IPO FAQs - Frequently Asked Questions on IPO

There are primarily two types of IPOs:

• Fixed Price Issue IPO: In a Fixed Price Issue IPO, the issuer company determines the issue price in advance and mentions it in the prospectus. Investors subscribe to the shares at the fixed price, and the number of shares available for subscription is also predetermined.
• Book Building Issue IPO: In a Book Building Issue IPO, the issue price is not fixed in advance. Instead, the issuer company and its underwriters determine a price range within which investors can bid for the shares. Based on investor demand, the final price is determined through a bidding process.

A Mainboard IPO refers to the process through which a well-established and typically larger company offers its shares to the public for the first time, thereby becoming a publicly traded company on the NSE or BSE.

The eligibility criteria for a Mainboard IPO in India typically include:

• A minimum paid-up equity capital of ₹10 crores
• A minimum market capitalization of the applicant's equity of ₹25 crores
• At least a three-year track record for the applicant or the promoters/promoting company

Mainboard IPOs typically have a minimum application value lot size ranging from Rs. 10,000 to Rs. 15,000. This means that investors participating in a Mainboard IPO need to apply for shares in multiples of this specified amount. The minimum lot size is determined by the issuing company and is aimed at ensuring orderly trading and adequate participation from investors.

An SME IPO, or Small and Medium Enterprises IPO, is a process through which small and medium-sized companies raise capital by offering their shares to the public and becoming listed on a stock exchange's SME platform.

For SME IPOs in India, the company should have a post-issue paid-up capital of less than ₹25 crores, net tangible assets of at least ₹1.5 crores, a positive net worth, and a track record of profitability for at least two of the last three financial years. Additionally, 100% underwriting and three years of market making are mandatory.

The minimum application lot size for SME IPOs in India is determined by the offer price of the shares. It ranges from 100 to 10,000 shares, with the minimum application amount or trading lot size not being less than ₹100,000. The specific lot size is set according to the price band of the shares being offered. For instance, if the price band is up to ₹14, the minimum lot size is 10,000 shares, and for a price band more than ₹750 up to ₹1,000, the minimum lot size is 160 shares.

An SME IPO (Initial Public Offering) and a Mainboard IPO are both methods by which a company can offer its shares to the public for the first time, thereby becoming a publicly traded entity. However, there are several key differences between the two:

Size and Scale:

• SME IPOs are designed for small and medium-sized enterprises (SMEs) with relatively smaller market capitalization and operating scale. These companies typically have lower revenue and market presence compared to larger corporations.
• Mainboard IPOs, on the other hand, are intended for larger, more established companies with higher market capitalization and operating scale. These companies often have significant revenue, assets, and market share.

Listing Requirements:

• SME IPOs generally have less stringent listing requirements compared to Mainboard IPOs. This makes it easier for smaller companies to access the public capital markets.
• Mainboard IPOs typically have more rigorous listing criteria, including higher minimum market capitalization, revenue, profitability, and corporate governance standards. These requirements are designed to protect investors and ensure the stability and credibility of the stock exchange.

RII, NII, QIB, and Anchor Investor are classifications of investors participating in IPOs:

• Retail Individual Investor (RII): RII refers to individual investors who participate in IPOs directly through the retail channel. These investors typically buy relatively small quantities of shares.
• Non-Institutional Investor (NII): NII includes individual investors or entities that are not institutional investors, such as high-net-worth individuals or corporate bodies. They usually invest larger amounts compared to retail investors but are not institutional investors like mutual funds or insurance companies.
• Qualified Institutional Buyer (QIB): QIBs are institutional investors that are deemed financially sophisticated and capable of participating in certain types of securities offerings not available to retail investors. Examples include mutual funds, pension funds, insurance companies, and certain types of investment firms.

In summary, RII and NII represent individual investors, while QIBs are sophisticated institutional investors. These classifications help define the diverse investor landscape in IPOs.

The basis of IPO (Initial Public Offering) allotment refers to the method used by companies and underwriters to allocate shares to investors who have subscribed to the IPO. The allocation process is typically determined by several factors:

1. Proportionate Basis: In many cases, shares are allotted on a proportionate basis. This means that if an IPO is oversubscribed (i.e., more investors apply for shares than there are shares available), each investor receives shares in proportion to the number of shares they applied for relative to the total demand.
2. Lottery Basis: In some instances, especially when demand exceeds supply significantly, shares may be allotted through a lottery system. Under this method, investors are randomly selected to receive shares, regardless of the size of their application.
3. Reserved Categories: Companies may reserve a certain portion of shares for specific categories of investors, such as retail investors, institutional investors, employees, or existing shareholders. This ensures that these groups have a chance to participate in the IPO.

Yes, it is possible to apply for an Initial Public Offering (IPO) using the BHIM (Bharat Interface for Money) application. BHIM UPI (Unified Payments Interface) has been integrated with the IPO application process to simplify and expedite the payment process for IPO subscriptions. Here’s how you can use BHIM UPI for IPO applications:

1. Create a UPI ID with any of the IPO-enabled BHIM UPI apps.
2. Enter your UPI ID on the IPO application form.
3. Check for a notification on your BHIM UPI app and approve it.
4. Review the application details and proceed.
5. Enter your UPI PIN to approve the mandate block.
6. Receive confirmation of the transaction.

Ensure that the bank account linked to your UPI ID is from the list of banks that are live on UPI with the IPO feature. This method allows for instant fund transfer and real-time application submission, making the IPO application process more efficient

Yes, you can apply for multiple Initial Public Offerings (IPOs) using the same Permanent Account Number (PAN). However, there are certain rules and limitations to consider:

• One Application Per IPO: You can only submit one application per IPO for a given PAN. Submitting multiple applications for the same IPO with the same PAN is not allowed and will result in rejection.
• Multiple IPO Applications: You can apply for different IPOs that are open for subscription at the same time using the same PAN.
• Family Members: If you wish to apply for more IPOs than one, you can do so in the names of different family members, provided each family member has their own PAN and demat account.
• Third-Party Applications: Some banks offer the facility to apply for up to five IPO applications using one bank account, but each application must be in the name of different individuals with separate PANs and demat accounts.