An Initial Public Offering (IPO) is the selling of securities to the public in the primary market. It 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. This paves way for listing and trading of the issuer’s securities. The sale of securities can be either through book building or through normal public issue.
Who decides the price of an IPO?
The issuing company in discussion with the lead merchant banker (the institutions upon which rests the entire responsibility of managing the issue) decides the price. There is no set price formula prescribed by SEBI. However the company and the lead banker are required to give full explanation of the key assumptions taken into consideration while deciding the issue price. In practice, there are two types of issues, one where the company and Lead Merchant Banker fix a price (called fixed price) and other, where there is a price band and rest is left to market forces to determine the final price.
What does ‘price discovery through Book Building Process’ mean?
Book Building is basically a process used in IPOs for price discovery of an offer. It is a method where, during the period for which the issue is open, different categories of investors apply at various prices based on their judgement, within the price band. The cut off is determined after the bid is closed to public.
What is Cut-Off Price?
In a Book building issue, the company that wishes to tap stock market for fresh funds is required to indicate the price band. The actual discovered issue price can be any price in the price band. This issue price is called ‘Cut-Off Price’. The issuer and lead manager, which is managing the issue, decides the cut off price after considering the issue size and the investors’ desire for the stock.
RSL facilitates the IPO application for all of its clients through online platform. Using the Online IPO service, an existing client can apply for the IPO using the Login to RACE Equity Platform
Process
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One needs to have a demat account |
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Make available the copy of PAN card |
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Other basic essentials such as address proof, bank details and contact details also required |
We also provide you with latest news about the upcoming and current IPO’s including their listing dates. Our analysts also offer investment advice based on thorough fundamental research of the currently open IPO’s.