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IPO - An Introduction Initial Public Offers

IPO - An Introduction to Initial Public Offers

What is an IPO?

IPO stands for Initial Public Offering. It is the new offer of shares from a company. This is done by offering those shares to the public, which were held by the promoters or the private investors prior to the IPO.

A follow on Public Offer, commonly known as FPO is one where the company is already listed and comes out with additional offer for sale.

What is meant by Book Building and Fixed Price issue?

A book built issue is one where the demand for the securities proposed to be issued by a company is elicited and built up and the price of the security is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. In book building, a price band is specified. The lower end of the price band is called the Floor Price and the higher end of the Price band is called the Cap Price

"Fixed Price issues", as the name suggests, are those where the company decides a particular price for the issue.

What is meant by Minimum and Multiple Quantity in a Book Building Issue?

In a book built issue, the company specifies a minimum quantity that the customer needs to apply to get eligible to place the bids.

Multiple quantity specifies the Lot size in which the investor can apply for an IPO. For e.g. An IPO may specify a minimum quantity of 100 and a multiple quantity of 50.So in order to apply for the IPO the investor will have to apply for at least 100 shares and in case he wants to apply for more shares, then he may apply in multiples of 50. So in this case he can apply for 100, 150, 200, 250 etc.

What is meant by Cut off Price and what is its significance?

Cut off price could be any price within the Price band .A bid submitted at cut off price is a valid bid at all price levels within the price band. While applying for IPO's online, the Cap price will be considered if the customer chooses the Cut off price and amount payable on application will be calculated as cut off price multiplied by the quantity applied for. Please note that Non-institutional bidders cannot apply at cut off price.

What is difference between a retail bid and a non -institutional bid?

The maximum amount that an investor can apply in the retail category is upto Rs. 1 lakh. If an investor wishes to apply for above Rs. 1 Lakh, the bid would be considered in the non-institutional category.

Can an investor revise his bids?

Yes, an investor can revise his bid before the close of the issue timing only.

IPO - An Introduction to Initial Public Offers

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