What are Post-IPO and the challenges a public company faces post IPO?

 The post-IPO stage is also called the sustainment stage of the IPO process. It is the process where the company needs to sustain its existence in the stock market by complying with all the norms and regulations of the stock exchanges and SEBI. Being listed on the stock exchanges brings drastic changes for the company. As starters, the reporting infrastructure of the company needs to change and align with what SEBI designates. This may mean drastic changes in the company's accounting method or may even lead to changes in the company's accounting team. This will have a cascading effect on the complete organization. It will include internal and statutory audits, IT (Information Technology) changes, processes, and documentation. As guidelines, the company may have to bring in new governance structures by adding independent directors, an internal audit committee, and investor relations officers.

Some common Guidelines a company needs to meet for the Sustainment stage

Once the company is listed on the stock exchange, many new laws or modifications of some prior laws start acting on the company, which they need to comply with. Following are some organizations and important laws that the company needs to comply with:

• Companies Act, 2013: Before listing, the company was a private company with different sections of the companies act applicable to it. But after the IPO, the company is now a Public Company with many stakeholders. Hence, new sections of the Act are now applicable to the company, which will change the nature of certain operations of the company.

• SEBI: SEBI (Securities and Exchange Board of India) is the financial gatekeeper of the financial markets in India. A company must comply with the SEBI and its regulations if it wants to enter the financial markets. SEBI has released a lot of regulations, which are amended from time to time, for the listed companies. Based on the security the company has issued, the regulations may vary, but one king of all, the SEBI LODR (Securities and Exchange Board of India Listing Obligations and Disclosure Requirements Regulations, 1993), which acts on all the listed companies. Every company must abide by them, and since they are amended time by time, the company needs to be on top of these amendments and ensure that it meets them.

• RBI: RBI (Reserve Bank of India) is the central bank of India. It is the ultimate financial authority of the country. Though it doesn’t need to keep a check on financial markets as SEBI is there, if a company issues certain kinds of special securities for which RBI has released guidelines, then it needs to comply with them too. These securities include but are not limited to IDRs, FCCBs, FCEBs, etc.

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Common challenges with Public Maintenance

Once an organization is listed on the stock exchange and has released its IPO, there are several challenges an organization faces with public maintenance. Some of the common challenges with public maintenance:

• Investor Record Keeping- The listed entity needs to work parallelly with its share transfer agent and depository companies to ensure the keeping of investor records. This requires a new kind of role in the investor relations company, whose task is to ensure that everything related to investors is done with. They may face challenges in communication, record-keeping, unrealistic expectations, unrealistic financials of the company, and uncompelling promises.

• Submission of various records- The listed entity needs to submit various documents in varied time intervals having varied timelines. This poses various challenges to the company, like keeping a tracker, meeting deadlines, and operating with multiple stakeholders for required documents (auditor, company secretary, trustee, board of directors, banks, etc.). Having multiple stakeholders poses more different problems like communication with everyone, bringing everyone on the same page and pace, ensuring timely meetings, and overall operations.

• Financial Reporting and Recordkeeping- The listed entity must maintain its compliance record with Ind AS and present the same in a particular format. Along with these, they need to have a statutory auditor audit this, create statements in both standalone and consolidated methods, and provide certain ratios. And all this needs to be done within the timeline. This poses challenges in training the employees, meeting the timeline, technical accounting gaps, and material misstatement.

• Corporate Governance- The company must comply with the corporate governance guidelines by maintaining the required number of directors, disclosing board meetings and agendas to stock exchanges, etc. This poses challenges of meeting the deadlines, creating a tracker, ensuring compliance with the tracker, and head-hunt challenges.

• Miscellaneous- Companies having subsidiaries have to cater to more different kinds of guidelines regarding Related Party Transactions. There are different guidelines for dealing with directors’ related parties and different guidelines for investing abroad or investing in any other subsidiary. This creates challenges for keeping track of these and may lead to material gaps, posing a threat to the company.

• Non- Regulatory challenges- The company faces various other challenges which may not be in the purview of regulations by regulatory authorities; these are

• Talent hunt: Finding the right talent for the company's new needs is challenging.

• Company Perspective: Any kind of fake or real news regarding the company can affect the perspective of investors of the company and hence, threaten its presence in the market.

• Analysts scrutiny: The company must face the analysts’ scrutiny bravely to keep the company afloat.

• Information dissemination: Once a company is a public company, any kind of information regarding the company is in the market, catering to all the information.

• Internal Audit: Company needs to have a robust framework for internal audit to ensure that none of the illegal practices are done.

• ESG: With sustainability rising, ESG has become a new focus. Now companies need to ensure and prove how they are sustainable environmentally also.

What is the impact of the challenges?

An organization faces several impacts of the challenges it faces during the post-IPO phase. Some of the implications include:

• Impact on Operational process:

• Integration of SEBI framework with other operations 

• Streamlining IT systems and reporting technology 

• Internal control compliance impact on the business model 

• Change in risk appetite

• Impact on Data and Reporting 

• Completeness and Accuracy of the data used for financial reporting Complexities in the IND AS framework 

• Statutory Auditing 

• Impact on talent and workforce 

• The hiring of new specialized staff 

• New leadership and governance structure 

• Effective delegation of duties to ensure compliance.

How does NSKT Global help during the Post-IPO phase?

NSKT has observed that many financial professionals who are new to this face a lot of challenges in meeting these requirements and ensuring that their company stands well on these. So NSKT, by putting its expertise and professional knowledge, has listed some common challenges that the company faces while complying with these norms. This has a wide range of impacts on various company stakeholders, and the company needs to ensure that it is smoothened, or else the sole existence of the company may be in question. We provide proper consultation to the organization which needs to post the IPO registration.