Different types of IPO

In this current IPO market, it is very much necessary that we should know what are the different type of IPO through which a company raises money.

  1.  Offer for Sale: These are the type of IPO where existing investors of the company are selling their stake in the company. The money raised through these type of IPO will not go to the company.
  2. Fresh Issue: These IPOs are raised by diluting promoters share in the company. The money raised through these IPO will directly go to company for its business. Any investor can know about the objectives of IPO through its red herring prospectus.

Read: Know all about IPO?

IPOs are offered on 2 types of platform

  1.  Main Stream IPO: The IPO issue should be greater than 25 crores and generally above 150 crores. Retail participation is encouraged therefore IPO lot size is less than Rs 15,000.
  2. SME IPO: The IPO issues should be less than 25 crores.  Retail participation is not encouraged and all investors are encouraged to invest after an in-depth analysis of the company. Therefore IPO lot size is greater than Rs 80,000.

Investing in SME IPO is generally riskier than the main stream and an investor should be cautious about the risk involved in the investment. Fresh Issue, often gives more advantage to the company as the funds collected directly goes to the company. Fresh Issue also promotes the confidence among investors but can also depend on individual IPO.

Read: How to invest in a winning IPO?

Read: Who are the Investors participating in IPO?