Why IPO Archives - DallalStreetInvestor

WHAT ARE DIFFERENT TYPES OF ISSUES IN IPO?

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

Offer for Sale: This part of the issue is said when existing investors of the company are selling their stake in the company. The money raised through this type of issue will not go to the company.
Fresh Issue: This type of issue is said when promoters are further diluting share in the company. The money raised through this issue will directly go to company for its business.

Any investor can know about the objectives of IPO through its red herring prospectus. Generally, most of the companies issue hybrid kind of issue in IPO (offer for sale + fresh issue).

IPOs are offered on 2 types of the platform:

Mainstream IPO: The main criteria for this type of IPO is that the issue size should be greater than 25 crores and is generally above 150 crores. Retail participation is encouraged therefore IPO minimum bid price is around Rs 15,000.
SME IPO: In this IPO the issue 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 minimum bid price is greater than Rs 80,000.

Investing in SME IPO is generally riskier than in the mainstream 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 it also depends on a lot of other factors.

Read: How to invest in a winning IPO?

Read: Who are the Investors participating in IPO?

ALL YOU NEED TO KNOW ABOUT IPO

In the present scenario, it is very unlikely that you have not heard about IPO. IPO stands for an Initial public offering and a company can go for it only once, though a company can raise money through other sources as well.

Need for IPO?

An IPO allows a company to raise funds from a large number of people and it also allows a company to get listed on stock exchanges (NSE/BSE). As everyone knows for doing business money or capital is needed and it is one source through which they can raise money.

Read: What are the Sensex and Nifty?

How will IPO help a company?

Apart from providing funds for the growth of the company, it also helps in providing an exit for existing investors.

How IPO proceeds?

Whenever a company decides to go for an IPO, it generally hires an investment bank. Investment bank prepares a Red herring prospectus and also decide the base price for the shares which will be going to be issued to the public. Finally, a company needs permission from SEBI in order to get listed on the exchanges. Once the approval is given, usually within a few weeks the company get listed on exchanges.

How to apply for an IPO?

Applications for IPO are allowed through a bidding system. Here one has to bid for the price between the prescribed limit and number of shares one wants to get allotted. There is minimum and maximum limit for the number of shares one can purchase. Nowadays, IPO Applications are processed only through ASBA (Application Supported Block Amount).In the application process, the amount remains blocked in your bank account for the IPO application. The amount is debited only when the shares are allotted to you.

When IPO company get listed?

Usually, the company get listed within 10 days of bidding application closure.

When can one sell IPO shares?

You can sell your allotted shares as soon as the company get listed on the exchanges.

Read: Thinking to apply for an IPO for 50% profit, Past known facts

I hope this will be useful. Thanks for reading.