The number of initial public offerings (IPOs) is increasing across the globe. Listing on the capital markets is a critical stage in a company's path to financial success. A successful IPO may unlock significant financial value and help a firm achieve its growth goals. There are many reasons to undergo this process, but all stakeholders and management must understand that it is a long-term commitment.
An eye on the future: How Grant Thornton Bharat can help in your IPO journey
A successful IPO is characterised by extensive planning and meticulous attention to detail to meet compliance needs and demonstrate the value of your business. Multiple factors affect every application process, and the journey each applicant takes is unique.
Grant Thornton’s comprehensive three-step plan can help you achieve your aspirations of seeing your name on the stock market ticker. Our proven formula takes into account the dynamic business environment, requirements of your company, compliance demands and regulatory challenges.
Our suite of interconnected services, staffed by cross-functional teams, ensures that we maximise value – for you and your stakeholders – every step of the way. Our experts can help you find and unlock value across the board.
Three-step formula covering all aspects of the listing process
1. Evaluating IPO readiness and IPO plan
Launching an IPO is a journey of transformation from being a private company to a public company. You would need to enhance corporate governance, (i.e., the organisation’s systems and processes), evaluate external forces (i.e., compliance needs for a listed company) and create a plan of action (i.e., a step-by-step allocation of responsibilities against timelines).
You must gauge whether the right resources are involved to deliver the IPO and comply with listing requirements. It is imperative to build a separate IPO team with the necessary skill set, experience and credible track record pertaining to the industry, sector, operations, strategic planning, financial reporting and control, public listing and choosing the right set of advisers, including investment bankers, lawyers, accountants and investor relations firm.
Your brand is as big as your story! Create a credible growth story, detailing the long-term vision of your business through a detailed and robust business plan.
With increasing globalisation, you can now list in the domestic market or choose to go global. The selection of an exchange is a long-term strategic decision and is driven by factors such as regulatory framework, investor and customer base, valuation and liquidity. Eventually, your choice is dependent on which exchange can enhance the investment proposition given your company’s strategy and objectives of listing.
Change from a private to a public company is significant in terms of disclosures, financial reporting, analyst calls, corporate governance and dealing with stakeholders and the public. Hence, this involves the transformation of culture within the senior management and employees in terms of accountability and trust. Preparing and educating your team for this change would need to be enabled by proper change management and culture transformation journey to prepare the company well in advance for the IPO.
2. Executing the IPO Plan
IPO is not just a milestone. It involves adapting to a new post-IPO normal, with focus on long-term sustainability and viability as well as increased scrutiny and perception by the market. Hence, you must build upon your IPO readiness study and work on the identified areas.
One of the most critical requirements for an IPO is the audited restated historical financial information in compliance with applicable standards - Ind AS, IFRS or US GAAP. Complexity in accounting treatment and contentious judgmental areas should be pre-cleared between auditors and management teams to avoid last-minute surprises.
Listed companies are subject to a higher degree of scrutiny by auditors and stakeholders. It is important to define the internal control framework, fill the gaps therein and set up an environment where the operating effectiveness of controls are tested regularly as per a plan. Similarly, for the purpose of writing prospectus and during a company’s life as a listed entity, there will be a heightened need for time-bound, good quality analytical information. At this stage, an IPO-bound company must evaluate the need for robust MIS structures.
A strong and transparent corporate governance structure is critical to create investor confidence and provide comfort over safety and growth of the funds invested. The key to building investor confidence is to have an experienced, strong, credible and independent board with a broad range of expertise. This board can guide the management of your company in achieving its corporate strategy whilst identifying, mitigating and managing risks.
For the IPO, your company may be required to create a capital structure that will not deter investors from investing in the proposition. You may need to reorganise your company’s group structure prior to the IPO and make changes in the holding company and legal entity structure. Many of the activities may involve the incorporation of companies and re-enter of contracts and other legal matters. It is essential that any restructuring is investigated in advance as it would have a direct impact on financial reporting.
It is important to engage with institutional investors early on in the process. Right set of anchor investors not just lend more credibility to the issue, but also help in setting valuation benchmarks for the company. Companies should try to bring in the right investment banker and advisers early on in the process who can suitably advise on valuation and engage with institutional investors. Further, an effective communication strategy around your company’s brand positioning is critical to attracting stakeholders such as investors, analysts, media, industry associations and financial institutions. Therefore, planned public relations (PR) activity and appropriate PR firm can help in amplification through the three phases –pre-IPO, price discovery and marketing and listing.
One of the most critical elements of the IPO process is the pricing of the issue and valuation of the company. Existing PE/VC investors and board along with the investment bankers and advisers need to work together to do a detailed valuation analysis and study based on comparable industry benchmarks and market multiples. IPO pricing is only start of the journey, and the real test for the company, is post IPO, in terms of company performance as well as stock price. Therefore, key is to set a sustainable price of the issue keeping in mind wider investor interests, and long term view and value creation for all stakeholders.
3. Listing on the capital markets
Capital markets regulators across the globe have specialist teams who review every word of the prospectus with a fine lens.
An IPO expert will be able to guide a listing aspirant based on the experience of undergoing the comment letter process.
After obtaining all the regulatory approvals, the IPO day is truly one of the key milestones of the company. Once listed, the responsibility and accountability of senior management and the board of directors increase significantly, to create trust accountability and transparency to investors and the wider stakeholder community. Hence, building a strong investor relations (IR) team and appointing an IR firm would be key to set up to establishing a robust and regular communication strategy and channel of the company’s business trends, financial performance and key events with the wider public.
Going public is filled with the excitement of achieving a major milestone, and this comes with major challenges, risks and responsibilities to all the key stakeholders. In my view, the IPO journey is a journey of transformation of business, process, governance and culture to create sustainable value of all stakeholders by creating strong foundation of trust and highest standards of governance.Raja Lahiri Partner, Growth
Seizing the Indian IPO opportunity
India is now poised to emerge as one of the top IPO destinations. While several dynamic privately held companies and startups are keen to go down the IPO route, the journey of going public is one of complex transformation requiring a structured approach and rigorous preparation, long before the actual transaction takes place. Watch our webinar, Seizing the Indian IPO opportunity’ as experts share insights on current IPO trends, benefits, favourable sectors and much more.Watch here
Transformation and value creation through an IPO
The decision to list on capital markets involves a lot of preparation and planning. Having the correct partner can help you navigate the regulatory and legal requirements of the process. Contact us today to see how we can help you in your journey to a successful IPO.
An integrated Grant Thornton Bharat team to help you through the IPO journey
IPO Readiness Assessment
- Evaluation of IPO considerations, why public?
- Evaluate IPO destination – India or overseas?
- Understand current state and IPO plan
- Perform diagnostic and gap assessment around financial statements, accounting policies, corporate governance and IT systems
- Tax structure assessment
- Formulate IPO calendar and responsibility matrix
- Assist management to be IPO ready
- Review of compliances required under Securities and Exchange Board of India’s (SEBI) Issue of Capital and Disclosure Requirements Regulations (ICDR) and LODR Regulations (Listing obligations and disclosure requirements)
- Digital and business transformation assessment
- Conduct workshops and training sessions with the IPO team
- IPO preparation and execution Project management office (PMO) services of the IPO process including setting up of PMO, setting timelines and workstreams, data-room management, co-ordination with various external and internal stakeholders, monitoring various work-streams and creating IPO dashboard
- Assistance in preparation of historical financial statements as per appropriate accounting standards
- Assistance in enterprise risk management, policies and corporate governance frameworks
- Benchmarking analysis with competitors
- Assistance in validating business plans and market assessment
- Management information system design and integration with IT systems
- Assistance in creating a cyber risk management framework
- Assistance in implementation of a digital transformation strategy
- ESOP advisory and implementation assistance
- Assistance in preparation of prospectus document including business, financial and other
- Support in preparation and presentation of quarterly financial results
- Support in regulatory and tax reporting and filings
- Internal audits and ongoing reviews of corporate governance policies
- Support to management in monitoring the use of IPO proceeds as per the prospectus
- Related party transactions review
Go global with us
Listing a company in an overseas market is a long journey. Whether you want to go global now or later, our team can empower you and show you the way forward.