+ What is an IPO?
IPO or Initial Public Offer is a way for a company to raise money from investors for its future projects and get listed to Stock Exchange. Or An Initial Public Offer (IPO) is the selling of securities to the public in the primary stock market.
Company raising money through IPO is also called as company ‘going public.
From an investor point of view, IPO gives a chance to buy shares of a company, directly from the company at the price of their choice (In book build IPOs). Many a times there is a big difference between the price at which companies decides for its shares and the price on which investor are willing to buy share and that gives a good listing gain for shares allocated to the investor in IPO.
From a company prospective, IPO help them to identify their real value which is decided by millions of investor once their shares are listed in stock exchanges. IPOs also provide funds for their future growth or for paying their previous borrowings.
+ Who decides the Price Band?
Company with help of lead managers (merchant bankers or syndicate members) decides the price or price band of an IPO.
SEBI, the regulatory authority in India or Stock Exchanges do not play any role in fixing the price of a public issue. SEBI just validate the content of the IPO prospectus.
Companies and lead managers does lots of market research and road shows before they decide the appropriate price for the IPO. Companies carry a high risk of IPO failure if they ask for higher premium. Many a time investors do not like the company or the issue price and doesnt apply for it, resulting unsubscribe or undersubscribed issue. In this case companies either revises the issue price or suspends the IPO.
+ What is Follow on public offering or FPO?
Follow on public offering (FPO) is public issue of shares for already listed company.
+ What is a Right Issue?
Rights Issue (RI) is an issue of shares of an already listed company to existing share holders.
+ Is it mandatory to have PAN number to apply in an IPO?
Yes, Since July 2006, SEBI made PAN number mandatory for IPO applicants. Forms submitted without PAN number or wrong PAN numbers are considered as faulty application and they are not considered for IPO allotment.
Its highly recommended that you double check your PAN number information before submitting the IPO application form. If you are filling the IPO application through online stock broker, make sure he has correct information.
+ Can I apply in an IPO through multiple applications on same name?
No, one person cannot apply multiple times through multiple applications for an IPO. Its a rule and if you apply in an IPO though multiple applications with same name or same demat account or same PAN Number, all of your application will be rejected.
If you would like to place order for multiple application, it works if you apply one each of your family members name. But again all eligible family members should have a demat account and a PAN number.
+ What is Basis of Allocation or Basis of Allotment?
Basis of Allotment or Basis of Allocation is a document publishes by registrar of an IPO to stock exchanges and IPO investors. This document provides information about final price fixed for an IPO, issue subscription (bidding) information or demand of an IPO and share allocation ratio.
The IPO allotment information is categorized by number of shares applied by an applicant. For each such category detail bidding information is provided in this document including number of valid application received, total number of share applied, ratio of the allotment and number of shares allocated to the applicants.
Ratio of the allotment is a critical field for IPOs oversubscribed multiple times. This field tells how many applicants will receive single lot of shares among a certain number of applicants. For example, ratio 1:8 means only one out of eight applicant received one lot of shares; ratio value FIRM means all the applicants are eligible to receive certain amount of share.
+ What is the minimum & maximum investment one could do in HNI category?
Any bid made by the Retail Investor in excess of Rs 1,00,000 is considered in the HNI category (Non Institutional Investors category of IPO).
Thus minimum investment amount for HNIs in an IPO is Rs 1,00,000 and the maximum investment amount is the max amount in the Non Institutional Investors of the IPO.
+ What is right issue?
+ What are the risk factors involve in applying in an IPO?
+ What are the determining factors for the selection of an ipo to invest?