An Initial Public Offering is a process by which a private company becomes public. It happens when companies start selling shares in the market for the first time. Selling shares is like selling a portion of the company’s stake to investors. There are two types of markets, primary and secondary markets. These offerings launch in the primary market. There are two reasons for initiating an IPO.
It intends to raise fresh capital to finance the expansion or diversification plans of the company. It can also be in the form of an offer for sale, where the offering is an exit route to early investors. All investors have questions such as an investment that are answered.
What is a price band?
A price band is a price floor, and a cap between which a seller allows buyers to place bids on security. For example, if the price band of Route Mobile is between Rs. 345 to Rs. 350, investors can bid for shares at any price between the mentioned range.
What is the minimum order quantity?
Minimum Order Quantity is the number of shares investors can apply while bidding in a public offering. If you want to bid for more shares, you can apply in multiples of the market lot of shares. If the minimum order quantity is 40 shares, you can apply at any price within the range. For more shares, invest in multiples of 40, like 80 or 120.
What is a cut-off price?
The cut-off price for an upcoming IPO is the offer price, finalised by a company in consultation with the book-running lead managers. It is any price within the price band. Applying on cut-off price means you are ready to pay whatever price the company decides at the end of the book-building process. When applying at a cut-off price, an investor has to pay the highest price while placing the bid.
If a company decides the final price is lower than the highest price asked for, the remaining amount returns to the retail investor.
How to check the application status?
While investing in the latest IPO, you can check the application status from the order book on the website or app. Remember that you cannot apply for a public offering multiple times with the same Demat Account or PAN number. In such cases, apply under a family member’s name who holds a Demat Account and PAN number.
How to apply?
If you have a Demat, Trading, and Bank Account with a branch, you can apply for recent IPOs by entering your registered mobile number, and captcha and clicking Send OTP. You receive the One Time Password. Enter it and click on Submit. Next, fill in details like PAN number, UPI ID, Demat Account ID, and depository name. Click on submit, agree to the terms, and Confirm. You receive the mandate within two hours. Accept it and apply.