ABCD of IPO
ABCD of IPO will make you learn about some small details related to initial public offerings. This is written keeping in mind the newbie investors of the market or beginners in the stock market. To begin with, let’s understand what is an IPO is?
IPO: Initial Public Offering.
IPO is a route a company uses to raise funds from the public by selling its equity in the primary market, for the first. When a company floats its IPO, the company gets listed on an exchange and then post its debut on the exchange, the shares come to the secondary market, its traded over national exchanges NSE and BSE.
The stock exchange where the IPO is listed. It’s the marketplace, where shares are traded. Mainline IPO’s are listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), whereas SME IPO’s are listed on NSE EMERGE and BSE SME Platform of the respective exchange.
IPO Opening Date/ Closing Date
It’s the date when shares of the company become available for the common public to subscribe for. From this date, investors can apply for the IPO, in the bidding IPO process. The closing date is the last day for the investors to put their bid to subscribe to the IPO.
On this day, shares are allotted to the investors who have put in their bids. However, every investor doesn’t get an allotment. As the shares are allotted through a lottery, as most IPOs mostly receive more bids than total shares available for sale. So investors, who are lucky to have got the shares, get allotment for the same on this particular day. Allotment can be checked on the official website of BSE or the site of the official registrar of the IPO.
Initiation of Refunds
When an investor, who applied for the IPO, doesn’t get an allotment, the amount blocked for the IPO is released by the firms, and the amount gets credited back to the investor’s bank account.
Credits of shares to Demat Account
On this day, shares allotted to the investors get credit to the investor’s respective Demat account.
IPO listing date
It is the day when the IPO makes its debut on the exchange. The IPO post this day starts trading in the secondary market.
Face value is the original value of stock listed on the certificate of incorporation of the stock in question.
IPO Price Band
This is the price band at which IPO is available to subscribers. Sometimes there is a price band or it can also be a fixed price. The price band is a range, e.g Rs100-Rs130, which means an investor can bid for IPO at any price within the given range.
This quantifies the number of shares in one block. If an IPO says it has 6 shares in one lot, it means, that investors will have to buy a minimum of one lot i.e. 6 shares. However, no. of shares in one lot is decided by the company.
It’s the total number of shares multiplied by the price of the share, i.e the total fund a company is intending to raise through the IPO.
It refers to the equity shares issued for the first time and selling them to the investors. The net proceeds for the sale of new shares go to the company selling its shares and are utilized for various purposes like repayment of the debt, organic growth, and many more.
Offer for sale
Offer for sale means selling of shares by existing shareholders it could be an existing promoter of the firm/investors of the company. Proceeds from the sale of these shares don’t go to the company but the investor or promoter selling their shares.
Fixed Price Issue
This is the price when investors already know the allotment price of the share in advance.
Book Building Process
In the building process, an indicative price range is known to the investors. The price at which securities will be offered/allotted is not known in advance to the investor.
How to apply for an IPO?
- Requirements for applying for IPO
To apply for any of the IPOs, investors need to have:
1. Bank Account
2. PAN Card
3. Demat Account
- Once the investor has all the papers ready, he/she can apply for the IPO at the IPO opening date, through his/her stockbroker.
Nowadays, it has become easy for investors to apply for the IPO through online platforms like invest19.com, where one can choose from the number of brokers and can open their Demat account in just 5 minutes and can apply for IPO from the comfort of their homes.