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What is an Initial Public Offerings (IPOs)?

Initial Public Offerings refer to a process where a private company goes public by offering its shares to the commoners for the first time. Through this process, an investor can get the shares of the company in exchange for an amount.

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What is an Initial Public Offerings (IPOs)?

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  1. Enterslice What is an Initial Public Offerings (IPOs)?

  2. IPOs refer to a process where a private company goes public by offering its shares to the commoners for the first time. Through this process, an investor can get the shares of the company in exchange for an amount. The companies may go public in this manner in order to raise capital for their growth and expansion. Therefore IPOs are regarded as a valuable mechanism for companies to broaden their business. It also provides an opportunity to retail investors to grow their money over time.

  3. Conditions to fulfil before launching Initial Public Offerings It should have net tangible assets of minimum 3 crore rupees in each of the previous 3 years, of which up to 50% can be held in monetary assets; 1 It should have recorded average pre-tax operating profit of minimum 15 crore rupees in 3 of the immediate 5 preceding years; 2 It must be having a net worth of an amount exceeding 1 crore rupees in each of the previous 3 years; 3

  4. Fixed Price Offering: This is a type of IPO when it is the responsibility of the issuing company to set its issue price for the initial sale of its shares. The issuing price shall be available to the public when the issuing company determines it. 1 Types of Initial Public Offering Book Building: In this type of IPO, the issuing company provides a 20% price band on the stocks for investors. All those interested place bids on shares before fixing of the final price. Here the investors are required to mention the number of shares they seek to purchase. 2

  5. Process of filing for an IPO The company must submit all relevant documents and information to SEBI, specifying the number of shares being issued, the set price, company’s track record and its plan to use the capital that is being raised through the IPO; When the company gets the regulatory approval, it issues a red herring prospectus which comprises of information regarding the IPO; Then the company seeks the assistance of a broking firm or investment banker to manage its IPO; The lead manager shall then invite bids for the IPO from all the investors, When the IPO comes live, the general public subscribes to it and gets its shares corresponding to their investment.

  6. You should have a PAN card issued by the Income Tax Department; 1- Eligibility to invest in an IPOs 2- You should hold a valid Demat account; It is not compulsory to have a trading account, but you may require the same to sell the shares you bought through IPO. 3-

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