Rathandeep – Finance Coach for Women

Reasons That Account For Delayed IPO Filing By Companies: Deciding The Way Forward

It was reported last year that the renowned hotel chain and vacation renting online marketplace, OYO withdrew its IPO application. As per what was stated in Business Today, OYO was asked to update additional sections in the DRHP (Draft Red Herring Prospectus). These sections included the company’s key performance indicators, outstanding litigations, basis for valuation, and risk factors, among other details.

Based on this delay in IPO filing, OYO decided to refile the IPO application with a proposal of $450 from the initial proposal of over $1 billion. The hospitality startup also decided to raise money from private investors for its various projects. For instance, JP Morgan provided a credit facility of over Rs 200 Crore to Oyo for fueling their expansion in the Accelerator Programme for first-generation hoteliers.

Lately, reports mention that the company is in talks of raising Rs 1000 Crore from family corporates and market experts.

If you see the trend, the company has a smart two-way strategy of building and expanding its business, through the initial public offering and private investors. At the same time, they aim to file a successful IPO but continue to face delays. 

As one of the upcoming IPO Advisory Firms, we want to take you through the factors that lead to delayed IPOs and what could companies like OYO do in such situations.

Factors That Contribute To Delayed IPO Filing

You may find a complex set of reasons why IPO applications can get delayed:

  • Companies might postpone an IPO if they witness that the market at present is experiencing some volatile downturns.
  • IPO applications can get delayed if the company is operating in an industry that is currently underperforming as well as disinterest conveyed by investors.
  • As mentioned above, OYO was asked to fill in more sections in the DRHP regarding their risk factors and key performance indicators. The company is probably suspected of a weak financial performance or falling short of expectations.
  • Some accounting issues may be left unresolved which can lead to delays as they get addressed.
  • A company may be experiencing pending lawsuits and regulatory investigations which leads to postponing an IPO filing until the legal matters are resolved.
  • A company may be undergoing management changes or the company’s leadership may decide to postpone the IPO for strategic reasons.

SEBI (Securities and Exchange Board of India) implements a thorough review process for IPO filings. This means that if the application filed by a company has mission information or sections, this can lead to delays as SEBI seeks clarification. At the same time, some industries require additional approvals from other government agencies leading to further extension of timelines.

Consider these six factors to create an effective IPO filing strategy for your company written by our expert IPO consultant.

What Should A Company Do When Faced With IPO Delays?

When a company faces IPO filing delays, the solutions are most often based on the reasons that contribute to the delays. Let’s consider the factor of unfavourable industry performance to identify the way forward:

  • Improve the company’s financial performance

Create strategies to improve profitability. For instance, OYO started the accelerator programme to expand their business through first-generation hotels. Reported in March this year, they aspired to boost the hotelier’s portfolio expansion, assisting over 700 hotels and 85+ small and first-generation hoteliers. OYO has planned to achieve long-term profitability and increased earnings through access to technology, mentorship, and financial support.

  • Anticipate industry recovery

If an industry is currently facing a downturn, wait for it to rebound. Once the industry trends are looking up, file an IPO for a period while also showcasing positive investor sentiment towards the industry.

  • Pursue private investments

If an IPO filing is delayed, one of our IPO advisory firm’s consultants offers a tip to consider seeking private investors to secure funds and meet financial needs. This will help improve business valuations once you re-apply for an IPO.

  • Refinance existing debts

If SEBI finds that your company is experiencing an outstanding debt, you could consider refinancing those existing debts with better terms. This way, you can improve your company’s financial flexibility and look less risky in the eyes of investors for a future IPO.
Looking for an IPO Consultant to help you re-create a good IPO filing strategy to prevent delays? Reach out to our firm teamed with expert SME IPO Consultants.

What do you think?

login ~login ~login ~login ~login ~login ~login ~login ~login ~login ~login ~

search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search ~ search