Emerging Economic environment and Retail Investors

Emerging equity gap alternative investment options, aging population, rise of

wealth in emerging economies, pensions, regulations; by 2020 down to 22% from
current 28%

Pre-IPO questions

Financial restructuring
Inherent substance for sustained performance
Story with duly evidenced plan for future
Pillars of strength to support present activities without IPO funds
Leadership abilities with change management attributes
Risk register based SOPs for REPM

Consultants facilitates answering these and initiating corrective approach

Balance to be stroked between operating and financial leverage

Risk exposures due to IPO

1. Regulatory risks
Compliance requirements of stock exchanges
Additional corporate governance restrictions
Increased regulatory scrutiny
Transparency and reliability requirements for financial statements
Insider trading violation fines
2. Shareholder related risks
Increased no of shareholders leading to higher litigation
Expanded geographical spread
Projections and earning guidance
Volatility risks of share market leading to higher fall potential
Alleged errors or misstatements in prospectus
3. Counter party risks potential indemnities to be provided to
underwriters and sponsors
4. Employee risks changes in pension plans
Corporate Governance

Enterprise risk exposure profile

Create and review risk register from below risks:

External

Natural
Political
Technological
Competition
Market
Reforms
Regulatory & Legal

Internal
1. Financial (Outermost level)
a. Credit
b. Liquidity
c. Forex
d. Taxation
e. Reporting (GAAP)
f. Cost of capital
g. Fraud
h. IT security safety
i. Information reliability
j. External reporting
k. Planning
2. Operational (Middle level)
a. Goal congruence
b. Customer success
c. Human resource
d. Secrecy
e. R&D
f. Health & Safety
g. Product/Service Failure
3. Environmental (Middle level)
a. Pollution
b. Brand erosion
c. Compliance
d. Image erosion
4. Governance & Strategic (Innermost level)
a. Leadership
b. PLC
c. Product profile
d. Business model
e. Business portfolio
f. Communication
g. Org structure
h. Business alliances

Important ToC topics of a prospectus

Risk factors
Presentation of financial and other information
Expected timetable of principal events and Offer statistics
Regulatory overview
Directors, senior mgmt and corp governance
Operating and financial review
Capitalization and indebtedness statement
Financial information

Areas for financial consultation

Pre-IPO and listing preparatory stage

1. Selection of assets to be put under listing and IPO
2. Risk register preparation and ERM framework
3. IFC FR and OFC for REPM (section 134, 143, 177 companies act)
4. Review existing internal MIS and mgmt control procedures
5. Rationalization and restructuring of Equity and/or Control structure
6. Rationalization of funding arrangements for prospective assets
7. Review of Loan Covenants
8. Accounting policies and GAAP differences with subsidiaries
9. IT general control and Info Safety & Security
10.Corporate governance policies
11.Related parties and business contracts with them
12.Reviews Buyers, Sellers, Insurers, contingent liabilities
Pre-IPO
1. Due Diligence
2. Statutory Auditors queries
3. MD&A section preparation (part 9 of prospectus)
4.