Akanksha Faxx

What is an IPO, or first public offering?
An initial public offering, or IPO, is the first time that shares of a private company are sold to the public in a new stock offering. With an IPO, a company can get money from buyers in the public market.

Goal of IPO– Raising Capital or Funds

Qualification For Listing IPO in India:

1. Net tangible assets of atleast Rs.3 cr in each of the following three full years.
2. Minimum of Rs 15cr as average pre-tax operating profit in 3 years of immediately preceeding 5 years.
3. Net worth at least Rs 1 cr in each preceeding 3 years.

PARTICIPANTS IN IPO PROCESS:

1. Lead Managers: Underwriting, Draft prospectus, Drive road shows, Pricing of IPO.
2. Syndicate Members: Faces public & promote the company & collects the bids of shares from public.
3. Registrars: Provides administrative supports to the issue process.
4. Bankers: Maintain potential BID amount in an ESCROW account.

PRICING OF AN IPO:

Fixed Price Method:

Price is decided by company and investment bank. There will be only one price at which shares will be allotted. 

Book Building or Dutch Auction Method:

 In this method there’s a ceiling & floor price which is fixed, then the auction starts (between CP & FP). If no one is bidding at first price then auctions will start reducing price. If majority bidder gives bid at certain price, that price will be considered to allot the shares.

Discriminatory pricing method: 

The shares will be allocated to the investors who give highest quantity and then the price.