In early 2024, public offerings are set to return to prominence, driven by a strong stock market and growing investor confidence in India. Notable IPOs like JNK India Ltd., Vibhor Steel, and the upcoming debuts of Ola, Snapdeal, Swiggy, and MobiKwik highlight the need to understand IPO terminologies. Let’s explore the essentials of IPOs together!
Fresh Issue vs Offer for Sale
In a Fresh Issue, a company offers its shares to the public for the first time, raising funds for growth and expansion. Conversely, in an Offer for Sale, existing stakeholders sell their shares, with proceeds going directly to them rather than the company.
Abridged Prospectus
An Abridged Prospectus provides a condensed version of a company’s details, allowing investors to grasp essential information swiftly. This document saves time without compromising on crucial insights needed for investment decisions.
Draft Red Herring Prospectus (DRHP)
The DRHP outlines key details about the company and is reviewed by SEBI (Securities and Exchange Board of India). This document offers transparency and a chance for public input before the IPO journey begins.
Red Herring Prospectus
Once approved by SEBI, the DRHP becomes the Red Herring Prospectus. This document provides vital insights without revealing specifics like the number of shares or their prices.
Price Band
A Price Band determines the range in which shares are available for purchase. It’s a collaborative decision between the company and underwriters, ensuring fair pricing for potential investors.
Book Building Process
During the Book Building Process, investors bid within the price band, determining the final IPO price through market demand. This process helps in discovering the fair market value of the shares.
Issue Price
The Issue Price, also known as the Offer Price, is determined by the company’s needs and investor demand, ensuring a balanced and fair market value.
Minimum Subscription
SEBI mandates a Minimum Subscription percentage, ensuring a baseline investor interest. If an IPO does not meet this minimum subscription, it is considered a failed IPO.
Oversubscription
An Oversubscribed IPO reflects strong investor confidence, with demand outpacing the available shares. This is a positive signal of market optimism and the perceived value of the company.
Undersubscription
An Undersubscribed IPO indicates limited investor interest, which can be influenced by factors such as pricing, marketing efforts, or prevailing market conditions.
Listing Date
Finally, the Listing Date marks the debut of the shares on stock exchanges, opening new opportunities for investors to trade beyond the initial offering process.
Thank you for reading!
Follow us for more tips on investing and navigating the financial markets.
www.empowryse.com