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| Initial Public Offering (IPO) is when an unlisted
company makes either a fresh issue of securities or an offer
for sale of its existing securities or both for the first
time to the public. This is an IPO. |
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| A Follow on Public Offering (FPO) is when an
already listed company makes either a fresh issue of
securities to the public or an offer for sale to the public,
through an offer document. |
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| Any company making a public issue or a listed
company making a rights issue of value of more than Rs.50
lakhs is required to file a draft offer document with SEBI
for its observations. The company can proceed further on the
issue only after getting observations from SEBI. The
validity period of SEBI’s observation letter is three months
only ie. the company has to open its issue within three
months period. |
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| SEBI does not recommend any issue nor does take any
responsibility either for the financial soundness of any
scheme or the project for which the issue is proposed to be
made or for the correctness of the statements made or
opinions expressed in the offer document. |
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| Offer document means Prospectus in case of a public
issue or offer for sale and Letter of Offer in case of a
rights issue, which is filed Registrar of Companies (ROC)
and Stock Exchanges. An offer document covers all the
relevant information to help an investor to make his/her
investment decision. Draft Offer document means the offer
document in draft stage. The draft offer documents are filed
with SEBI, atleast 21 days prior to the filing of the Offer
Document with ROC. SEBI may specifies changes, if any, in
the draft Offer Document and the issuer or the Lead Merchant
banker shall carry out such changes in the draft offer
document before filing the Offer Document with ROC. The
Draft Offer document is available on the SEBI website for
public comments for a period of 21 days from the filing of
the Draft Offer Document with SEBI. |
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| Red Herring Prospectus is a prospectus, which does
not have details of either price or number of shares being
offered, or the amount of issue. This means that in case
price is not disclosed, the number of shares and the upper
and lower price bands are disclosed. An RHP for and FPO can
be filed with the RoC without the price band and the issuer,
in such a case will notify the floor price or a price band
by way of an advertisement one day prior to the opening of
the issue. In the case of book-built issues, it is a process
of price discovery and the price cannot be determined until
the bidding process is completed. Hence, such details are
not shown in the Red Herring prospectus filed with ROC in
terms of the provisions of the Companies Act. Only on
completion of the bidding process, the details of the final
price are included in the offer document. The offer document
filed thereafter with ROC is called a prospectus. |
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| The guidelines have provided that the issuer in
consultation with Merchant Banker shall decide the price.
There is no price formula stipulated by SEBI. SEBI does not
play any role in price fixation. The company and merchant
banker are however required to give full disclosures of the
parameters which they had considered while deciding the
issue price. There are two types of issues one where company
and Book Running Lead Manager fix a price (called fixed
price) and other, where the company and Book Running Lead
Manager stipulate a floor price or a price band and leave it
to market forces to determine the final price (price
discovery through book building process). |
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| In a book built issue allocation to Retail
Individual Investors, High Net Worth Investors and Qualified
Institutional Buyers is in the ratio of 35: 15: 50
respectively. In case the book built issues are made
pursuant to the requirement of mandatory allocation of 60%
to QIBs in terms of Rule 19(2)(b) of SCRR, the respective
figures are 30% for Retaill and 10% for HNI. |
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| Retail individual investor means an investor who
applies or bids for securities of or for a value of not more
than Rs.1,00,000 and investor applies or bids for securities
of or for a value of more than Rs.1,00,000 is defineds as
HNI Investor. |
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| Yes every investor has Demat Account to apply for
an IPO and has the responsibility to put the correct DP ID
and Client ID details in the bid/application forms. |
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| Yes. The investor can change or revise the quantity
or price in the bid using the form for changing/revising the
bid that is available along with the application form.
However, the entire process of changing of revising the bids
shall be completed within the date of closure of the issue.
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| In case of fixed price issues, the investor is
intimated about the CAN/Refund order within 30 days of the
closure of the issue. In case of book built issues, the
basis of allotment is finalized by the Book Running lead
Managers within 2 weeks from the date of closure of the
issue. The registrar then ensures that the demat credit or
refund as applicable is completed within 15 days of the
closure of the issue. The listing on the stock exchanges is
done within 7 days from the finalization of the issue. |
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| In the case of book-built issues, the exchanges
(BSE/NSE) display the data regarding the bids obtained (on a
consolidated basis between both these exchanges). |
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| The investor is entitled to receive a Confirmatory
Allotment Note (CAN) in case he has been allotted shares
within 15 days from the date of closure of a book Built
issue. The registrar has to ensure that the demat credit or
refund as applicable is completed within 15 days of the
closure of the book built issue. |
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| The listing on the stock exchanges is done within 7
days from the finalization of the issue. Ideally, it would
be around 3 weeks after the closure of the book built issue.
In case of fixed price issue, it would be around 37 days
after closure of the issue. |
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| Merchant Bankers to the issue or Book Running Lead
Managers (BRLM), syndicate members, Registrars to the issue,
Bankers to the issue, Auditors of the company, Underwriters
to the issue, Solicitors, etc. are the intermediaries to an
issue. The issuer discloses the addresses, telephone/fax
numbers and email addresses of these intermediaries. In
addition to this, the issuer also discloses the details of
the compliance officer appointed by the company for the
purpose of the issue. |
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| Most of the issue complaints pertain to non-receipt
of refund or allotment, or delay in receipt of refund or
allotment and payment of interest thereon. These complaints
shall be made to the post issue Lead Manager, who in turn
will take up the matter with registrar to redress the
complaints. In case the investor does not receive any reply
within a reasonable time, investor may complain to SEBI,
Office of investors Assistance. |
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| In Book building issue, the issuer is required to
indicate either the price band or a floor price in the red
herring prospectus. The actual discovered issue price can be
any price in the price band or any price above the floor
price. This issue price is called ?Cut off price?. This is
decided by the issuer and LM after considering the book and
investors? appetite for the stock. SEBI (DIP) guidelines
permit only retail individual investors to have an option of
applying at cut off price. |
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| After the closure of the issue, the bids received
are aggregated under different categories i.e., firm
allotment, Qualified Institutional Buyers (QIBs),
Non-Institutional Buyers (NIBs), Retail, etc. The
oversubscription ratios are then calculated for each of the
categories as against the shares reserved for each of the
categories in the offer document. Within each of these
categories, the bids are then segregated into different
buckets based on the number of shares applied for. The
oversubscription ratio is then applied to the number of
shares applied for and the number of shares to be allotted
for applicants in each of the buckets is determined. Then,
the number of successful allottees is determined. This
process is followed in case of proportionate allotment. In
case of allotment for QIBs, it is subject to the discretion
of the post issue lead manager. |
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| Qualified Institutional Buyers are those
institutional investors who are generally perceived to
possess expertise and the financial muscle to evaluate and
invest in the capital markets. In terms of clause 2.2.2B (v)
of DIP Guidelines, a ?Qualified Institutional Buyer? shall
mean: |
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Public financial
institution as defined in section 4A of theCompanies Act,
1956 |
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Scheduled commercial
banks |
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Mutual funds |
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Foreign institutional
investor registered with SEBI |
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Multilateral and
bilateral development financial institutions |
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Venture capital funds
registered with SEBI |
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Foreign Venture capital
investors registered with SEBI |
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State Industrial
Development Corporations |
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Insurance Companies
registered with the Insurance Regulatoryand Development
Authority (IRDA) |
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Provident Funds with
minimum corpus of Rs.25 crores |
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Pension Funds with
minimum corpus of Rs. 25 crores) |
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| These entities are not required to be registered
with SEBI as QIBs. Any entities falling under the categories
specified above are considered as QIBs for the purpose of
participating in primary issuance process. |
