Why A Private Limited Company Decides Become Public Limited Company?

[Ishita Ramani]

Introduction

Going public is the process by which a private company becomes a publicly traded entity through an Initial Public Offering (IPO). This means that the company’s shares are available for purchase by the general public, and the company becomes publicly owned. Going public is usually dons to raise capital for expansion, research and development, or to payoff debt. Additionally, venture capitalists may use IPOs as an exit strategy to get out of their investment in a company.

What is a Public Limited Company?

A public company is a corporation whose ownership is distributed among public shareholders through publicly traded stock shares. When a privately held company decides to go public, it offers securities for sale to the general public and obtains a listing on a stock exchange. Going public and being listed on stock exchanges is a significant milestone in the life cycle of a company and is a matter of reputation for companies.

Reasons why a company decides to become Public Limited Company

1. Increase Reputation and Goodwill

When a company goes public, the public pays close attention to its brand and market. It is an outstanding opportunity for a company or an organization that has never been in the public eye to become highly visible in order to attract more quality talent, opportunity, and credibility. An IPO (Initial Public Offering) also generates a major amount of goodwill and publicity for the organization.

2. Raise Capital

Going public allows a company to raise additional capital by selling shares to the public. The proceeds may be used to expand the business, fund research and development, or payoff debt.

3. Liquidity and Valuation

By going public, a company provides liquidity for its shareholders. The public offers creates a market for the company’s shares that gives investors the ability to sell their holdings. It also enhances the wealth of shareholders who can use the publicly traded stock as collateral loans.

Going public sets a market value for a company’s shares. They are only worth what someone is willing to pay for them, and the public market provided a transparent and objective way to determine that value.

4. Stakeholders Profitability

The company is growing incredibly fast because of a great brand image, a strong presence, and enhanced performance. As a result, shareholders of the companies enjoy higher revenues and liquidity. Over time, shareholders will also be able to make more profit or earning from the company’s current shares. As a result, if the business activities grow significantly high because of this opportunity, it could be very profitable for shareholders.

5. Mergers and Acquisitions

Well-managed businesses are often sought after by large corporations for mergers and acquisitions. Additionally, the IPO process can be utilized to finance such transactions. A successful IPO not only increases a company’s value, reputation, and status, but also provides additional funds to support mergers and acquisitions.

6. Capital Generation

Going public is a common way for companies to raise capital. The capital can be used to expand corporate operations, invest in research, payoff debts, build infrastructure, and more. The objective is to have funds set aside for future growth. The more capital a company has, the greater the likelihood of expansion.

Pvt Ltd Company Registration in India is the process of legally establishing a private limited company. It involves obtaining a Director Identification Number (DIN) and Digital Signature Certificate (DSC), getting name approval, drafting the Memorandum of Association (MOA) and Articles of Association (AOA), filing incorporation documents, and obtaining the Certificate of Incorporation. Additional steps include obtaining a PAN and registering for GST. Professional assistance is advisable for a smooth and compliant registration process.

Summary

Going public can be a great way for a Private Limited Company to grow. By becoming a publicly traded entity, companies with solid foundations can reap several benefits from going public. A company going public is often viewed as a sign of growth, which benefits its public image. One of the more significant benefits of going public is raising capital, which can be used to expand corporate operations, invest in research, build infrastructure, payoff debts, and more.