Finance IPOs
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Appealing to the public Do you have a mind-blowing idea that can cash in sky high profits and ROI for your business? Do the existing infrastructure, manpower and resources require an overhaul to gear up? If these symptoms exist in your organisation, then it’s time to think about going public, says Geethalakshmi R, CEO and Managing Partner, Associated Business Attorneys. Is your bank dodging appointments to discuss investment for the proposed new business silhouette? Does expansion sound so imminent, yet the CFO is adamant on a latent cash drain? Then now is the time to consider an Initial Public Offering (IPO) as a reliable alternate to generate capital funds from the public domain.
What is an IPO? In simple terms, an IPO is forsaking and pledging all what you can determine as company assets, including income, towards repayments, security for repayment as a barter for a term loan, facility assistance proposed to be received from your venture capital and investment banking sources.
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SME ADVISOR MIDDLE EAST
IPO as an alternate capital resource
Mapping growth potential For every SME, regularly graphing the company’s growth against the company’s expense is a good exercise which comes handy while assessing IPO as an alternate capital resourcing option. A vital feature for IPO determination as the right option is the company’s strong and cemented upscale growth graph. A ROI indicator at 20 – 25% annual returns would be the minimum welcome benefit to begin with. The proposal must be designed with 60 – 70% upscale growth confirmation within one to three years of initial public offering, which will make the company’s profile reasonably competent for a probable candidate. JULY 2011
For every SME, regularly graphing the company’s growth against the company’s expense is a good exercise which comes handy while assessing IPO as an alternate capital resourcing option. A vital feature for IPO determination as the right option is the company’s strong and cemented upscale growth graph
Charting the inflow capital prerequisite If your company’s business objective has reached a stage where expansion is vital and promising, IPO is the right option, as expansion calls for additional capital. Capital is the value needed on a budgeted basis that would be the overall estimate, keeping in mind your proposal for expansion. Your causes for expansion must be glossy in approach to woo the investor so be smart to include all cost heads, including cost estimates for R&D, sourcing resource for market presence expansions, innovative and re-engineered strategy implementations, sales force expansion and territorial presence and expansion. In some cases we have seen even investments in the Government sectors proposed by SME’s during their next five year plan in the IPO offer proposal. The mantra is simply an international reach out that promises strong yet effective growth potential for the business upscale. Never underestimate your cost Although IPO’s are an alternative for generating capital, it is an expensive exercise. Normally companies opting for IPO include IPO cost as one major factor that contribute to overall budgeting of the company’s finances. However, successful IPO’s have been established, wherein the company estimated about 25 – 30% of the company’s existing equity as base value cost for setting up the IPO, keeping in mind fees and consulting allocation to be around 25 – 30%. Luminaries for management Getting qualified for an IPO predominantly revolves around