Frequently Asked IPO Questions
Find relevant IPO related frequently asked questions so that you have fair idea on IPOs and IPO application process
It’s good that you’re interested in IPOs. We will explain you what is IPO in a bit detail to you. Let’s assume that you own an asset like a house but due to any personal reason, you need some money but you don’t have that much cash with you, what will you do? You may a tendency to either sell your asset or take a loan against that asset to meet your obligation. Similarly, any company floats an IPO to meet it’s requirement for money or capital for any reason.
Full Form of IPO is Initial Public Offering. As the name suggests when any company offers its shares to general public for the first time, then it is known as IPO, also subsequent public offerings are known as FPO. Any company has to follow a certain predefined process laid down by the market regulator ( SEBI). The whole process is known as IPO
Buying and Selling an IPO is as easy as eating saucy french fries, Trust me !!
All you need to follow, is the below steps before you can actually trade any IPO.
The whole process can be divided into three segments. – Getting an IPO trading account with a SEBI compliant broker.
You need to place a request for account opening with a broker to start shares trading. In India for online IPO applications, you need to follow ASBA (Applications Supported by Blocked Amount) channel and only Banks support “Hasslefree” ASBA route for IPO applications, therefore you will be required to open an account with any SEBI approved Bank Broker.
Next, You will be required to open a trading account as well as a Demat account with a bank broker for IPO shares purchase. Through the trading account you can place an IPO order whereas there is a need of a Demat account for storing Shares certificates in digital format issued by a company.
– Bidding for the IPO and waiting for the allotment of shares
Once you get a trading and a demat account with your broker then you place orders for shares through the terminal issued by your broker for the IPO purpose. You need to highlight the size of your order and at the same time you need to maintain the bank balance equivalent to your order size for successful order placement. Once you place an order, you will get a confirmation. Successful confirmation will mean that you can go on a small vacation of 4-5 days without worrying about the allotment of shares.
– Once shares are credited in your demat account then you can sell shares on listing day or any other day post listing
Usually shares are credited in demat account of allottee a day before the listing of the company on exchanges. Once shares are credited in your account, you can sell your shares on listing day or any other day as per your wish.
There is no fixed timeline for any of the IPO related events, but usually any company needs to wait for at least 6 months before getting listed on indian exchanges.
– The end to end IPO process is as follows
– Any company which shows an intent to bring an IPO, usually appoints an Investment bank for making the company public. An Investment Bank usually takes care of all the IPO related processes and requirements for a company
– After appointing the investment bank, the company needs to get the approval of SEBI by submitting the required forms
– One of the important aspect of IPO is red herring prospectus (RHP), every company has to bring out a RHP, which contains information like size of the IPO, financial statements, company details and future plans post IPO
– Once any IPO gets approval from SEBI, the hired agency conducts marketing of the IPO for the company through digital as well as conventional channels
– Just before the Issue is made open for investors, the hired Investment bank set the price band
– Next, the IPO is opened for bidding for investors, in India the bidding window is of 3 days for mainstream IPOs
– After the bidding is done, the company allots the shares and also declares the price at which shares are issued to investors.
– Once the bidding is closed, after 6 days the company get listed on both the exchanges, i.e NSE & BSE
Well fundamentally there is only one IPO type known as mainstream IPO or Regular IPO. But SEBI has laid down certain requirements which need to be fulfilled before any company bring an IPO.
As SMEs are the backbone of indian economy and generates employment, government has lowered the barriers for SMEs in bringing out IPOs so that SMEs don’t die in the want of capital. Therefore the IPO meant for SMEs is known as SME IPO
Paid up Capital
Minimum post issue paid up capital should be 10 crores rupees
Minimum post issue paid up capital should be 1 crores rupees & maximum limit is 25 crore rupees
Offer Document Vetting
Is done by SEBI
Is done by Exchanges
Minimum Retail IPO size
Rs 10K-Rs 15K
Usually 6 Months
Usually 3-4 Months