What is the eligibility criteria for filing an IPO?

Company eligibility norms stipulated by SEBI:

Company Eligibility – Entry Norm I (Profitability Route)

a) Net tangible assets of at least Rs. 3 crore in each of the preceding three full years of which not more than 50% are held in monetary assets. However, the limit of 50% on monetary assets shall not be applicable in case the public offer is made entirely through an offer for sale.

b) Minimum of Rs. 15 crore as average pre-tax operating profit in at least three years of the immediately preceding five years.

c) Net worth of at least Rs. 1 crore in each of the preceding three full years.

d) If there has been a change in the company’s name, at least 50% of the revenue for preceding one year should be from the new activity denoted by the new name

e) The issue size should not exceed 5 times the pre-issue net worth

Company Eligibility – Alternative routes

To provide sufficient flexibility and also to ensure that genuine companies are not limited from fundraising on account of strict parameters, SEBI has provided the alternative route to the companies not satisfying any of the above conditions, for accessing the primary market, as under:

Entry Norm II (QIB Route)

The issue shall be through book building route, with at least 75% of the net offer to the public to be mandatory allotted to the Qualified Institutional Buyers (QIBs). The company shall refund the subscription money if the minimum subscription of QIBs is not attained.

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