What is an IPO?
Who decides the price band?
Who decides the date of the issue?
How many days an IPO issue is open?
Is it mandatory to have PAN number to apply for an IPO?
Is it mandatory to have a DEMAT account to apply for an IPO?
Can I apply in an IPO through multiple applications on same name?
Can a minor apply for an IPO?
What information should I keep after I submit the IPO application form?
- Photocopy of the application form
- Photocopy of the cheque issued
- Application number in case of online IPO submission
Can I revise or cancel my IPO application?
What is the difference between floor price and cut-off price for a book building issue?
A company coming up with book building public issue decides the price band for the issue. The price band usually contains an upper level and a lower level.
Floor price is the minimum price (lower level) at which bids can be made for an IPO.
Investors can bid for the book build IPO at any price in the price band decided by the company. In the book building process, retail investors have an additional option to choose "cut-off" price for bidding.
Cut-off price means that an investor is ready to pay whatever price decided by the company at the end of the book building process. Retail investor has to pay the highest price while placing the bid at cut-off price. If the company decides the final price lower than the highest price asked for IPO, the remaining amount will be returned to the retail investor.
What is 'Market Lot Size' and 'Minimum Order Quantity' for an IPO?
'Market Lot' and 'Minimum Order Quantity' are two important factors that investors should know while bidding for an IPO.
Minimum Order Quantity, as the name says, is the minimum number of shares that an investor can apply while bidding in an IPO. If the investor wants to bid for more shares, they can apply in multiples of IPO market lot (lot size or IPO bid lot) of shares.
Example:
IPO: Power Grid Corporation of India Limited IPO
Public Issue Price: Rs. 44/- to Rs. 52/- Per Equity Share
Market Lot: 125 Shares
Minimum Order Quantity: 125 Shares
Investor can apply in this IPO as below:
At Rs. 44/- * 125 Shares * 1 Lot = Rs. 5500/-
At Rs. 44/- * 125 Shares * 2 Lot = Rs. 11000/-
At Rs. 44/- * 125 Shares * 18 Lot = Rs. 99000/-
At Rs. 52/- * 125 Shares * 2 Lot = Rs. 13000/-
At Rs. 52/- * 125 Shares * 1 Lot = Rs. 6500/-,
At Rs. 52/- * 125 Shares * 15 Lot = Rs. 97500/-
What is the difference between retail investor, Non-institutional bidders and Qualified Institutional Bidders (QIB’s)?
- Retail Individual Investor (RII) - In retail individual investor category, investors cannot apply for more than one lakh (Rs. 1,00,000) in an IPO. Retail individual investors have an allocation of 35% of shares of the total issue size in Book Build IPO's.
NRI's who apply with less than Rs.1,00,000 /- are also considered as RII category.
- High Networth Individual (HNI) - If a retail investor applies more than Rs.1,00,000/- of shares in an IPO, they are considered as HNI.
- Non-institutional bidders - Individual investors, NRIs, companies, trusts etc., who bid for more than Rs.1 lakh are known as non-institutional bidders. They need not to register with SEBI like RII's. Non-institutional bidders have an allocation of 15% of shares of the total issue size in Book Build IPOs.
- 4.Qualified Institutional Bidders (QIBs) - Financial institutions, banks, FIIs (Foreign Institutional Investors), and mutual funds that are registered with SEBI are called QIBs. They usually apply in very high quantities