An initial public offering (IPO) is the first sale of a company’s shares to the public. The main purpose of an IPO is to raise capital for the corporation. This sale is done in the primary market.

Evaluating an IPO is an important decision. You need to analyse the company, its business, management to choose the right IPO to invest in.

• Companies potential for growth
• Look to see for steady rising profits
• Growth plan and previous earnings
• If a product or discovery the company comes out with will bring price of the stock up
• Find out about their competitors
• Eind out about what they exactly do

It also requires taking the view of the market, because depending on the market sentiments, the value of the IPO, once it is listed can vary a lot for the short-term. For more information on this topic, click here and get the IPO investment Guide.

Through an IPO a company offers to sell the part-ownership of the company by offering shares to general public. There are a given number of shares that a company is willing to offer in an IPO. So depending on how many people have applied for buying the shares, the company will either offer you shares or will refund your money back, if the amount received is more than what the company is planning to raise (or if the issue is oversubscribed). You can easily apply to buy the shares of that company by filling an application form that will be available at any of the Arihant’s offices/investment center, or you can also apply online through www.arihantcapital.com/ipo.

A draft prospectus provides the information on the financials of the company, promoters, background, tentative issue price etc. It is filed by the Lead Managers with the Securities and Exchange Board of India (SEBI) to provide issue details. The final prospectus is printed after obtaining the clearance from SEBI and the Registrar of Companies (ROC).

A red herring prospectus (RHP) is a preliminary registration statement that must be filed with the regulatory authority describing the IPO and the prospects of the issuing company. There is no price or issue size stated in the red herring, and it is sometimes updated several times before being called the final prospectus.

It is known as a red herring because it contains a passage in red that states the company is not attempting to sell their shares before the registration is approved by the regulatory authority.

A book building offer is an issue where issuing company defines a price range i.e. floor (lower) price and Cap (Upper) price. After subscription, company decides the basis of allotment depending upon under/over subscription. On this basis an applicant may or may not get allotment of shares.

It’s an issue where issuing company defines single price per share. After subscription, company decides the basis of allotment depending upon under/over subscription. On this basis an applicant may or may not get allotment of shares.

In Book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called “Cut Off Price”. Only retail individual investors have an option of applying at Cut Off Price.

The price of the IPO is known in advance to investors in case of offer of shares through normal public issue. On the other hand, the demand can be known everyday as the book is built in case of book building, which demand is not known until the close of the issue in case of the normal public issue.

Floor price is the minimum price at which bids can be made. The issuer company in consultation with the book-running lead manager fixes the floor price.

No. The system automatically rejects the bids if price is less than floor price.

SEBI (Securities' Exchange Board Of India) issues guidelines, which specifies the percentage of the total securities offered for each category of investors from time to time. Currently, in any IPO, the allocation is usually as under: QIB – 50%, HNI – 15%, Retail - 35%

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.

The RHP may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20 per cent.

The regulators do not play a role in setting the price for issues. The company decides the price or 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.

A bid is applicable only in case of book-building IPO. A bid is the price at which an investor wants to buy the requisite quantity of securities. The investor can choose any price within the specified price band of the issue. The price at which he wants to apply is the bid price.

Yes, as per SEBI guideline trading in the securities on the exchange is permitted in demat mode only. Securities allotted in an IPO can only be in the demat mode and will be credited to the demat accounts of the allottee. Click here to open a demat account with Arihant.

This is where the role of a stock exchange comes into picture. Stock exchange is like a marketplace where shares of different companies are bought and sold. So after an IPO, the company would get itself listed on a stock exchange. After it has been listed you can either sell your shares or even buy more shares from the stock exchange. However, the price in which you bought the shares through IPO may be different from when it is listed and traded on stock exchange. Click here to open an account with Arihant.

Yes you can buy shares directly from the stock exchange, it is not necessary to apply for an IPO to buy shares. You can buy them from the stock exchange after the company lists itself on the exchange (NSE and/or BSE). However, to buy and sell shares on a stock exchange you have to go through a registered intermediary called a stock broker. Arihant is one of India's leading stock broking houses and through us you have convenient options to buy and sell shares either directly through our website, or calling on our Tele-trade phone number or by visiting any of our investment centers across India.

When you open www.arihantcapital.com website, the home page has a feature NEWS, select news and the select IPO to check the forthcoming issues.

Alternatively you can go to product and services and choose IPO. There you can get the detail which shows forthcoming IPO’s, draft prospectus etc.

In the research section there is a IPO section wherein you can view the IPO recommendation notes of the forthcoming or open issues. In the report, our research team analyzes the forthcoming issue based on its financials, promoters’ background, project details, future prospects etc. and help the investor in deciding whether the issue is worth investing or not.

At Arihant, you can apply for IPOs without going through the tedious process of application filling, cheque signing and submission. All you need to do is fill in the number of shares you want to apply for and the price at which you wish to buy through i-Trade IPO, Arihant’s online IPO facility, and we manage the rest of the paperwork for you. This is done on the Authority of the Power of attorney executed by you in favour of Arihant capital markets limited along with a Online IPO Registration Form.

• Applying for IPO through physical application

  You can invest in IPO through filling-in an application form that can be acquired from any of Arihant’s branches near you. Once you have received the application form, you just need to fill in the details in the form and provide a copy of your PAN card along with a cheque with amount you wish to invest filled in and duly signed.

  We will check the application for you and forward it to the respective center where your application will be reviewed and shares will be accordingly allotted.

• Applying for IPO Online

  With i-Trade IPO (our online IPO facility) investing in IPO is hassle-free i.e. without going through the tedious process of filling the application form, signing cheque and finding location for submitting the form. With our online IPO facility, you just have to

  • Login to your customer trading account at Arihant
  • Select the IPO you want to invest in and your desired quantity
  • Submit your order

Rest all the paper work and cheque writing will be done by us on the basis of information provided by you.

To apply in an IPO you must need the followings:

• You needs to have a demat account.
• PAN copy and PAN details is required.
• Basic details such as your name, address, bank details, cheque number and the contact details needs to be provided.
• Proper bid lot and price within bid range (investment amount and number of shares)
• Order of names in the application should be same as in your DP account.

The minimum application amount differs from issue to issue. In a normal issue, the Lead managers decide the value and this would be notified on the form. In a book building issue, a price range is declared and the investors who quote higher value are allotted the shares. In Highlights page of any IPO these issues are explained in detail.

The minimum application amount differs from issue to issue. In a normal issue, the Lead managers decide the value and this would be notified on the form. In a book building issue, a price range is declared and the investors who quote higher value are allotted the shares.

In Highlights page of any IPO these issues are explained in detail.

Please bear in mind that in a book building exercise the final price is decided based on at what price the maximum demand can be generated for the issue. Your quoting a price above the band "will not" in any way improve your chances of getting an allotment.

Ultimately you will be allotted the shares only at the price decided by the company based on the bids received. Also note that if you quote a price below the band then you will get the last priority for allotment and that too at the discretion of the company.

No. You can only make one application for the same IPO in your own name. Multiple applications will be rejected.

The steps, as set out in the i-Trade IPO services walkthrough includes:

• Open a trading and demat account with Arihant. Once you open an account or if you already have a trading and demat account with Arihant then fill in and submit an online IPO registration form along with a Power of Attorney
• You will receive a username and password to access i-Trade IPO service
• Login using the given username and password on www.arihantcapital.com/ipo
• Once you are logged in, view details of current IPO offerings and select the desired IPO you want to apply for
• Punch the number of shares you want to apply for and the price at which you want to bid for (or use cut off option) and submit your application
• You may check the status of the i-Trade IPO application from the website after the closing date of the respective IPO

Make sure you have transferred funds from your bank account to your trading account before you invest in IPO to ensure that your application is successful. So for example, if you bid for shares worth Rs. 99,000 in an IPO, then you must have upto Rs. 1,00,000 in your trading account, otherwise your application will be rejected.

Yes, it is a round-the-clock service and you can submit your application online for the particular IPO anytime within the specified Arihant IPO services offering period.

You can send in your application anytime before 12pm on the day of closing of the IPO application (stipulated closing time is mentioned for each IPO which can view once you login). In some instances, the bidding for the IPO ends in the early half of the day. So you will need to check the exact time till which you can submit your bid or apply for the IPO.

The Issuer Company will decide the basis of allotment and if allotted the shares will be credited to your demat account under which the application was made.Refund Order if any will be directly sent to your address registered against the demat account with the bank particulars duly printed on.

Yes, you can view all your transactions online. You will have to go to the transaction log page and punch in your transaction date and IPO you have applied for to view your desired transaction update and details.

Yes. You can change or cancel your offer online at any time until your application shows ‘in-process’ status online and till the application is not transmitted to the stock exchange.

With Arihant online IPO service you have the option of amending your application.

To make any amendments, you will need to first login to the IPO platform. Upon login, go to the orderbook, and then click on the application number you want to modify. There will a tab ‘Modify’, click on this tab and then you can make modifications to the quantity and price and submit the changes.

Similarly to cancel your application, you just need to click on the cancel option after logging in and selected the IPO application you want to cancel.

For Accepted applications the NSE Confirmation number is displayed in the Transaction Log page after you login to i-Trade IPO.

Whether you want to invest online or offline in an IPO depends on your comfort level with using computer and internet. However, online mode is more convenient and saves time, effort maybe money too (if you consider fuel cost).

One benefit of investing offline however is that you don’t need a trading account to invest in an IPO unless you decide to sell the shares you have been allotted through the IPO.

Investing in IPO with Arihant online IPO service is absolutely safe. All your data is securely transferred to the NSE for the bidding purpose.

Potential risks of online transactions include interruption, transmission blackout, delayed transmission due to data congestion in the Internet traffic and incorrect data transmission due to the public nature of the Internet.

Once you receive notification of your allocation and the offering begins to trade in the secondary market (e.g., on an exchange), you can sell your allocated shares. To sell the shares, you need to have a trading account with a stock broker.

To open a trading account with Arihant, click here.

Yes, you can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing of revising the bids shall be completed within the date of closer of the issue.

If the IPO is oversubscribed, the allotment is generally made by way of balloting based on the basis determined by the listed company.

This means that you may receive only a fraction of the shares you applied for. You may also be allotted with more or fewer shares than others who have applied for the same number of shares. It is also possible that you are not allotted any shares at all.

You can check your chosen settlement account on the IPO closing date, since application money will only be debited if the application has been successfully submitted.

Following are some of the reasons why your application may be rejected:

• Inaccurate payment amounts.
• Inaccurate information like PAN Card details.
• Multiple applications, meaning submitting more than one application form with the same name (or even joint name applications), will be rejected.
• More demand for an IPO in the market, in other words if the IPO is oversubscribed.

In a public issue, you will be getting refund or share certificates after 40-45 days from the closing date of the issue. In a book building issue, you will be getting the refund/certificates in 30-40 days from the closing date. The share certificates will also be mailed around the same time if you have got the allotment.