Introduction-
A public listed company, also known as a publicly traded company, is a type of business organization that has issued shares of its stock to the public through a public stock exchange. This means that anyone can buy and own a portion of the company by purchasing shares of its stock.
When a company decides to go public, it typically goes through an initial public offering (IPO), which involves issuing new shares of stock to the public for the first time. The IPO process usually involves working with investment bankers, lawyers, and accountants to prepare and file a registration statement with the relevant regulatory authorities, such as the Securities and Exchange Commission (SEC) in the United States or the Securities and Exchange Board of India (SEBI) in India.
Once the company’s shares are listed on a stock exchange, anyone can buy and sell the shares on the open market. This can provide liquidity to the company’s shareholders and allow the company to raise additional capital by issuing additional shares in the future.
Being a public listed company also involves complying with various regulatory requirements, such as filing periodic financial statements, holding annual shareholder meetings, and disclosing material information to the public in a timely and transparent manner. This can provide greater transparency and accountability to the company’s shareholders and the public.
Overall, becoming a public listed company can provide access to capital and greater visibility to the public, but it also involves greater regulatory compliance and scrutiny.
What is meant by public listed company?
A public listed company, also known as a publicly traded company, is a type of business organization that has issued shares of its stock to the public through a public stock exchange. This means that anyone can buy and own a portion of the company by purchasing shares of its stock.
To become a public listed company, a business typically goes through an initial public offering (IPO), which involves selling a portion of the company’s stock to the public for the first time. Once the company is listed on a stock exchange, its shares can be freely traded by investors, and the company’s stock price will fluctuate based on market demand.
Public listed companies are required to meet certain regulatory requirements, including financial reporting and disclosure, to ensure transparency and accountability to their shareholders and the public. They are also subject to oversight by regulatory bodies such as the Securities and Exchange Commission (SEC) in the United States or the Financial Conduct Authority (FCA) in the United Kingdom.
Registration Process of listed companies in India –
In India, the registration process for a company that wants to become a listed company involves several steps, including:
- Incorporation: The company must first be incorporated as per the provisions of the Companies Act, 2013. This involves obtaining a certificate of incorporation from the Registrar of Companies (ROC) after submitting the necessary documents and paying the prescribed fees.
- Appointment of a Merchant Banker: The company must then appoint a merchant banker who will assist in the listing process. The merchant banker will be responsible for preparing the draft offer document, filing the same with the Securities and Exchange Board of India (SEBI), and coordinating with various intermediaries involved in the process.
- Due Diligence: The company must undergo a due diligence process to ensure that all relevant information about the company and its operations is disclosed in the offer document. This involves preparing a prospectus that contains detailed information about the company, its financials, management, and other relevant details.
- Filing of Offer Document: The company must then file the offer document with the SEBI for approval. Once approved, the company can then move forward with the process of listing its shares on a recognized stock exchange.
- Listing and Trading: After the successful completion of the above steps, the shares of the company are listed on the stock exchange, and trading can commence. The company must continue to comply with the ongoing regulatory requirements of the stock exchange and SEBI to maintain its listed status.
SEBI rules for public listed company –
The Securities and Exchange Board of India (SEBI) is the regulatory body that oversees public listed companies in India. SEBI has established several rules and regulations that public listed companies must follow to maintain transparency, protect investors’ interests, and ensure fair practices. Some of the key SEBI rules for public listed companies in India are:
- Disclosure and Transparency: Listed companies must comply with SEBI’s regulations for continuous disclosure and transparency. They must disclose all relevant information about their financial performance, shareholding patterns, insider trading, and any other material information that could affect the stock price.
- Corporate Governance: Listed companies must comply with SEBI’s corporate governance guidelines, which include the appointment of independent directors, the establishment of a board of directors, and the formation of audit committees. The board must act in the best interests of the company and its shareholders.
- Insider Trading: SEBI prohibits insider trading, which means that a person in possession of non-public information must not use it to trade in the company’s securities. Listed companies must take measures to prevent insider trading and ensure that their employees, directors, and officers are aware of the prohibition.
- Takeover Code: SEBI has established a takeover code that regulates the acquisition of shares or voting rights in a public listed company. The code is designed to protect the interests of minority shareholders and prevent any unfair practices.
- Delisting Regulations: SEBI has established regulations for the delisting of securities, which provides a framework for companies to voluntarily delist their securities or for regulators to mandate delisting.
These are some of the key SEBI rules for public listed companies in India. Public listed companies must comply with all relevant regulations and guidelines to maintain their listed status and protect their shareholders’ interests.
TOTAL PUBLIC LISTED COMPANIES IN INDIAN –
As of February 2023, there are over 5,000 public listed companies in India. These companies are listed on the two major stock exchanges in India, namely the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), as well as a few other smaller stock exchanges.
The NSE is the largest stock exchange in India, and it has over 1,600 listed companies. The BSE, on the other hand, has over 5,000 listed companies, including many of India’s largest corporations.
These companies operate in a wide range of industries, including technology, healthcare, energy, consumer goods, and financial services. Many of these companies are household names in India and have a significant impact on the country’s economy.
Investors can buy and sell shares of these public listed companies through a stockbroker or an online trading platform. It’s important to note that investing in the stock market involves risks, and investors should conduct their own research and consult with a financial advisor before making any investment decisions.
Advantages of Public listed Companies in India –
There are several advantages that public listed companies in India can enjoy, including:
- Access to Capital: One of the most significant advantages of going public is access to a large pool of capital. By issuing shares to the public, companies can raise significant amounts of capital that can be used for a variety of purposes, including expansion, research and development, and debt reduction.
- Liquidity: Public listed companies enjoy greater liquidity than private companies, as their shares can be bought and sold on stock exchanges, making it easier for shareholders to sell their shares when they need to. This can also make it easier for companies to attract new investors and to use their shares as a currency for acquisitions and other strategic transactions.
- Improved Credibility: Public listing can enhance a company’s reputation and credibility, as it demonstrates a willingness to operate transparently and be held accountable to a wider group of stakeholders. This can help to build trust with customers, suppliers, and investors, which can be an important factor in a company’s long-term success.
- Attracting Talent: Public listed companies can often attract top talent more easily than private companies, as they can offer stock options, bonuses, and other incentives that can help to align the interests of employees with those of the company and its shareholders.
- Better Valuation: Public listed companies are subject to greater scrutiny and analysis by investors, analysts, and regulators, which can lead to a more accurate valuation of the company’s stock. This can help to ensure that the company’s shares are priced fairly, which can benefit both the company and its shareholders.
Overall, going public can provide several advantages to companies, including access to capital, liquidity, improved credibility, talent attraction, and better valuation. However, becoming a public listed company also involves greater regulatory compliance and scrutiny, which can be a significant cost and burden for some companies.
Features of Public listed company –
Public listed companies have several features that distinguish them from private companies. Some of the key features of public listed companies include:
- Issuance of Shares: Public listed companies issue shares of their stock to the public through a public stock exchange, which provides a means for investors to buy and sell shares in the company.
- Regulatory Compliance: Public listed companies are subject to extensive regulatory compliance, including compliance with securities laws, accounting standards, and other regulations.
- Access to Capital: Public listed companies can raise significant amounts of capital by issuing shares to the public, which can be used to fund business expansion, research and development, and other initiatives.
- Shareholder Democracy: Public listed companies are owned by their shareholders, who have the right to vote on important issues such as the election of directors, major transactions, and other matters that affect the company.
- Greater Transparency: Public listed companies are required to disclose extensive information about their operations and financial performance, which provides greater transparency and accountability to shareholders and other stakeholders.
- Liquidity: Public listed companies enjoy greater liquidity than private companies, as their shares can be bought and sold on stock exchanges, making it easier for shareholders to sell their shares when they need to.
- Professional Management: Public listed companies typically have professional management teams with extensive experience in managing large and complex organizations.
- Brand Recognition: Public listed companies often enjoy greater brand recognition and credibility than private companies, which can help to attract customers, partners, and investors.
These are just a few of the key features of public listed companies. While going public can provide several advantages, it also involves greater regulatory compliance and scrutiny, which can be a significant cost and burden for some companies.
Structure of Public Listed Companies –
Public listed companies typically have a hierarchical structure that is designed to facilitate decision-making and ensure effective management of the company’s operations. The exact structure may vary depending on the size and complexity of the company, but the following are some of the key roles and responsibilities that are typically found in a public listed company:
- Board of Directors: The board of directors is responsible for overseeing the company’s operations and setting strategic goals for the company. The board is typically made up of a group of independent directors, executive directors, and non-executive directors, who are appointed by the shareholders.
- Chief Executive Officer (CEO): The CEO is responsible for the day-to-day management of the company and is accountable to the board of directors. The CEO typically has broad decision-making authority and is responsible for implementing the company’s strategy and achieving its financial and operational goals.
- Chief Financial Officer (CFO): The CFO is responsible for managing the company’s financial operations, including accounting, budgeting, financial reporting, and investor relations. The CFO typically works closely with the CEO and the board of directors to ensure that the company’s financial performance is in line with its strategic goals.
- Chief Operating Officer (COO): The COO is responsible for overseeing the company’s daily operations and ensuring that the company’s processes and procedures are efficient and effective. The COO typically works closely with the CEO and other senior executives to implement the company’s strategy and achieve its operational goals.
- General Counsel: The general counsel is responsible for providing legal advice and guidance to the company’s management team and board of directors. The general counsel is typically responsible for managing the company’s legal affairs, including contracts, regulatory compliance, and litigation.
- Corporate Secretary: The corporate secretary is responsible for managing the company’s corporate governance and compliance with regulatory requirements. The corporate secretary typically works closely with the board of directors and other senior executives to ensure that the company’s policies and procedures are in line with best practices and regulatory requirements.
These are just a few of the key roles and responsibilities that are typically found in a public listed company. Depending on the size and complexity of the company, there may be additional roles and responsibilities, as well as committees and sub-committees, that are designed to support effective management and decision-making.
Conclusion –
In conclusion, public listed companies are business organizations that have issued shares of their stock to the public through a public stock exchange. Becoming a public listed company can provide access to capital and greater visibility to the public, but it also involves greater regulatory compliance and scrutiny.
In India, there are over 5,000 public listed companies that are listed on the major stock exchanges, including the National Stock Exchange and the Bombay Stock Exchange. These companies operate in a wide range of industries and have a significant impact on the country’s economy.
Investing in public listed companies can be a good way for individuals to participate in the growth of the Indian economy and potentially earn a return on their investment. However, investing in the stock market also involves risks and requires careful research and analysis to make informed investment decisions. It is important for investors to consult with a financial advisor and to understand the risks and potential rewards of investing in the stock market.