After building your company to a force to reckon with, you as the promoter of the business, will always want to expand by way of starting new operations, entering new markets and introducing new products. To do this, you may require additional funds. In such a case, Promoter Funding against your shareholding is an excellent way to raise funds immediately.
Aditya Birla Finance offers you Promoter Funding as a deft solution to raise funds quickly. Whatever the needs of your business, whether scaling up operations or starting a new ancillary company, it is one of the most reliable business funding options against the shares you own. Thus, it helps you gain the financial wherewithal you require without disrupting your long-term investments.
Your investments in gold and property can be kept out of the ambit of debt when your shares can generate the requisite capital for you. This business financing opportunity against shares generates an instant line of credit. However, the amount of the loan is calculated basis the quality of the stocks or shares you own.
Promoter Funding is increasingly being used by promoters to grow their business or to increase their stake in the company, as also to convert outstanding securities into equity shares. Promoters may even buy out other investors in the company using the capital raised from promoters’ shareholding.
Promoters who hold adequate numbers of eligible securities (as stipulated by the lending institution) may find it easier to obtain this loan. There is increased transparency in the process of extending this line of credit, with SEBI regulations making it mandatory for promoters to disclose the value of their pledged shares.
Small and Medium Enterprises, known commonly as SMEs, have become an integral part of India's socio-economic development. SMEs have a low capital cost and enable increased employment opportunities. As of 2022, over 66 lakh new enterprises have been registered across the country.
SMEs are mostly private companies funded by private investors. However, you can get funds from public investors by making your SME public. Read on to know more about SME IPOs.
Similar to your regular Initial Public Offering (IPO), SME IPOs are IPOs issued by Small and Medium Enterprises. SMEs that obtain their funding from private investors issue IPOs when private financing can no longer meet their financial requirements. After the IPO ends, SME stocks are traded on the stock exchange. Public investors can become stakeholders in the SME by buying their shares.
SMEs can issue IPOs and get listed on the exchange if they meet the following requirements:
Let us understand the SME listing process. SMEs must hire the right professionals to tackle the mountain of paperwork and other compliance formalities for issuing an IPO. Here are the steps private SMEs must follow if they intend to go public.
The first step to getting the IPO process started is to appoint a merchant banker. The merchant banker, also known as an underwriter, is a professional with expertise in market expectations. Underwriters are responsible for drafting the IPO-related documents, including data about the face value, the selling price of the shares, etc. The appointed banks must conduct due diligence to ensure the data provided by the SME is accurate and without any discrepancies.
Before your company goes public, the potential investors prefer to access the company's information, i.e., operations and prospects. The underwriter creates a document called the Draft Red Herring Prospectus (DRHP). The DRHP allows potential investors to analyse the company's financial data and conduct a market evaluation to make informed investment decisions.
When companies file a regular IPO, they submit the DRHP to the Securities and Exchange Board of India (SEBI). However, SMEs must submit and get the DRHP verified by the Stock Exchange.
Once the Stock Exchange approves the draft, the underwriters add the IPO opening and closing dates, IPO issue price, etc., and launch the IPO on a predetermined date. At this point in time, only the underwriters, banks, and stock exchange have information about the company's plan to go public. Therefore, the next step is advertising and marketing the new IPO to attract public investors.
The last step is to launch the IPO on the opening date. Investors can subscribe to a minimum lot of shares before the closing date. The allotment stage comes after the closing date, where a select number of investors are allotted the shares.
After the IPO is officially launched in the primary market and the company allots the shares to the investors, the company becomes a public company. At this point, other investors can buy its shares in the secondary market.