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To raise funds, a company has many different options, but going public (through raising in an IPO) is one of the options and also a dream milestone for many growing businesses.
Raising an IPO comes with various legalities, filings, and approvals from SEBI. This process is not as simple as it looks; it requires the fulfillment of lots of compliance, which the company needs to understand. In this guide, we will cover all the important aspects and requirements related to IPO
Overview of Raising Equity Capital in India
In India, Public companies can raise equity capital(shares) in the form of issuing securities in the market (they issue securities like shares in the market and, in return, get capital from investors).
In the securities market, there are two interdependent and inseparable segments:
Primary market: The primary market is used by companies (called issuers) for raising fresh capital for the very first time to the general public for the sale of equity or debt. An IPO is a part of the primary market
Secondary market: The secondary market provides liquidity to the capital raised in the primary market through trading and settlement on the stock exchanges.
What is an IPO?
A company can issue a prospectus to the general public, called public offerings, and if the company is doing it for the very first time, then it is called IPO (Initial Public Offering).
An IPO (Initial Public Offering) is the detailed process through which a privately held company offers its shares to the public for the first time and lists them on a stock exchange. They need to list themselves on the stock exchange; without it, they cannot go public.
In simple terms, they issue shares for the first time to the general public, basically sell their shares through listing, and in return, they get capital for their businesses.
Who regulates the process of IPO?
In India, the entire process—from raising funds through an IPO in the primary market to trading of shares in the secondary market—is regulated by the following regulatory bodies and acts:
- Securities and Exchange Board of India (SEBI)
- Provisions of Companies Act 2013: Provisions Relating to Prospectus –Provisions on Minimum Subscription, Allotment, Return of Allotment –Power to SEBI under section 55 A relating to Issue & transfer of securities
- Securities Contract (Regulation) Act, 1956
Types of IPO in India (By Market Segment)
This categorization is based on the size of the company and the stock exchange on which they are listed.
1. Mainboard IPO: A mainboard IPO is when a company raises funds by offering its shares to the public for the first time through listing on the Mainboard (here, Mainboard refers to the primary platform of stock exchanges), such as the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange) in India.
The Mainboard IPO is meant for large companies that meet the compliance process (strict eligibility criteria) set by SEBI (Securities Exchange Board of India).
After listing successfully, their shares are traded on the secondary segment/market of the stock exchange, where institutional and retail investors can also buy/sell freely.
A Mainboard IPO = Large companies + NSE/BSE main exchange listing + wider investor participation.
General eligibility for Mainboard IPO
To be listed on the Mainboard, a company must generally meet these profitability requirements:
| Eligibility Checklist | Mainboard IPO requirement |
| Minimum paid-up capital | Not be less than 10 crores |
| Capitalization of the applicant’s equity | Not be less than 25 crores |
| Net tangible assets | At least ₹3 crore in the last 3 years. |
| Operating profit | At least ₹15 crore during the preceding three years |
| Net worth | Net worth of minimum ₹1 crore in each of the preceding three years. |
| Change of Name | If the company has changed its name, at least 50% of revenue in the preceding year must be from the activity indicated by the new name |
| Issue Size | The issue size should not exceed five times the company’s net worth |
If a company does not meet these basic profit eligibility criteria, then the company has the option of another route, also called the Qualified Institutional Buyers (QIB) Route, Appraisal / Project-Based Route. To know more regarding this route, you may contact our professional
2. SME IPO
An SME IPO (Small and Medium Enterprises Initial Public Offering) is when a small or medium-sized company raises funds from the public for the first time. They list their shares on special SME platforms of stock exchanges such as BSE SME or NSE Emerge in India.
It is designed specifically for startups and growing businesses that are smaller than Mainboard-listed companies.
It provides them with access to capital markets without the compliance burden of Mainboard IPOs.
Shares are later allowed to migrate to the Mainboard once the company grows.
General Eligibility Criteria for SME IPO
| Eligibility Checklist | SME IPO Requirement |
| Incorporation | The company must be incorporated under the Companies Act, 2013 |
| Paid-up Capital (Post Issue) | Should not exceed ₹25 crore |
| Net Tangible Assets | At least ₹1.5 crore as per the latest audited financials |
| Track Record | Minimum 3 years of operations (relaxation possible in certain cases) |
| Net Worth | Positive net worth |
| Operating Profit | Generally positive operating profit in at least 2 out of the last 3 years |
| Change of Name | If the name is changed, at least 50% of revenue should be from the new activity |
| Promoter Contribution | Minimum 20% of post-issue capital |
| Lock-in Period | Promoters’ shares locked in for 3 years |
| Public Shareholding | Minimum 25% public shareholding |
| Market Maker | Mandatory appointment of a SEBI-registered Market Maker |
| Underwriting | The Issue must be 100% underwritten |
| Investor Category | Mainly retail and HNI investors (institutional participation is optional) |
| Trading Lot Size | Higher lot size to limit excessive retail speculation |
| Migration to Mainboard | Allowed after meeting the Mainboard norms and shareholder approval |
Methods of Raising an IPO
There are mainly two methods used in India (as per SEBI regulations and global practice).
1. Fixed Price Method: In this method, the company and its investment bank decide and set a fixed price for the shares before the IPO opens to the general public.
Investors then have the option to buy the shares at the pre-determined price of the share only.
In this method, there is no bidding; that’s why investors cannot influence the share price. Payment has to be made upfront at the time of application. And after allotment, all the refunds are given if the shares are not allotted fully.
2. Book Building Method: In this Method, investors bid for shares within a price band instead of being offered a fixed price.
In this, investors usually bid within this band, quoting how many shares they want and at what price.
Based on the demand, the final price (called the cut-off price) is decided, and shares will be allotted at the cut-off price. It helps companies discover the best price for their shares based on market demand.
Process of Issuing an IPO in India
Issuing an IPO is a detailed process that requires
Step 1: Check Eligibility Criteria
The company first evaluates whether it meets the eligibility norms for:
- Mainboard IPO or
- SME IPO
This includes financial, legal, and governance checks.
Step 2: Appointment of Intermediaries
The company appoints SEBI-registered intermediaries such as:
- Merchant Banker
- RTA
- Auditors
- Underwriters
Step 3: Preparation of Documentation
Key documents are prepared, including:
- Draft Red Herring Prospectus (DRHP)
- Financial statements
- Legal disclosures
- Risk factors
Step 4: Filing with SEBI
The DRHP is filed with SEBI, which reviews the disclosures and may issue observations.
Step 5: Marketing and Roadshows
The company and the merchant banker promote the IPO to investors through:
- Roadshows
- Investor meetings
- Advertisements
Step 6: IPO Opening and Subscription
The IPO opens for public subscription through ASBA-enabled banks.
Step 7: Allotment and Listing
After subscription:
- Shares are allotted
- Refunds are processed
- Shares are listed on the stock exchange
Intermediaries/ Key Participants Required for Raising an IPO
You cannot raise a public IPO in India without the mandatory appointment of certain regulated and SEBI-registered professionals. Let’s understand these requirements:
Merchant Banker: Manages the IPO end-to-end and acts as the lead coordinator.
Registrar and Transfer Agent (RTA): Handles applications, allotments, refunds, and shareholder records.
Underwriters: Ensure full subscription to the IPO.
Banker to the Issue: Manages funds, escrow accounts, and refunds.
Auditors / Chartered Accountants: Audit financials and certify disclosures.
Market Makers (SME IPO): Provide post-listing liquidity.
Depositories & Depository Participants: Enable dematerialization and electronic trading.
How Can Mercurius Help?
Mercurius supports companies across the entire IPO journey by:
- Assessing IPO eligibility
- Structuring Mainboard or SME IPOs
- Coordinating with SEBI-registered intermediaries
- Managing compliance and documentation
- Supporting listing and post-listing obligations
Conclusion
An IPO is a powerful growth tool, but it requires careful planning, regulatory compliance, and professional execution.
At Mercurius, we connect you with efficient and experienced service providers and SEBI-registered intermediaries who guide you at every stage of the IPO journey—from making your company eligible to successfully raising an IPO on both the Mainboard and SME platforms.
For more details, you may contact us or book a free consultation with our experts.
