Why Is The IPO Process So Baroque?

Companies raise capital by way of an Initial public offering (IPO). They issue the new or existing stocks to the general public against its IPO and raise capital to achieve further growth targets. Companies prefer IPOs to raise capital than debt financing with financial institutions as they need not repay the capital raised through an IPO issue. Private companies can reach many investors via an upcoming IPO, but the IPO process is complex and time-consuming.

IPOs are highly regulated by government organizations like the Securities and Exchange Board of India (SEBI). IPO registration statements are subject to review by the capital market regulator SEBI to monitor compliance with defined disclosure requirements. Recently, SEBI came up with the new IPO rules for the 'Basis of Issue Price'. It was observed by the regulator that many new-age technology entities do not have a proven track record, and even then, they are coming up with IPOs. It may have remained in losses before achieving break-even because these companies are in their growth phase and choose gaining scale over profits.

With time, the SEBI keeps adding new rules to the IPO process in the interest of investors. Here is the post to define the process.