So, Zomato went public. They hopped on to the IPO bandwagon in time and their business is now doing wonders for them. It could have gone south for them but fortunately, their plan worked out well and here they are, still delivering value. What\u2019s advertising got to do with IPO anyway? Well, wherever there are brands, there\u2019s advertising, or at least, marketing involved to a great extent.<\/p>\n\n\n\n
The IPO Fever<\/strong><\/p>\n\n\n\n Before jumping the gun, let\u2019s first understand what IPO actually means. To explain IPO in the simplest way \u2013 it is a process under which a private company offers its shares to the public with the basic purpose to raise money from investors. This process is how a private company gradually transforms into a publicly listed firm. Going further technical, there\u2019s also an Offer For Sale (OFS) that allows some of the existing promoters to cut down their shareholding in listed companies. However, money that\u2019s raised from OFS goes into the private investors\u2019 pockets who offer their equity for sale.<\/p>\n\n\n\n The Unicorn Status:<\/em><\/strong> Firms that surpass their company valuation of $1 billion, are usually entitled to opt for IPOs, but the rules are not fixed. Only some of the big names in the industry with a proven track record usually get to apply for an IPO to get listed publicly.<\/p>\n\n\n\n It\u2019s not just about Zomato. Many companies ranging from tech start-ups in the food & beverage industry, cosmetics, manufacturing, BFSI and so many more have gone public or are expecting to go public in 2021. Marketing, in the IPO scenario, has a very significant role to play and it all boils down to one of the quintessential P\u2019s of marketing \u2013 Price!<\/p>\n\n\n\n If underpricing impacts the IPO, it potentially affects the product market performance. How? Underpricing possibly attracts eyeballs because of the media presence and creates considerably valuable publicity. But, is it going to make the public rich or drain them of their life savings? That\u2019s where the Draft Red Herring Prospectus (DRHP) comes into the story.<\/p>\n\n\n\n The Red Herring of the IPO Fairytale<\/strong><\/p>\n\n\n\n Every story has a clue or a piece of information that is intended to be misleading or distracting. IPO is no different. There are conmen who steal from the public and there are genuine businesspeople. How do we know who\u2019s who?<\/p>\n\n\n\n The Draft Red Herring Prospectus (DRHP)<\/strong> is the looking glass. DRHP is an offer document filed by a company addressed to the Security & Exchange Board of India (SEBI) in order to raise money from the public by selling the shares of the company to its investors. Once SEBI reviews the DRHP, it either clears it for final proceedings or seeks changes from the merchant bankers who are handling the IPO on behalf of the company.<\/p>\n\n\n\n The DRHP includes crucial details about the IPO including the company\u2019s business, operations, promoters, financials, industry position and shareholding pattern. The document also outlines the purpose of the company to raise funds from the public and how it plans to use the money raised.<\/p>\n\n\n\n The scenes from \u201cThe Wolf of the Wall Street<\/em>\u201d or \u201cGuru<\/em>\u201d might be playing in your head while you think of IPOs, but the marketing of an IPO is a different story altogether. Marketing of the IPO, as mentioned earlier, revolves around \u2018price\u2019 followed by \u2018promotion\u2019, of course (that\u2019s where advertising joins the party).<\/p>\n\n\n\n Marketing \u2013 The Party-starter<\/strong><\/p>\n\n\n\n IPOs look at parties differently than normal people and advertising is nothing close to normal. Its job is to think out-of-the-box and that\u2019s what makes this party more interesting. When an IPO follows the steps to first present the proposal, get the underwriting agreement done, assemble the team and process the documentation, marketing materials are then required for the team to promote the new stock issuance.<\/p>\n\n\n\n The team of underwriters and executives promotes the issuance to ascertain the demand and arrive at a final offering price. Throughout the marketing process, the team is allowed to revise the price based on their financial analysis and the market trend.<\/p>\n\n\n\n