IPO Knowledge Base
Why companies go public through IPO?
Usually it is not possible to buy shares in a private company. A potential investor can approach the owners, but they’re not obliged to sell any shares. However, public companies sell at least a portion of themselves to the public and they also trade on stock exchanges. Public companies have thousands of shareholders and are [...]
Who is qualified institutional buyer (QIBs)?
QIBs are those institutional investors who are perceived to possess expertise and the financial strength to evaluate and invest in the capital markets. A QIB is defined as -
a. Public financial institution as defined in section 4A of The Companies Act, 1956;
b. Scheduled commercial banks;
c. Mutual funds;
d. Foreign institutional investor registered with Sebi;
e. Multilateral and [...]
What is IPO differential pricing?
Pricing of an IPO where one category is offered shares at a price different from the other category is called differential pricing. According to regulatory guidelines, differential pricing is allowed only if the securities to applicants in the firm allotment category are offered at a price higher than the price at which the net offer [...]
What is a IPO cut-off price?
In book-building issues, the issuer is required to indicate either the price band or a floor price in the Red Herring Prospectus. The actual issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut off price”. This is decided by the issuer [...]
What is IPO hard underwriting/soft underwriting?
Hard underwriting refers to an exercise when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. If the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to [...]
What is IPO open book/closed book?
In book-built issues issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is known as open book system of book building. Under closed book building, the book is not made public and the bidders will have to take a call on the price at [...]
What is an e-IPO?
A company can also issue capital to public through the online system of the stock exchange. The appointment of various intermediaries by the issuer includes a prerequisite that such members/registrars have the required facilities to accommodate such an online issue process.
How is the IPO Retail Investor defined as?
Retail individual investor refers to an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000.
Is there any preference while doing the IPO allotment?
The allotment to the Qualified Institutional Buyers (QIBs) is made on a discretionary basis. The discretion is left to the merchant bankers who first disclose the parameters of judgment in the Red Herring Prospectus. The merchant bankers are free to set their criteria and mention the same in the Red Herring Prospectus.
What is IPO Reserved Categories or reservation on competitive basis?
Reservation on competitive basis refers to allotment of shares made in proportion to the shares applied for by the concerned reserved categories. Reservation on competitive basis can be made in a public issue to the employees of the company, shareholders of the promoter companies in the case of a new company and shareholders of group [...]
