. If legal cases are pending or compliance has not been followed, then approvals can be delayed or even rejected.
Dematerialisation of Shares
All the shares of the company are required to be converted into demat form before IPO can be launched. Physical shareholding is not permitted at the time of public issue. This step is done to make sure smooth trading happens after listing and also to prevent frauds.
Appointment of IPO Team
Before filing the IPO, company is supposed to appoint an IPO team. Merchant banker is engaged as lead manager, registrar is appointed for allotment, auditors, legal experts, and market makers are also included. Without this professional team, the IPO documents cannot be prepared in proper manner.
Drafting and Filing of Prospectus
A Draft Red Herring Prospectus (DRHP) has to be prepared with the guidance of merchant banker. This document is containing all details of company’s business, financials, promoters, risks and intended use of funds. It is submitted to the exchange and SEBI for review. Only after review and approval the company can move forward towards launching the IPO.
Other Important Conditions
- There should not be winding up petition against the company.
- Promoters should not be declared wilful defaulters.
- The company should not have been referred to BIFR (Board for Industrial and Financial Reconstruction).
- All tax and statutory dues should be cleared.
These are basic but very important points in the checklist.
Conclusion
So the answer to the question “when can a company go for IPO in India” is simple: only when all the financial, legal, governance, and compliance conditions are satisfied. Positive net worth, profit track record, demat of shares, appointment of professionals, preparation of prospectus and approval by regulators – all these steps have to be completed.
The IPO is not only a fundraising exercise, it is also a test of discipline and readiness. If companies are following the checklist sincerely, then they can enter the public market with confidence and also win the trust of investors. For entrepreneurs, the decision may look difficult, but with proper planning and expert guidance, the dream of being listed is very much possible.
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