One of the major talking points in the year 2021 was the Initial Public Offerings or IPOs of several leading companies in India. From giants in the food retail industry to companies offering digital payments, the year has seen the launch of IPOs across various sectors - IPOs that created almost unprecedented buzz and attracted the interest of veteran investors and first-time investors alike.
Published on 12 July 2022
OPEN A FREE* DEMAT AND TRADING ACCOUNT
IN 15 MINS*
What is an Initial Public Offering?
If you are wondering what an Initial Public Offering is, the answer lies in the nomenclature. An Initial Public Offering or IPO is the first time a private limited company offers its shares to the public through an invitation for application to said shares. This process marks a major step for any organization and enables them to raise money from the public.
However, an IPO also entails diluting the ownership of a private company from a select few to many. All companies planning to go public through an IPO must comply with all the rules and regulations laid down by the Securities and Exchange Board of India (SEBI).
Initial Public Offering - Interview Questions
Here are some of the most frequently asked Technical Initial Public Offering Interview Questions.
1. What is book building in an IPO?
According to the Securities and Exchange Board of India, book building is the process of building up the demand for securities to be issued by a company. This is done by offering a price band for the potential investors instead of a fixed price for the shares. The Allotment Price for the shares is determined on the basis of the quantum of the shares to be issued as well as the quantum of shares for which applications are received during the Initial Public Offering.
2. What is the Minimum Number of Days for Which An IPO Should Remain Open?
An Initial Public Offering must remain open for a minimum period of three working days, during which investors can register their bids for the shares through applications.
3. What is meant by Floor Price and Cap Price in an Initial Public Offering?
The Floor Price is the lowest point in the spectrum of the price band announced by a company using the book building route in their IPO. This price is the minimum price at which investors can apply for the shares of the company. In stark contrast, the cap price is the highest point in the price band and the maximum price at which you can place your bid for the shares in a company's IPO. Also Read: Cut Off price in IPO
4. What is the primary difference between the book building and normal public issue routes of Initial Public Offerings?
The primary difference between a book building offer of shares and a normal public issue is that the former has no fixed price at which the final allotment of securities shall be done. On the other hand, the latter does have a fixed price at which the securities are offered through an IPO.
Furthermore, the demand for the issue can be determined every day in case of a Book Building issue, whereas the demand for a Normal Public Issue can be ascertained only at the end of the issue.
5. Can a retail investor apply for an IPO?
Yes, retail individual investors can apply for the securities of a company offered through an Initial Public Offering. 35% of the total securities offered in an IPO is reserved for this category of applicants, which includes:
Individuals resident in India
Non-resident Indians (NRIs)
Hindu Undivided Families (HUFs)
A retail individual investor can apply for shares amounting to a maximum of ₹2 lakhs in an IPO.
Team Espresso
We care that you succeed
Bringing readers the latest happenings from the world of Trading and Investments specifically and Finance in general.
When a company wants to raise funds from the public by allowing subscription to its securities, it has to draft and file a prospectus. A prospectus is a legal document that details the company’s financial securities – stocks or equities – available to the public. All companies issuing shares to the public are required to file a prospectus with the regulator for prospective customers, enabling them to make informed investment decisions.
IPO or Initial Public Offering is a process whereby a private company offers shares to the public through new stock issuance. The objective of the IPO is to raise capital from the public. Multiple businesses, including several well-known companies, are launching their IPO with the intent to go public.
The category of Qualified Institutional Bidder or QIBs includes institutional investors such as:
Mutual Funds
Commercial Banks
Public Financial Institutions
Foreign Portfolio Investors
50% of the securities in an Initial Public Offering are reserved for Qualified Institutional Bidders.
The Market Lot Size is the minimum number of shares that you need to apply for in an IPO. For instance, if the company that is offering their shares through an Initial Public Offering specifies a lot size of 200 shares, then you can apply for shares in multiples of 200 shares. It is important to note that no application can be made for less than one lot, that is, 200 shares.
The cut-off price or allotment price for an Initial Public Offering is determined on the basis of the number of shares offered in the IPO and the number of shares for which applications have been received.
Related Articles
Gray Market Premium: A Complete Guide
Before understanding the meaning of gray market premium, it is vital to understand the meaning of gray market and its working.
When a company wants to raise funds from the public by allowing subscription to its securities, it has to draft and file a prospectus. A prospectus is a legal document that details the company’s financial securities – stocks or equities – available to the public. All companies issuing shares to the public are required to file a prospectus with the regulator for prospective customers, enabling them to make informed investment decisions.
IPO or Initial Public Offering is a process whereby a private company offers shares to the public through new stock issuance. The objective of the IPO is to raise capital from the public. Multiple businesses, including several well-known companies, are launching their IPO with the intent to go public.
The category of Qualified Institutional Bidder or QIBs includes institutional investors such as:
Mutual Funds
Commercial Banks
Public Financial Institutions
Foreign Portfolio Investors
50% of the securities in an Initial Public Offering are reserved for Qualified Institutional Bidders.
The Market Lot Size is the minimum number of shares that you need to apply for in an IPO. For instance, if the company that is offering their shares through an Initial Public Offering specifies a lot size of 200 shares, then you can apply for shares in multiples of 200 shares. It is important to note that no application can be made for less than one lot, that is, 200 shares.
The cut-off price or allotment price for an Initial Public Offering is determined on the basis of the number of shares offered in the IPO and the number of shares for which applications have been received.
Sharekhan Comtrade Private Limited (TM) operates the web site accessible from the URL www.myespresso.com (the “web site”').
Sharekhan Comtrade Private Limited is committed to protecting your privacy and utilising technology that gives you the most powerful, safe, online experience that you can get anywhere else.
Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.
Sharekhan Comtrade Private Limited requests the minimum information it believes necessary to achieve this goal.
The following discloses Sharekhan Comtrade Private Limited's information gathering and dissemination practices for the Web Site:
System Data:
Sharekhan Comtrade Private Limited uses your IP address to help diagnose problems with our server and to administer the web site. Your IP address is used to identify you and your shopping cart and to gather broad demographic information.
Registration Data:
The Web Site's registration form may require users to give us contact information (like their name, phone number and e-mail address), unique identifiers (like their PAN Number) and demographic information (like their pin code, age or income level). The Web Site uses customer contact information from the registration form to send the users information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Comtrade Private Limited's partners. The customer's contact information is also used to contact the visitor when necessary. Unique identifiers (such as PAN numbers) are collected to verify the user's identity. Demographic and profile data is also collected at the Web Site. We use this data to tailor the visitor's experience at the Web Site, showing them contents that we think they might be interested in, and displaying the contents according to their preferences. This information is shared with advertisers on an aggregate basis.
Links and Co-Branded Sites:
This site contains links to other Web Sites which are not necessarily been screened or reviewed by www.myespresso.com. Sharekhan Comtrade Private Limited is neither responsible for the privacy practices or the contents of such Web Sites nor shall be held answerable for the inaccurate, inappropriate or offensive data, material, information, products and services that may be viewed on those sites.
Sharekhan Comtrade Private Limited may operate a number of co-branded sites. Policies regarding information collection and sharing may differ on some of these co-branded sites. If you have any particular questions, you should check the privacy statement that appears on each co-branded site.
Order Forms:
The Web Site uses an order form for customers to request information, products and services. The Web Site collects visitors' contact information (like their mobile number or e-mail address), unique identifiers (like their PAN number) financial information (like their account or credit card numbers) and demographic information (like their pin code, age or income level). Contact information from the order form is used to send orders, information about Sharekhan Comtrade Private Limited, and promotional material from some of Sharekhan Comtrade Private Limited's partners to the visitors of the Web Site. The visitor's contact information is also used to get in touch with the visitor when necessary. Financial information that is collected is used to check the users' qualifications and bill the user for products and services. Unique identifiers (such as PAN numbers) are collected from Web Site visitors to verify the user's identity.
Surveys and Contests:
The Web Site's online surveys ask visitors for contact information (like their mobile number or e-mail address) and demographic information (like their pin code, gender, age or income level). The Web Site uses contact data from its surveys to send the user information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Ltd.'s partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below. Demographic and profile data is also collected at the Web Site. The Web Site use this data to tailor its visitor's experience at the Web Site, showing them content that it thinks they might be interested in, and displaying the content according to their preferences. This information is shared with advertisers on an aggregate basis.
Sharekhan Comtrade Private Ltd run contests on the Web Site in which we ask visitors for contact information (like their e-mail address). Sharekhan Comtrade Private Limited uses contact data from its contests to send users information about Sharekhan Comtrade Private Ltd. and promotional material from some of our partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below.
Third-Party Advertisement Servers:
Sharekhan Comtrade Private Limited engages the services of an outside advertisement company to display advertisement on the Web Site. These advertisements may contain cookies. While Sharekhan Comtrade Private Limited uses cookies in other parts of the Web Site, cookies received with banner advertisements are collected by the Advertisement company, and Sharekhan Comtrade Private Limited does not have access to this information.
Protection of your Data and Information:
The privacy and protection of your data and information provided to us is of vital importance. Sharekhan Comtrade Private Limited shall ensure to safeguard the security and confidentiality of any information you share with us. Any personally identifiable information of the customers obtained by us shall not be used or shared other than for the purposes to which the customers consents. However security and confidentiality of information cannot be guaranteed cent percent. Hence despite our utmost efforts to protect your personal information, Sharekhan Comtrade Private Limited and www.myespresso.com cannot warrant the security of any information you transmit to us through our online services. Such transmission of your personal information is done at your own risk.
Disclosure of Customer Information :
Sharekhan Comtrade Private Limited and www.myespresso.com shall not deliberately disclose customer's personally identifiable information to any unauthorized third person, save and except where such information shall be disclosed in good faith and for the purpose of law for the time being in force or to protect the rights and property of Sharekhan Comtrade Private Limited and www.myespresso.com.
Public Forums :
The Web Sites makes chat rooms, forums, message boards and/or news groups available to its users. Please remember that any information that is disclosed in these areas becomes public information and you should exercise caution when deciding to disclose your personal information.
Supplemental Information :
The Web Site supplements the information that you provide with information that is received from third parties.
The Web Site DOES NOT entice by the prospect of a special game, prize or other activity, to divulge more information than is needed to participate in the activity.
Further to the above, in light of the recently notified Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011. (Hereinafter referred to as the Rules)
The following shall be deemed to be sensitive information :
Password;
Financial information such as Bank account or credit card or debit card or other payment instrument details;
Physical, physiological and mental health condition;
Sexual orientation;
Medical records and history;
Biometric information;
Any detail relating to the above clauses as provided to body corporate for providing service; and
Any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise:
provided that, any information that is freely available or accessible in public domain or furnished under the Right to Information Act, 2005 or any other law for the time being in force shall not be regarded as sensitive personal data or information for the purposes of Rules.
Collection of Information:
Compliance with KYC guidelines as per SEBI / Exchanges / Or any other Act, law or regulation requiring the same and any internal KYC guidelines formulated by Sharekhan Comtrade Private Limited.
In order to provide enhanced trading experience to the client.
In order to provide any further information to be provided to regulators.
Such information may be collected in a manner that the client is always aware of the collection and purported usage of the same. The client shall have an option to withdraw consent to share the information. However such intimation shall be required in writing. Such intimation shall only be taken into account from the date on which the same is received. Sharekhan Comtrade Private Limited may choose to stop services to such a client in case such intimation is received. Such information shall only be used for the purpose it is collected.
Clients would be allowed an option not to disclose any information to be collected, provided the same is in compliance with regulatory requirements.
Disclosure of information:
Disclosure of sensitive information would be as per the terms agreed by the clients. For any change in such terms, the clients would be informed.
Provided no consent may be required in case the same is being shared as per compliance guidelines or as required by regulators.
Any information being disclosed to third parties would be in accordance with the Rules and would be done provided such third party has the same level of compliance guidelines as Sharekhan Comtrade Private Limited.
Sharekhan Comtrade Private Limited shall allow clients to review their personal information and the same shall be allowed to be edited provided exchange guidelines relevant to the same are followed.
Sharekhan Comtrade Private Limited shall maintain reasonable security practices and procedures and maintain a comprehensive documented information security programme. In the event of an information security breach, Sharekhan Comtrade Private Limited or a person on its behalf shall be required to demonstrate as and when called upon to do so by the agency mandated under the law, that there have implemented security control measures as per their documented information security programme and information security policies and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business.
KYC Languages
Download Client Registration Documents (Rights & Obligations, Risk Disclosure Document, Do's & Don't's) in Vernacular Language :
Note: "This document is a translated version of the client registration documents in English and is being provided in vernacular language to facilitate better understanding by the investors. In case of any ambiguity, the contents of the English version would prevail."
NDNCR Terms & Conditions
By accepting the Terms & Conditions, you authorise Espresso, its representatives and agents to provide information about various products, offers and services provided by Espresso through any mode, including telephone calls, SMSes, emails, letters and any other mode of communication. You also confirm that laws in relation to unsolicited communication referred in "National Do Not Call Registry" as laid down by "Telecom Regulatory Authority of India" will not be applicable for such information/communication.
Filing Complaints on SEBI Complaint Redress System (SCORES) - Easy and Quick
Register on the SCORES portal
Mandatory details for filing complaints on SCORES:
Name
PAN
Address
Mobile Number
Email ID
Benefits:
Effective communication
Speedy redressal of grievances
You can file complaints on SCORES through https://scores.gov.in/scores/Welcome.html
