IPO-less listing or listing of a company on stock exchanges without an IPO issue is what is referred as IPO-less listing is common parlance. Though the phenomena is quite rare in the Indian context, nonetheless guidelines by the capital market regulator SEBI in this direction came as a big relief for start ups and SMEs who wish to take the direct listing route.
Conditions to be met for direct listing by companies
SEBI guidelines state that a small and medium enterprise which intends to go public without an IPO issue has to be less than 10 years old.
Revenues in any of the financial year should not exceed Rs. 100 crore mark.
Before the listing, there has to be a minimum public shareholding of 25%.
The concerned company with listing plans upon listing has to issue its shares to the shareholders of a listed company as per the amalgamation or reconstruction arrangement.
Example of a company listing on exchanges without an IPO issue or IPO-less listing
Recently, Aditya Birla Capital which met the eligibility criteria to list on the bourses without an IPO issue with 25.6% public shareholding in the company went public on September 1.
The IPO-less listing of the financial services arm of the Aditya Birla group was part of the composite scheme of arrangement in which Aditya Birla Nuvo and Grasim Industries merged whereas the financial services business of the company was spun off into a new entity named Aditya Birla Capital.
So, in the arrangement, Grasim issued its 3 shares for 10 shares of Aditya Birla Nuvo. And, investors in Grasim for every equity share held were given 7 shares of Aditya Birla Capital.
Thus, in a case of IPO-less listing, the company begins to trade on the bourses without an IPO issue and the existing shareholders can freely sell their shares while public investors can invest in them.