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What is an IPO?When an unlisted company offers its shares to the public for the first time, the process is known as Initial Public Offering (IPO). An IPO paves the way for listing of the company’s shares on a recognized stock exchange.
What are the different kinds of issues?Issues can be either Public, Rights of Preferential issues.A
Public issue can be either an
IPO where a company offers its securities to the public for sale for the first time. A public issue can also be a
follow on public offering (FPO) where an already listed company either makes a new share issue to the public or a fresh issue to existing shareholders.A
Rights issue is an issue of shares by a listed company to its existing shareholders as on a record date. The additional shares offered to the investors under a rights issue are usually in proportion to the investors’ existing holdings in the company.A
Preferential issue, also known as private placement involves an issue of shares or convertible securities by a listed company to a specific group of investors as defined under Section 81 of the Companies Act, 1956. To be eligible to raise capital via a private placement, the issuer company has to meet all the norms mentioned in the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP).
What is a Follow on Public Offering (FPO)?When a listed company makes a fresh issue of shares to the public or an offer for sale to the public, through an offer document, it is called a
follow on public offering (FPO). However, a company must continue to meet the listing norms in order to raise funds via this process.
What is a Fixed Price IPO?A fixed price issue is an issue where the price of each share on offer is mentioned in the offer document by the issuing company. After subscription, the issuer decides the basis of allotment depending upon under/over subscription of shares.
What is a Book Building issue?In this kind of issue, the price of each share is not fixed at the outset. Instead, the offer document specifies a price range i.e. floor (lower) price and Cap (upper) price. The price of the issue is determined on the basis of the demand for the issue from prospective investors, at different price levels within the specified range.
What is a difference between Fixed Price issue and Book Building issue?In Book Building securities are offered at prices above or equal to the floor prices, whereas securities are offered at a fixed price in case of a public issue. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.
What is a cut off price?This term relates to a book build issue wherein the issuing company must specify the price band or a floor price in the offer document. The actual price of the issue is discovered on the basis of demand for the issue. The actual price must be within the price band or any price above the floor price. This issue price is called Cut off price. Only retail individual investors have an option of applying at this price.
What is the eligibility requirement for making public issues?For raising funds via a public issue including an IPO and FPO the company must meet the below mentioned norms, as specified by capital market watchdog SEBI.Entry Norm I– the issuer shall meet the following norms:a) Have Net Tangible Assets of at least Rs. 3 crores for 3 full years.b) Have Distributable profits in atleast three yearsc) Have Net worth of at least Rs. 1 crore in three yearsd) If there is a change in name, atleast 50% revenue for preceding 1 year should be from the new activitye) The issue size does not exceed 5 times the pre- issue net worthIn order to offer flexibility to potential issuers, SEBI has allowed two alternative routes to companies not satisfying any of the above conditions, for accessing the primary Market, as under:Entry Norm IIa) Issue shall be through book building route, with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs)b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 years.Entry Norm IIIa) The “project” is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s)b) The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for at least 2 yearsThe company shall also satisfy the criteria of having at least 1000 prospective allotees in its issue, in addition to satisfying the aforesaid eligibility norms.Are there any exemptions allowed from the above mentioned eligibility norms?Yes, SEBI has laid down certain exemptions from the aforesaid eligibility norms that a prospective issuer needs to meet in order to raise funds via a public issue. The exemptions from these eligibility norms includea) Private Sector Banksb) Public sector banksc) An infrastructure company whose project has been appraised by a PFI or IDFC or IL&FS or a bank which was earlier a PFI and not less than 5% of the project cost is financed by any of these institutions.d) Rights issue by a listed company.
What is the role of SEBI in an issue?Being the capital market regulator,SEBI plays a critical role in the primary market. Any company which wants to go public, or a listed company which wants to make a rights issue of more than Rs 50 lakhs must file a draft offer document with SEBI for its observations. The validity period of SEBI’s observation letter is three months only, meaning that the company has to open its issue within the three-monthperiod.
Who is a Retail investor?According to regulations, a Retail Individual Investor means an investor who applies or bids for securities of or for a value of not more than Rs.200,000.
What is the process of investing in an IPO?We, at Reliance Securities, offer you an incredible opportunity to invest in IPOs in a simple and hassle free manner. To invest in an IPO, you must fill in the required details such as the number of shares etc. in the online screens by selecting IPO page under Investment Products and then selecting desired issue. We will do all the required paperwork on the basis of the information provided by you.
Can an investor view his transactions?Yes, you can view your transactions online. All you have to do is to click IPO Order Book link on Investment Products. You need to specify the date range and all transactions for specified date range will be displayed at your fingertips.
Can an investor modify his IPO transactions?No, you cannot modify your transactions once an order is successfully placed.
Can I place orders in IPO against stocks held in my demat account?No, IPO orders can be placed only against 100% cash.
How does an investor know if his application is accepted or rejected?We will intimate our clients via an e-mail over the status of their application.
How does an investor know whether he is allotted shares?We will intimate our clients via an e-mail over the allotment of shares. Clients can also check their Demat account balance with their DP to see whether they have been allotted shares.
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