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Q. What are the different kinds of issues? |
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Primarily, issues can be classified as a Public, Rights or Preferential issues. |
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Q. What is IPO? |
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Initial Public Offering 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. It is a way for a company to raise money from investors for
its future projects and get listed to Stock Exchange. Or An Initial Public Offer
(IPO) is the selling of securities to the public in the primary stock market.
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Q. What is FPO? |
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A further public offering (FPO) is when an already listed company makes either a
fresh issue of securities to the public or an offer to sale to the public, through
an offer document. An offer for sale in such scenario is allowed only if it is made
to satisfy listing or continuous listing obligations. |
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Q. What is Right Issue? |
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Rights issue (RI) is when a listed company which proposes to issue fresh securities
to its existing shareholders as on a record date. |
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Q. What is Offer Document? |
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Offer documents 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
and Stock Exchanges. Offer Document covers all the relevant information to help
an investor to make his/her investment decision. |
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Q. What is Draft Offer Document? |
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Draft Offer Document means the offer document in draft stage. The draft offer documents
are filed with SEBI, atleast 21 days prior to the filling of the offer Document
with ROC/Ses. SEBI may specifies changes, if any, in the draft offer Document and
the issuer or the lead marchant banker shall carry out such changes in the draft
offer document before filing the offer document with ROC/Ses. The Draft Offer document
is available on the SEBI website for public comments for a period of 21 days from
the filling of the draft Offer Documents with SEBI. |
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Q. What is Red Herring Prospectus? |
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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. On the other hand, an issuer can state the issue size and the number
of shares are determined later. An RHP for an FPO can be filed with the RoC without
the price band and the issuer, in such a case will notify the floor 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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Q. What is Fixed Price Offer? |
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An issuer company is allowed to freely price the issue. The basis of issue price
of disclosed in the offer document where the issuer discloses in detail about the
qualitative and quantitative factors justifying the issue price. The issuer company
can mention a price band of 20% (cap in the price band should not be more than 20%
of the floor price) in the Draft offer documents filed with SEBI and actual price
can be determined at a later date before filling of the final offer documents with
SEBI/ROCs |
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Q. What is the difference between Book Building Issue and Fixed Price Issue? |
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Initial Public Offering can be made through the fixed price method, book building
method or a combination of both. Fixed Price process ? Price at which the securities
are offered/allotted is known in advance to the investor. ? Demand for the securities
offered is known only after the closure of the issue. ? Payment if made at the time
of subscription wherein refund is given after allocation. Book building process
? Price at which securities will be offered/allotted is not known in advance to
the investor. Only an indicative price range is known. ? Demand for the securities
offered can be known everyday as the book is built. ? Payment only after allocation
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Q. What is the difference between Floor Price and Cut-Off Price for a Book Building
Issue? |
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Floor Price is the minimum price (lower level) at which bids can be made for an
IPO. Cut-off price means the investor is ready to pay whatever price is 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 company decides the
final price lower then the highest price asked for IPO, the remaining amount is
return to the retail investor
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Q. How does Book Building Work? |
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Book building is a process of price discovery. Hence, the Red Herring prospectus
does not contain a price. Instead, the red hearing prospectus contains either the
floor price of the securities offered through it or a price band along with the
range within which the bids can move. The applicants bid for the shares quoting
the price and the quantity that they would like to bid at . Only the retail investors
have the option of bidding at “cut-off: After the bidding process is complete, the
“cut-off” price is arrived at on the lines of Dutch auction. The basis of allotment
is then finalized and letters allotment/refund is undertaken. The final prospectus
with all the details including the final issue price and the issue size is filed
with ROC, thus completing the issue process |
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Q. Who decided the price band? |
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Company decides on the price band in consultation with Merchant Bankers. The basis
of issue price is disclosed in the offer document. The issuer is required to disclose
in detail about the qualitative and quantitative factors justifying the issue price.
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Q. How can you classify Retail Investor? |
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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. NRI's who apply with less then
Rs 1,00,000 /- are also considered as RII category. |
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Q. Can a retail investor also bid in a book built issue? |
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Yes, RI can bid in a book-built issue for a value not more than Rs. 100000. Any
bid made in excess of this will be considered in the HNI catefory. |
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Q. How can you classify Non- institutional bidders? |
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Individual investors, NRI's, companies, trusts etc who bid for more then Rs 1 lakhs
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 IPO's. |
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Q. Who are Qualified Institutional Bidders (QIB's) |
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Financial Institutions, Banks, FII's and Mutual Funds who are registered with SEBI
are called QIB's. They usually apply in very high quantities. QIBs are mostly representatives
of small investors who invest through mutual funds, ULIP schemes of insurance companies
and pension schemes. QIB's have an allocation of 50% of shares of the total issue
size in Book Build IPO's. |
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Q. Where can I get form for applying/bidding for the shares? |
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The form for applying/bidding of shares is available with our all offices and Branches. |
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Q. Is it compulsory for me to have a Demat Account? |
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As per the requirement, all the issues of size in excess of Rs.10 crores, are to
made compulsorily in the demat more. Thus, if an investor chooses to apply for an
issue that is being made in a compulsory demat mode, he ha to have a demat account
and has the responsibility to put the correct DP ID and Client ID details in the
bid/application forms. |
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Q. What are the dos and don’ts for bidding / applying in the issue? |
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The investors are generally advised to study all the material facts pertaining to
the issue including the risk factors before considering any investment. They are
strongly warned against any ‘tips’ or relying on news obtained through unofficial
means.
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Q. How many days the issue open? |
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As per Clause 8.8.1, Subscription list for public issues shall be kept open for
at least 3 working days and not more than 10 working days. In case of Book built
issues, the minimum and maximum period for which bidding will be open is 3 – 7 working
days extendable by 3 days in case of a revision in the price band. The public issue
made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii)
of Chapter II may be kept open for a maximum period of 21 working days. As per clause
8.8.2., Rights issues shall be kept open for at least 30 days and not more than
60 days.
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Q. Can I know the number of shares that would be allotted to me? |
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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 exchange is done within 7 days form the finalization of
the issue. |
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Q. How do I know if I am allotted the shares? and by what timeframe Q. will I get a
refund if I am not allotted? |
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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 closureof a book built
issue. The registrar has to ensure that the demat credit or refund as applicable
is completed with in 15 days of the closure of the book built issue. |
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Q. How long will it take after the issue for the shares to get listed? |
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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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Q. We have heard that SEBI has allowed use of ECS for refunds in the issue process?
Now will all the applicants get refund through ECS? |
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Yes, SEBI vide its circular dated January 20,2006 has permitted use of ECS for refunds
in the issue process.
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Q. Are we required to give details of bank account where the refund amount shall
be credited? |
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The bank account details will be directly taken from the depositories database and
hence are not required to be filled in the application form for issues wholly made
in dematerialized form. |
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Q. Are we required to do any thing in order to ensure that we get refund through
ECS? |
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The application are required to ensure that bank details including MICR code(9 digit
code which appears in the cheque leaf) maintained at the depository level are updated. |