IPO FAQs Frequently Asked Questions. Here is the FAQ with some common questions and answers about IPO (Initial Public Offering) subscription. Find All IPO FAQs Below here. If you want to know more about IPOs and want to invest in Upcoming IPO in India than Click upcoming IPO.
IPO FAQs Frequently Asked Questions
Get the latest IPO FAQs frequently asked questions details here in this IPO FAQs section.
Question 1 : What is an IPO?
Answer : An IPO is the process by which a private company goes public by offering shares of stock to public investors for the first time. It marks the transition of the company from a private to a publicly-traded entity.
Question 2 : How can I subscribe to an IPO?
Answer : There are generally two ways to subscribe to an IPO – through a broker or directly with the company if they allow retail subscriptions. Most IPOs are primarily offered to institutional investors, but popular IPOs may reserve a portion for retail (individual) investors.
Question 3 : What are the eligibility criteria for IPO subscription?
Answer : Eligibility can vary for each IPO but typically requires having a trading/demat account with a broker, meeting minimum application value requirements, being an Indian resident, etc. The company’s prospectus outlines the specific criteria.
Question 4 : How is the IPO price determined?
Answer : The IPO price band is determined by the company going public based on valuation by merchant bankers. The final price is decided after the book building process based on investor demand.
Question 5 : How are IPO shares allotted?
Answer : If the IPO is oversubscribed, shares are allotted on a pro-data basis as per pre-defined criteria like investor category, number of shares bid for, etc. outlined in the prospectus.
Question 6 : What is the IPO listing date?
Answer : The listing date is when the company shares start trading on the stock exchange, usually 1-2 weeks after the IPO subscription period closes.
Question 7 : What risks are involved in IPO investments?
Answer : IPOs carry higher risks as there is limited information and trading history available for the company. Overpricing, volatility, information asymmetry are some key risks.
Question 8 : What is the difference between an IPO and FPO?
Answer : An IPO (Initial Public Offering) is when a private company issues shares to the public for the first time to get listed on a stock exchange. An FPO (Follow-on Public Offering) is when an already listed company issues new shares to investors to raise additional capital.
Question 9 : What is the IPO application process?
Answer : The typical process is: 1. Check IPO eligibility criteria 2. Study IPO prospectus 3. Decide number of shares to apply for 4. Submit application form online or offline with payment 5. Wait for allotment status and refund if applicable.
Question 10 : What is the IPO application revision period?
Answer : Some IPOs allow a window after the application period to revise the number of shares or price bid. This is called the IPO application revision period.
Question 11 : What is IPO grading?
Answer : IPO grading is a service where a credit rating agency assigns a grade to the IPO based on an assessment of the company’s fundamentals, to help investors make informed decisions.
Question 12 : What is an IPO bid lot?
Answer : An IPO bid lot is the minimum number of shares that investors must apply for in an IPO, set by the company issuing the shares.
Question 13 : Can I withdraw my IPO application?
Answer : No, once an IPO application is submitted, it cannot be withdrawn. It will either be successful and allotted shares, or unsuccessful and receive a refund.
Question 14 : What happens if an IPO is undersubscribed?
Answer : If the total applications received are less than the shares issued, it is undersubscribed. The company may decide to extend/cancel the IPO, or approve the listing with the undersubscribed shares.
Question 15 : What are IPO anchor investors?
Answer : Anchor investors are institutional investors who are allocated shares in an IPO before the public subscription opens, to inspire confidence in the offering.
Question 16 : Can Minors apply for IPO subscriptions?
Answer : Yes, minors (individuals below 18 years of age) are allowed to apply for IPO subscriptions in India, but with certain conditions:
- Application through Guardian Minors cannot apply directly in their own name. The IPO application has to be made by their legal guardian (parent/court-appointed).
- Using Minor’s Bank Account The payment for the IPO application must be made from the minor’s own bank account. Using the guardian’s account is not permitted.
- Demat Account The minor must have their own demat account. Shares allotted in the IPO will be credited to the minor’s demat account.
- PAN Card The minor is required to have a PAN (Permanent Account Number) card, which needs to be quoted in the IPO application.
- Birth Certificate Proof of the minor’s age like a birth certificate may need to be submitted along with the application.
- Guardian Details Complete details of the guardian applying on behalf of the minor must be provided.
So in summary, while minors cannot apply directly, they are eligible with the IPO application being routed through their legal guardian and using their own bank accounts, demat accounts and PAN details.
It’s recommended to carefully go through the specific IPO prospectus for the correct process and requirements for minor applications. The guardian takes full responsibility for the investment on behalf of the minor.
Question 17 : What are IPOs Common Categories?
Answer : The IPO FAQs included, IPOs in India are typically categorized into different groups based on the type of investor and the number of shares they can apply for. Here are the common IPO categories :
- Qualified Institutional Buyers (QIBs) This category includes foreign and domestic institutions like banks, mutual funds, insurance companies, pension funds etc. A significant portion of the IPO (around 50%) is reserved for QIBs.
- Non-Institutional Investors (NIIs) This includes high net-worth individuals (HNIs), corporate bodies, and non-institutional entities that do not fall under the QIB category. Around 15% of the IPO is reserved for NIIs.
- Retail Individual Investors (RIIs) This is the individual investor category consisting of Indian residents who place bids for shares worth up to ₹2 lakhs. Around 35% of shares are reserved for RIIs.
- Employee Reservation Portion Some companies reserve a small portion of the IPO for subscription by their own employees. Allotment in this is made on a proportionate basis.
Within these broad categories, there can be further sub-categories based on the number of shares applied for:
i) Anchor Investors: Large QIBs that are allocated shares 1 day prior to the IPO opening. ii) High Net-worth Individuals (HNIs) within the NII category who apply for a large value.
The ratio of allocation across these categories is mentioned in the IPO prospectus. Pricing, lot sizes, and allotment ratios can differ across categories based on demand.
Question 18 : What is the IPOs Market Size in India?
Answer : The IPO market size in India has seen significant fluctuations over the years, depending on market conditions and investor sentiment. However, here are some key statistics on the IPO market size in recent years: all IPO FAQs.
- 2022:
- Total IPO proceeds raised: ₹59,538 crore (around $7.2 billion)
- Number of IPOs: 63
- This was a sharp decline from the record year of 2021.
- 2021:
- Total IPO proceeds raised: ₹1.19 lakh crore (around $16 billion)
- Number of IPOs: 63
- This was an all-time record year for Indian IPOs, driven by strong investor appetite.
- 2020:
- Total IPO proceeds raised: ₹26,611 crore (around $3.6 billion)
- Number of IPOs: 30
- IPO activity slowed down due to the COVID-19 pandemic.
- 2019:
- Total IPO proceeds raised: ₹12,365 crore (around $1.7 billion)
- Number of IPOs: 16
- 2018:
- Total IPO proceeds raised: ₹30,959 crore (around $4.8 billion)
- Number of IPOs: 24
In terms of market capitalization, companies that launched IPOs in 2022 had a cumulative market cap of around ₹3.5 lakh crore as of early 2023.
India ranks amongst the top IPO markets globally, though the yearly size can vary significantly based on economic conditions and the pipeline of companies going public. The introduction of new-age tech startups going public has boosted India’s IPO market in recent years. You can go through all IPO FAQs Page.
Question 19 : What can be the IPOs market size in 2024?
It’s difficult to predict the exact IPO market size for 2024 in India as it depends on various factors, but here’s an outlook based on recent trends and analysis: IPO FAQs are common.
- IPO Pipeline Several prominent startups like Byju’s, Oyo, PharmEasy, Delhivery etc. have filed draft papers and are expected to go public in 2024, subject to market conditions. A strong startup IPO pipeline bodes well for 2024.
- Economic Conditions India’s economic growth, inflation, interest rate scenario and overall market sentiment will play a crucial role. A robust economy should aid IPO activity.
- Global Factors Global factors like the Russia-Ukraine war, recession fears, U.S. monetary policies etc. can impact foreign investor participation in Indian IPOs.
- Regulatory Environment Stable and conducive regulations from SEBI (Securities and Exchange Board of India) facilitate a healthy IPO market.
- Investor Demand After a relatively subdue 2022, investor appetite for public issues, especially from retail and institutional segments, will be a key driver.
Most analysts and experts anticipate 2024 to be a better year than 2022 in terms of IPO FAQs activity and fundraising in India. Estimates suggest:
- Total IPO proceeds could range between ₹80,000 crore to ₹1 lakh crore (around $10-$12 billion)
- Number of IPOs could be around 80-100
However, these are broad estimates. Actual IPO market size will depend greatly on the evolving macro environment in 2024. Overall, a rebound from 2022 levels is widely expected. These are some IPO FAQs Frequently Asked Questions about the IPO FAQs subscription.