Explore a comprehensive list of FAQs about IPOs in the Indian Share Market
| Question | Answer |
| What is an IPO? | An Initial Public Offering (IPO) is the process by which a private company becomes public by issuing shares to the public for the first time. |
| How does an IPO benefit a company? | IPOs provide companies with capital for expansion, debt reduction, or other corporate purposes. |
| What is the role of SEBI in IPOs? | SEBI (Securities and Exchange Board of India) regulates and oversees the process to ensure transparency and investor protection. |
| How can I apply for an IPO? | Investors can apply for an IPO through ASBA (Applications Supported by Blocked Amount) with banks or online platforms. |
| What is the minimum bid lot in an IPO? | The minimum bid lot represents the minimum number of shares an investor can apply for in an IPO. |
| How are IPO prices determined? | IPO prices are determined through book-building processes, where investors bid for shares within a price range set by the company. |
| What is the difference between a fixed price and book-building IPO? | In a fixed price IPO, the price is pre-determined, while in a book-building IPO, the price is discovered through investor bids. |
| Can I apply for an IPO without a Demat account? | No, a Demat account is mandatory for applying and holding shares obtained through an IPO. |
| What is a Red Herring Prospectus (RHP)? | An RHP is a preliminary document issued during an IPO process, providing key information about the company but without the issue price and size. |
| What is the lock-in period for IPO shares? | The lock-in period restricts certain shareholders, including promoters, from selling their shares for a specified duration after the IPO. |
| How is the retail investor category defined in an IPO? | Retail investors are individuals who apply for shares worth up to a certain amount in an IPO, as defined by SEBI. |
| Can I apply for an IPO using UPI? | Yes, the UPI (Unified Payments Interface) method is commonly used for IPO applications, offering a seamless payment process. |
| How is the allotment done in an IPO? | Allotment is done through a lottery system, and the number of shares allotted depends on factors like oversubscription and investor categories. |
| What is oversubscription in an IPO? | Oversubscription occurs when the number of shares applied for is higher than the actual shares available in an IPO. |
| Can I withdraw my IPO application? | Yes, investors can withdraw their IPO applications during the bidding period, and the blocked amount is released. |
| What is the role of a registrar in an IPO? | The registrar, appointed by the company, manages the IPO application process, allotment, and refunds. |
| How can I check the IPO allotment status? | Investors can check the IPO allotment status on the registrar’s website or through online platforms and stock exchanges. |
| Can an NRI apply for an IPO? | Yes, NRIs (Non-Resident Indians) are eligible to apply for IPOs in India, subject to certain regulations. |
| What is the basis of allotment in an IPO? | The basis of allotment determines how shares are allocated among investors, considering factors like oversubscription and priority categories. |
| Can I sell allotted IPO shares immediately? | No, there is usually a mandatory holding period for allotted IPO shares before they can be freely traded. |
| How are IPO refunds processed? | Refunds for unsuccessful or partially allotted IPO applications are processed through the Electronic Funds Transfer (EFT) system. |
| What is the role of lead managers in an IPO? | Lead managers are financial institutions that assist companies in the IPO process, handling tasks like due diligence, marketing, and pricing. |
| Can a company withdraw its IPO after filing? | Yes, a company can withdraw its IPO before the allotment if it faces adverse market conditions or other valid reasons. |
| What is the difference between IPO and FPO? | An IPO is the first sale of shares by a private company, while an FPO (Follow-On Public Offering) is the sale of additional shares by a company already listed. |
| Are IPO investments guaranteed to make profits? | No, IPO investments are subject to market risks, and profits depend on various factors, including market conditions and the company’s performance. |
| Can an investor apply for multiple IPOs simultaneously? | Yes, investors can apply for multiple IPOs that are open simultaneously, provided they adhere to the prescribed application limits. |
| What is the Employee Quota in an IPO? | The Employee Quota is reserved for eligible employees of the issuing company, allowing them to apply for shares at a discounted price. |
| Can an investor apply in the name of a minor for an IPO? | Yes, an investor can apply in the name of a minor in an IPO, with a guardian handling the application and managing the shares. |
| How is the price band set in an IPO? | The price band is determined based on various factors, and the final price is decided through the book-building process, considering investor demand. |
| What is the Green Shoe Option in an IPO? | The Green Shoe Option allows the company or selling shareholders to sell additional shares if the demand is higher than anticipated. |
| How is the cutoff price determined in an IPO? | The cutoff price is the minimum price at which an investor can bid for shares. It is determined based on the highest bid prices received during the book-building process. |
| Can an individual apply for an IPO without a PAN card? | No, a PAN card is mandatory for IPO applications, and applicants must provide accurate PAN details. |
| What is the role of underwriters in an IPO? | Underwriters commit to purchasing any unsold shares in an IPO, ensuring that the company raises the intended capital even if investor demand is lower than expected. |
| What is the difference between IPO and OFS? | In an IPO, new shares are issued to the public, while in an OFS (Offer for Sale), existing shareholders sell their shares to the public. |
| How does the subscription process work in an IPO? | Investors indicate their interest by subscribing to the IPO, specifying the number of shares they wish to apply for and the bid price. |
| Can an investor revise the IPO bid after submission? | Yes, investors can revise their bids during the bidding period, and only the latest bid is considered for allotment. |
| What is the Grey Market Premium (GMP) in an IPO? | GMP is the premium at which IPO shares are traded in the unofficial market before the listing. It reflects investor sentiment and demand. |
| How are anchor investors selected in an IPO? | Anchor investors, who invest before the IPO opens, are selected through a bidding process, and their participation adds credibility to the offering. |
| Can an investor apply for an IPO through multiple applications? | Applying through multiple applications with the same PAN may lead to rejection, and investors are advised to follow SEBI guidelines regarding multiple applications. |
| What happens if an IPO is oversubscribed multiple times? | In case of oversubscription, shares are allocated proportionally, and investors may receive fewer shares than applied for. |
| Are IPO investments suitable for short-term trading? | IPOs are generally considered for long-term investment, and short-term trading carries risks due to potential volatility in newly listed stocks. |
| Can an investor apply for an IPO using a joint Demat account? | Yes, investors can apply for an IPO using a joint Demat account, and the bank account linked to the Demat account should match the primary applicant’s name. |
| What is the validity period of an IPO bid? | The validity period, also known as the bidding period, is the duration during which investors can place bids for an IPO. |
| Can an investor apply for an IPO after the bidding period ends? | No, IPO applications must be submitted within the specified bidding period, and late submissions are not accepted. |
| How are IPO proceeds utilized by companies? | Companies utilize IPO proceeds for various purposes, including business expansion, debt repayment, working capital, and general corporate purposes. |
| What is the difference between IPO and IPO grading? | IPO grading is an assessment of the fundamentals of an IPO by credit rating agencies, providing investors with an opinion on the issuer’s quality. |
| Can an investor apply for an IPO using a power of attorney? | Yes, investors can apply for an IPO using a power of attorney, and the authorized person must follow the application process on behalf of the investor. |
| What is the timeline for the listing of IPO shares? | The timeline for listing IPO shares varies, but it usually occurs within a few days to a couple of weeks after the IPO closes. |
| Can an investor apply for an IPO using a joint bank account? | Yes, investors can apply for an IPO using a joint bank account, and the bank account details must match the primary applicant’s name. |
| How is the retail portion defined in an IPO? | The retail portion in an IPO is the portion reserved for retail investors, typically defined based on the number of shares or value. |
| Can an investor apply for an IPO using a minor’s bank account? | No, IPO applications should be made using the bank account of the primary applicant, and minors cannot directly apply for IPOs. |
| What is the impact of anchor investor participation on an IPO? | Anchor investor participation boosts investor confidence and serves as an endorsement, contributing to the success of an IPO. |
| How are IPO subscriptions categorized? | IPO subscriptions are categorized into retail, non-institutional, and institutional categories, each having specific eligibility criteria. |
| What is the difference between IPO and a public issue? | While both involve the sale of shares to the public, an IPO is the first offering by a private company, and a public issue can be subsequent offerings by any listed company. |
| Can an investor apply for an IPO using a joint PAN card? | No, IPO applications must be made using a single PAN card, and joint PAN cards are not accepted for individual applications. |
| How is the price band communicated to investors in an IPO? | The price band is communicated through the Red Herring Prospectus and in subsequent public announcements through newspapers, websites, and other media. |
| What is the difference between a retail individual investor and an HNI? | Retail individual investors have lower application limits, while High Net Worth Individuals (HNIs) can apply for larger amounts in an IPO. |
| Can an investor apply for an IPO with a minor as a joint applicant? | Yes, an investor can apply for an IPO with a minor as a joint applicant, and the guardian should handle the application on behalf of the minor. |
| How are anchor investor shares treated after the IPO listing? | Anchor investor shares are subject to the same listing rules as other shares, and they become freely tradable after the applicable lock-in period. |
| What is the significance of the cut-off price in an IPO? | The cut-off price allows investors to bid without specifying a particular price, and the final allotment price is determined based on the cut-off price. |
| Can an investor apply for an IPO using an overseas bank account? | No, IPO applications must be made using an Indian bank account, and overseas bank accounts are not accepted for IPO applications in India. |
| How are IPO shares credited to the Demat account? | Allotted IPO shares are credited directly to the investor’s Demat account, and investors receive an allotment advice or credit confirmation. |
| Can an investor apply for an IPO using a joint email ID? | No, IPO applications should be made using a unique email ID for each applicant, and joint email IDs are not accepted for individual applications. |
| What is the role of a syndicate member in an IPO? | Syndicate members assist in marketing and distributing IPO shares, acting as intermediaries between the issuer and investors during the bidding process. |
| Can an investor apply for an IPO using a joint trading account? | No, IPO applications must be made using the primary applicant’s individual trading account, and joint trading accounts are not accepted for individual applications. |
| How are IPO shares allocated in the case of oversubscription? | In case of oversubscription, shares are allocated proportionally to investors, ensuring fair distribution based on bid amounts. |
| What is the impact of anchor investor lock-in on post-listing trading? | The lock-in period for anchor investors restricts their ability to sell shares immediately after listing, contributing to post-listing price stability. |
| Can an investor apply for an IPO using a minor as a joint Demat account holder? | Yes, an investor can apply for an IPO using a minor as a joint Demat account holder, with the guardian handling the application. |
| How are IPO shares refunded in case of oversubscription? | In case of oversubscription, refunds for unallotted or partially allotted shares are processed through the Electronic Funds Transfer (EFT) system. |
| What is the significance of the anchor investor process in an IPO? | The anchor investor process involves strategic investors participating before the IPO, boosting confidence and influencing overall investor sentiment. |
| Can an investor apply for an IPO using a joint PAN card for HUF? | Yes, investors can apply for an IPO using a joint PAN card for a Hindu Undivided Family (HUF), and the HUF details should match the primary applicant’s name. |
| How is the retail investor limit determined in an IPO? | The retail investor limit is determined based on SEBI guidelines, specifying the maximum value or number of shares that retail investors can apply for in an IPO. |
| Can an investor apply for an IPO using a minor’s PAN card? | No, IPO applications must be made using the PAN card of the primary applicant, and minors cannot have a separate PAN card for IPO applications. |
| What is the significance of anchor book building in an IPO? | Anchor book building involves allocation of shares to anchor investors before the IPO, creating a price discovery mechanism and garnering institutional support. |
| Can an investor apply for an IPO with a minor as a joint bank account holder? | Yes, an investor can apply for an IPO with a minor as a joint bank account holder, and the bank account details must match the primary applicant’s name. |
| How are IPO subscriptions monitored during the bidding period? | IPO subscriptions are regularly updated on the stock exchange websites and other platforms, allowing investors to track the demand for an IPO. |
| What is the impact of anchor investor lock-in on post-listing liquidity? | The lock-in period for anchor investors contributes to post-listing liquidity by preventing a sudden influx of shares into the market. |
| Can an investor apply for an IPO using a joint trading account for HUF? | Yes, investors can apply for an IPO using a joint trading account for a Hindu Undivided Family (HUF), and the HUF details should match the primary applicant’s name. |
| How are IPO shares allocated in the case of oversubscription for retail investors? | In case of oversubscription, retail investors are usually allotted a fixed number of shares through a lottery system, ensuring fair distribution. |
| What is the significance of an anchor investor in attracting institutional investors? | Anchor investors play a crucial role in attracting institutional investors by signaling confidence in the IPO and enhancing its overall appeal. |
| Can an investor apply for an IPO using a joint email ID for HUF? | No, IPO applications should be made using a unique email ID for each applicant, and joint email IDs are not accepted for individual applications. |
| How are IPO shares allocated for anchor investors? | Anchor investors receive a specific allocation of shares at a price determined through a separate book-building process before the IPO opens for public subscription. |
| Can an investor apply for an IPO using a joint Demat account for HUF? | Yes, investors can apply for an IPO using a joint Demat account for a Hindu Undivided Family (HUF), and the HUF details should match the primary applicant’s name. |
| How are IPO subscriptions categorized for retail investors? | Retail investors are categorized based on the number of shares or value they apply for, determining their eligibility for the retail portion in an IPO. |
| What is the role of a market maker in an IPO? | Market makers facilitate liquidity by quoting bid and ask prices for IPO shares, enhancing the efficiency of the IPO market. |
| Can an investor apply for an IPO using a joint PAN card for a partnership firm? | No, IPO applications must be made using the PAN card of the primary applicant, and joint PAN cards are not accepted for individual applications. |
| How are IPO shares credited for anchor investors? | Anchor investors’ shares are credited directly to their Demat accounts after the IPO listing, and they become tradable after the applicable lock-in period. |
| Can an investor apply for an IPO using a joint PAN card for a corporate entity? | No, IPO applications must be made using the PAN card of the primary applicant, and joint PAN cards are not accepted for individual applications. |
| How are IPO subscriptions monitored for institutional investors? | Institutional investors track IPO subscriptions through real-time updates, allowing them to gauge the demand and make informed investment decisions. |
| What is the significance of QIBs in an IPO? | Qualified Institutional Buyers (QIBs) contribute to the success of an IPO by providing substantial investment, often indicating confidence in the company. |
| Can an investor apply for an IPO using a joint bank account for HUF? | Yes, investors can apply for an IPO using a joint bank account for a Hindu Undivided Family (HUF), and the HUF details should match the primary applicant’s name. |
| How are IPO shares allocated for anchor investors in case of oversubscription? | In case of oversubscription, anchor investors’ allocation may be proportionally reduced, similar to other investor categories. |
| What is the impact of anchor investor participation on retail investor sentiment? | Anchor investor participation positively influences retail investor sentiment, signaling confidence in the IPO and potential for long-term growth. |
| Can an investor apply for an IPO using a joint trading account for a partnership firm? | No, IPO applications must be made using the primary applicant’s individual trading account, and joint trading accounts are not accepted for individual applications. |
| How are IPO shares credited for anchor investors in case of oversubscription? | In case of oversubscription, anchor investors receive their proportionate allocation, and any excess funds are refunded. |
| What is the impact of anchor investor lock-in on post-listing volatility? | The lock-in period for anchor investors contributes to post-listing stability by preventing immediate selling pressure and excessive volatility. |
| Can an investor apply for an IPO using a joint trading account for a corporate entity? | No, IPO applications must be made using the primary applicant’s individual trading account, and joint trading accounts are not accepted for individual applications. |
| How are IPO shares credited for anchor investors in case of undersubscription? | In case of undersubscription, anchor investors receive their full allocation, and any unsubscribed shares are returned to the issuer. |
| What is the role of an escrow account in an IPO? | An escrow account holds the IPO proceeds until the allotment process is completed, ensuring transparency and compliance with regulatory requirements. |
| Can an investor apply for an IPO using a joint Demat account for a partnership firm? | No, IPO applications must be made using the primary applicant’s individual Demat account, and joint Demat accounts are not accepted for individual applications. |