Yes, a company can be listed on the stock exchange without an IPO. It is not necessary for every company to go through the IPO route to get listed on stock exchanges. A company can be listed without IPO under 2 cases
- De-merger from parent company
- Start-ups or SME under some condition can get listed
De-Merger from parent company:
There are various companies which got listed as a result of a demerger from the parent company. Their parent company was already listed on stock exchanges, therefore the new entity didn’t go for an IPO. As a part of SEBI guidelines, a public limited company should have at least 25% of the public shareholding. The companies which are fulfilling these criteria before getting listed need not go IPO route. The shareholders of the parent company will also get a shareholding in the newly demerged entity. The allotment of shares of new demerged entity is decided on the basis of the amount of shareholding which is getting diluted by the parent company.
Here are few examples of the companies which got listed without IPO
- Reliance Home Finance got listed as part to give additional value to its shareholders. Link
- Sintex Industries can unlock value for its investors
- Aditya Birla capital list on bouses
- 5 Paisa capital, India’s first trading firm to get listed on exchanges.
Start-ups, SME listing without IPO:
Market regulator, SEBI has approved an amendment of rules to permit Start-ups and SME (small and medium enterprises) to get listed on stock exchanges without going through IPO route. Such companies will be exempted from 25% of the minimum public shareholding.
Few conditions for startups and SME to list are
- Investors will be able to invest in the firms with a minimum capital of Rs 10 lakh.
- Firms should be incorporated in India and should not be more than 3 years old.
- Such companies are listed on ITP (Institutional Trading Platform), therefore will not be allowed to raise capital, but they can continue to make private investments.
- Last, if the investment is by an angel fund then it should not be less than Rs. 50 lakh and not more than Rs 5 crore. It is mandatory for the angel fund to be invested for a minimum duration of 3 years.
Listing of SME and startups is a wonderful word by the government. It will provide exit opportunities for existing investors and will help for investor participation.