How to prepare companies for IPO on main stock exchange

At some point, the IPO stops being a distant idea.

A growth discussion turns into questions about disclosures, board structure, and whether the numbers would hold up in public markets. Merchant bankers enter the conversation. Timelines suddenly matter. The shift is subtle, but real.

For many Indian companies, that’s the moment when the question changes from can we grow to are we ready to be public.

Preparing for a mainboard IPO isn’t about paperwork or valuation alone. It’s about readiness: financial, operational, and strategic long before the filing begins.

This guide walks through how Indian companies prepare for an IPO on the main stock exchange, step by step.

What Is an IPO?

An Initial Public Offering (IPO) is when a privately held company opens up its ownership to the public and lists its shares on a stock exchange such as the NSE or BSE for the first time.

At a basic level, an IPO allows a company to raise capital from public investors. But for companies planning a main board listing, it goes much further than that.

An IPO does three important things at once:

• It turns a private company into a publicly listed one
• It brings in public shareholders alongside promoters and early investors
• It places the business under continuous regulatory and market scrutiny

Once a company lists on the main board, the way it operates changes, often more than promoters expect at the start.

Why Do Indian Companies Choose to Go Public?

Most Indian companies start thinking about an IPO when they reach a point where private funding, internal cash flows, or bank debt are no longer enough to support the next phase of growth. With strong activity on the main board in recent years, going public has also become a realistic option for many mid-sized, well-run businesses.

Companies usually choose the IPO route for a few practical reasons:

• To raise capital at scale: In 2024–25, main board IPOs raised over ₹1.7 lakh crore, showing the depth of capital available in public markets compared to most private funding routes.
• To create liquidity for promoters and early investors: Many recent IPOs included offers for sale (OFS), allowing partial exits while keeping control of the business.
• To increase visibility with investors: Companies like DOMS Industries, IREDA, and Netweb Technologies saw a noticeable rise in investor and analyst attention after listing.

An IPO can unlock capital and visibility, but it also brings constant scrutiny. Companies that benefit the most are usually the ones already comfortable operating with discipline and transparency.

How Does an IPO Work on the Indian Main Stock Exchange?

An IPO on India’s main board is a step-by-step process. Here’s a concise view of how it actually happens:

1. Check Readiness – Assess financials, governance, and compliance before considering a listing.
2. Hire Advisors – Bring in merchant bankers, auditors, and legal counsel to guide the IPO.
3. Prepare DRHP – Draft the Red Herring Prospectus with business details, financials, risks, and use of funds.
4. Regulatory Review – SEBI and stock exchanges review the DRHP and issue clarifications.
5. Market & Book Building – Roadshows, anchor allocations, and book-building determine demand and pricing.
6. Allot & List – Shares are allotted and trading begins; ongoing reporting and governance obligations start.

How to Prepare a Company for an IPO

Preparing for an IPO means fixing what public markets will examine long before they start pricing your shares.

Step 1 – Assess Whether the Company Is IPO-Ready

Before even thinking about filing, you need a formal IPO readiness assessment. Experts from EY and PwC recommend starting this 12–24 months before your planned IPO. The goal is simple: identify gaps early so you don’t hit roadblocks later.

Readiness Scorecard 

Dimension	What to Check	Maturity Score (0–3)
Financial Track Record	3–5 years of audited accounts; consistent profitability or growth	0 = Poor / 3 = Strong
Governance	Independent directors, audit committee, board practices	0 = Weak / 3 = Robust
Reporting & MIS	Monthly/quarterly financial packs; reliable management reporting	0 = Ad-hoc / 3 = Streamlined
Legal Clean-Up	Related-party transactions, pending litigations, compliance	0 = Multiple issues / 3 = Clean
Operational Scale & Management Bandwidth	Ability to handle public scrutiny and investor interactions	0 = Limited / 3 = Full readiness

How to interpret:

• Score each dimension 0–3.
• If more than two critical dimensions score below 2, delay filing and create a 12-month remediation plan to strengthen weak areas.

A structured readiness assessment gives a clear picture of where your company stands, what needs fixing, and how confident you can be in moving forward toward the IPO.

Step 2 – Strengthen Financials and Reporting

Once readiness is assessed, the real work starts. This step is about making your numbers predictable, explainable, and defensible, because auditors, merchant bankers, and investors will test them from every angle.

What gets examined first (and hardest)

Quality of earnings

• Separate recurring profits from one-offs (asset sales, subsidies, reversals).
• In recent IPO reviews, advisors flag that many post-listing disappointments came from unpredictable EBITDA, not weak growth.

The question investors ask: Can this performance repeat?

Audit trail & accounting consistency

• Lock accounting policies early; avoid last-minute changes.
• Maintain 2–3 years of clean audits with clear Indian GAAP / IFRS reconciliations if applicable.

Internal controls (SOX-like discipline)

• Implement strong internal controls 12–18 months pre-IPO.
• Deloitte and EY frameworks recommend early controls around revenue recognition, expenses, related parties, and cash management.

This reduces audit friction and builds confidence during diligence.

Example: KPI presentation in the DRHP 

KPI	SaaS Company	Manufacturing Company
Revenue Growth	YoY recurring revenue growth	Volume-led revenue growth
EBITDA Margin	Adjusted EBITDA margin	EBITDA margin by plant
Gross Margin Trend	Subscription margin stability	Input cost vs pricing spread
Free Cash Flow	Burn vs breakeven path	Operating cash conversion
Customer Concentration	Top 5 clients % of revenue	Top customers / OEM exposure
Churn / Order Visibility	Logo & revenue churn	Order book / capacity utilisation

 

Step 3 – Fix Corporate Governance Early

Corporate governance is one of the first things regulators and investors test, and one of the hardest to fix late. The rule of thumb advisors follow: if it looks rushed, it will be questioned.

Before filing, the basics must already be in place, not proposed, not “in progress.”

• Independent board in place: At least the required number of independent directors, actively participating, not symbolic appointments.
• Audit Committee constituted: With independent directors and a clear charter covering audits, controls, and financial oversight.
• Compliance officer appointed: SEBI ICDR (2025) explicitly requires a designated Company Secretary / Compliance Officer responsible for regulatory compliance and disclosures.

These are expected to be operational well before filing, not created just to meet checklist requirements.

Step 4 – Align Legal, Tax, and Compliance Structures

This step is about removing structural friction. Most IPO delays don’t come from growth or demand, they come from unresolved legal and tax complexity that surfaces during DRHP review.

SEBI expects a simple, transparent ownership structure by the time you file.

• Eliminate complex cross-holdings: Layered entities and circular holdings attract scrutiny and clarification requests.
• Rationalise preference shares: Convert or clearly define rights where required to avoid valuation and control ambiguity.
• Resolve pledged shares early: SEBI’s 2025 guidance tightens disclosure around lock-ins and pledged promoter holdings, unresolved pledges raise immediate red flags.

The cleaner the cap table, the smoother the SEBI review.

Related-party transactions (RPTs)

This is one of the most examined sections in the DRHP.

• Document all RPTs clearly
• Reduce or rationalise where possible: ICDR amendment commentary highlights that avoidable or recurring RPTs often trigger follow-up questions from regulators and investors.

Auditors will test whether these transactions are arm’s length and ongoing for valid commercial reasons.

Tax readiness and contingencies

Tax issues don’t need to be perfect, but they must be understood and disclosed cleanly.

• Resolve major disputes where possible
• Clarify tax provisions and exposures
• Prepare disclosures early: Moss Adams and Forvis guidance emphasise starting tax readiness 12–18 months pre-IPO to avoid last-minute valuation or pricing impact.

Step 5 – Prepare the IPO Story for Investors

By the time you reach this step, the market already knows your numbers. What it’s trying to understand now is how those numbers behave in the future. That’s where the IPO story comes in, it’s the lens investors use to value the business.

How investors listen to your story?

They want to see whether your business model, unit economics, and scaling plan connect logically, and whether the use of IPO proceeds actually strengthens that loop. EY’s guidance on equity stories points to this: valuation expands when investors can clearly see what scales, what doesn’t, and what management plans to fix with public capital.

Final Thoughts

Companies that prepare early control the process. Companies that don’t end up reacting to regulators, advisors, or the market.

This is where CFOSME fits in. We work with growing Indian companies to build IPO-ready finance functions, strengthening reporting, governance, controls, and decision-making well before the filing stage. Not as auditors or bankers, but as hands-on CFO partners focused on readiness and execution.

If you’re evaluating whether your company is moving toward a mainboard IPO or need clarity on what needs fixing first, speak with a CFOSME expert. A short consultation can help you understand where you stand and what to prioritise next.