Question 1

Which SEBI regulation governs the IPO filing and what are the minimum eligibility thresholds?

Accepted Answer

SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (ICDR Regulations) govern the IPO process. Under Regulation 6(1), a company must have net tangible assets of at least Rs 3 crore in each of the preceding 3 full years and a minimum average pre-tax operating profit of Rs 15 crore during 3 of the immediately preceding 5 years. Alternatively, under Regulation 6(2), a company may list without the profit track record if it meets the QIB subscription threshold and other conditions.

Question 2

What is the mandatory lock-in period for promoter shareholding post-IPO?

Accepted Answer

Under SEBI ICDR Regulations 2018, Regulation 16, the minimum promoter contribution (at least 20% of post-issue paid-up capital) is locked in for 18 months from the date of allotment. The remaining pre-issue promoter shareholding beyond the minimum contribution is locked in for 6 months from the date of allotment. These timelines were revised by the SEBI (ICDR) (Second Amendment) Regulations 2021.

Question 3

What financial statement requirements must the Draft Red Herring Prospectus (DRHP) include?

Accepted Answer

Under SEBI ICDR Regulations 2018, Schedule VI and the SEBI circular SEBI/HO/CFD/DIL1/CIR/P/2019/83, the DRHP must include restated standalone and consolidated financial statements for the 3 immediately preceding financial years, prepared in accordance with SEBI (ICDR) Regulations and Companies Act 2013 Schedule III. The statutory auditor must issue a restated financials report under Section 143 of the Companies Act 2013. For the stub period, limited review financials not older than 6 months from the date of filing are required.

Question 4

How are IPO proceeds taxed in the hands of the selling shareholders (Offer for Sale)?

Accepted Answer

In an Offer for Sale (OFS) component, proceeds are received directly by the selling shareholders, not the company. If the shares are listed equity shares held for more than 12 months, gains are Long-Term Capital Gains taxable under Section 112A of the Income-tax Act 1961 (for AY 2026-27) at 10% on gains exceeding Rs 1 lakh without indexation. Under the Income-tax Act 2025 (effective TY 2026-27), the equivalent provision is Section 67. STT is levied on the sale under the Finance Act 2004.

Question 5

What are the continuing obligations under SEBI LODR after listing?

Accepted Answer

Post-listing, the company is governed by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (LODR). Key obligations include: quarterly financial results within 45 days of quarter-end (Regulation 33), corporate governance report within 21 days of each quarter-end (Regulation 27), related party transaction disclosures (Regulation 23), and appointment of a Company Secretary as Compliance Officer (Regulation 6). Material events must be disclosed to stock exchanges within 24 hours under Regulation 30.

Ipo Listing Process

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