Initial Public Offering (IPO) - A Crisp Note
What is an IPO?
An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time, thereby becoming a publicly traded company. It helps the company raise capital from investors.
Eligibility for Indian Companies to Opt for IPO:
Profitability: Companies must have reported profits in at least three of the last five years.
Net Tangible Assets: Minimum of ₹3 crore in each of the preceding three years.
Net Worth: Minimum of ₹1 crore in each of the preceding three years.
Other Requirements: Companies must adhere to SEBI guidelines, including minimum public shareholding and disclosure norms (Only Public Ltd company can come with an IPO)
Modes of IPO:
Fresh Issue: New shares are created and sold to the public. Proceeds go to the company for business expansion, debt repayment, etc.
Offer for Sale (OFS): Existing shareholders sell their shares to the public. Proceeds go to the selling shareholders, not the company.
IPO Pricing Mechanisms:
Fixed Price Method: The company sets a fixed price for the shares.Investors know the price before applying.
Book Building Process: A price band is set (minimum and maximum price).Investors bid within this range.
The final price is determined based on demand (usually the cut-off price).
What is an IPO?
An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time, thereby becoming a publicly traded company. It helps the company raise capital from investors.
Eligibility for Indian Companies to Opt for IPO:
Profitability: Companies must have reported profits in at least three of the last five years.
Net Tangible Assets: Minimum of ₹3 crore in each of the preceding three years.
Net Worth: Minimum of ₹1 crore in each of the preceding three years.
Other Requirements: Companies must adhere to SEBI guidelines, including minimum public shareholding and disclosure norms (Only Public Ltd company can come with an IPO)
Modes of IPO:
Fresh Issue: New shares are created and sold to the public. Proceeds go to the company for business expansion, debt repayment, etc.
Offer for Sale (OFS): Existing shareholders sell their shares to the public. Proceeds go to the selling shareholders, not the company.
IPO Pricing Mechanisms:
Fixed Price Method: The company sets a fixed price for the shares.Investors know the price before applying.
Book Building Process: A price band is set (minimum and maximum price).Investors bid within this range.
The final price is determined based on demand (usually the cut-off price).
