1. What is IPO?
An IPO is the process through which a company offers its shares to the public for the first time. By doing this, the company gets listed on a stock exchange and raises capital from investors. The primary purpose of an IPO is to gather funds for business expansion, debt repayment, or investment in new projects.
2. What is the difference between IPO and FPO
- IPO (Initial Public Offering): This is the first time a company offers its shares to the public, transitioning from a private to a public entity.
- FPO (Follow-on Public Offering): This occurs when a company that is already publicly listed offers additional shares to raise more capital.
3. What are the type of IPOs?
1. Fixed Price Issue: The Company offers shares at a predetermined fixed price.
2. Book Building Issue: A price range (price band) is provided, and investors place bids within that range.
3. Offer for sale (OFS): Existing shareholders sell their shares to the public, and no new shares are issued.
4. What is the process of an IPO?
1. Planning: The company assesses its financial needs and decides how much capital to raise.
2. Filing: A Red Herring Prospectus (RHP) is submitted to SEBI.
3. Price Band Setting: The price range for the IPO is finalized to guide investors.
4. Subscription: Investors apply for shares during the IPO period.
5. Allotment: Shares are allocated to investors, and refunds are issued for unallocated shares.
6. Listing: The company’s shares are listed on a stock exchange, and trading begins.
5. What is a Price Band in IPO?
A Price Band is the range within which investors can bid for shares in a book-building IPO. It consists of two limits: the lower price (Floor price) and the upper price (cap price).
6. Wha is the difference between a Book Building Issue and a Fixed Price Issue?
- Book Building Issue:
- 1) The price is determined through bidding.
- 2) Investors bid within the given price band, and the final price is decided based on demand.
- 3) It provides flexibility and transparency.
- Fixed Price Issue:
- 1) Shares are offered at a fixed price, decided beforehand.
- 2) Investors know the price upfront but may get clarity on demand.
7. What is a lock-in period in an IPO?
The Lock-in-period is a specific duration during which certain shareholders ( e.g.- promoters, anchor investors) cannot sell their shares after the IPO listing.