Frequently Asked Questions on IPOs

Frequently Asked Questions on IPOs

 

Q. What is Book Building?

SEBI Guidelines defines Book Building as a process undertaken by which a demand for the securities proposed to be issued by a corporate body is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.

Q. What is the main difference between offer of shares through book building and offer of shares through normal public issue?

Price at which securities will be allotted is not known in case of offer of shares through book building while in case of offer of shares through normal public issue, price is known in advance to investor. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.

Q. What is minimum number of days for which bid should remain open in book building?

Book should remain open for minimum of 3 working days.

Q. Can open outcry system be used for book building?

No. As per SEBI, only electronically linked transparent facility is allowed to be used in case of book building.

Q. Is the issue price for placement portion and net offer to public the same?

Yes.

Q. What is the floor price in case of book building?

Floor price is the minimum price at which bids can be made.

Q. Can the Individual Investor use book building facility for making an application?

Yes.

Q. What are the formalities to be completed by members before participating in an IPO?

The member has to submit a one-time undertaking in prescribed format to the membership department. Members have to make the request in prescribed format giving details of the user ids along with the VSAT numbers.

Q. Can more than one issue be held simultaneously using NSE IPO system?

Yes.

Q. Can the bidder revise his bids?

Yes.

Q. Which members will be allowed to participate in book building of issue?

Book Running Lead Manager appointed by the issuer will intimate to the exchange the list of members who are eligible to participate in the issue. These members will be allowed to enter the bids in the IPO.

Q. How to install the IPO software in trading terminal?

The members have to copy the NTIPOTDR.EXE file in root directory and then inflate the file by using command NTIPOTDR -D -O. The above executable file is available in extranet under common/ipo directory.

Q. What proof can bidder request from trading member for entering bids?

Whenever a bid is entered by trading members in to the system, a unique transaction registration slip is automatically generated. Transaction registration slip gives details regarding number of shares bid for, price, the client name etc.

 Also Read : All about IPOs

Q. Is it possible to enter bids less than floor price?

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

Q. Is the Margin amount a compulsory field in order entry?

Margin amount is a compulsory numeric field. However if member collects no margin amount then he has to enter 0 in margin amount field.

Q. Can members set up order limits for themselves?

Yes. Corporate Manager of each member can set up order limits for all the dealers under him.

Q. Will the member be able to see the bid details for all the issues?

User will see the bid details for all the issues. However, he is able to enter bids only for those issues for which he has been appointed as member by Book Running Lead Manager.

Q. Can the Syndicate Members set limits on orders to be entered by other members?

No. However the Syndicate Members can see the orders entered by members who are activated under him, by downloading EOD report.

Q. Can the Syndicate members modify or cancel the orders of other members?

Syndicate members cannot cancel or modify the bids entered by other members.

Q. What are the reports downloaded to Syndicate members?

Syndicate Member (SM) will get a report download of his own orders as well as of all other members who are activated under him.

Q. Will the change in the user level hierarchy in the IPO segment affect any change in the Capital Market Segment or vice versa?

The environment for Capital Market Segment and IPO book building segment are different. It is a matter of convenience, that User Ids available in the Capital Market Segment are used in IPO book building segment. Hence, any change in either of the Market segment will not affect the other market.

All about Initial Public Offering

All about Initial Public Offering

What is IPO ?

A corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is the largest source of funds with long or indefinite maturity for the company.

What is Book Building?

SEBI guidelines defines Book Building as "a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built-up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document".

Book Building is basically a process used in Initial Public Offer (IPO) for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date.

As per SEBI guidelines, an issuer company can issue securities to the public though prospectus in the following manner:

• 100% of the net offer to the public through book building process
• 75% of the net offer to the public through book building process and 25% at the price determined through book building. The Fixed Price portion is conducted like a normal public issue after the Book Built portion, during which the issue price is determined.

The concept of Book Building is relatively new in India. However it is a common practice in most developed countries.

Difference between Book Building Issue and Fixed Price Issue

In Book Building securities are offered at prices above or equal to the floor prices, whereas securities are offered at a fixed price in case of a public issue. In case of Book Building, the demand can be known everyday as the book is built. But in case of the public issue the demand is known at the close of the issue.

All about Initial Public Offering

Ordinary Business transacted at an Annual General Meeting

Ordinary Business transacted at an Annual General Meeting

Ordinary Business transacted at an Annual General Meeting

Section 102(2) of  the Companies Act,  2013 talks about  the businesses i.e.  the matters/items/agendas, which constitute the Ordinary Businesses to be discussed, considered and approved by the members i.e. the shareholders of a company in the Annual General meeting of that Company.

These businesses  are to be compulsorily dealt  in every Annual  General  Meeting of  a Company,  and therefore these are called as ‘Ordinary Business’.

The Ordinary Businesses as prescribed in the Section 102(2) of the Companies Act, 1956 are as follows:

(i)            the consideration of financial statements and the reports of the Board of Directors and auditors;

(ii)           the declaration of any dividend;

(iii)          the appointment of directors in place of those retiring;

(iv)           the appointment of, and the fixing of the remuneration of, the auditors;

Any businesses except the above 4(four) businesses shall be deemed to be ‘Special Businesses’.

Notes:

·         . The corresponding provisions  for Section 102(2) of  the Companies  Act,  2013  were earlier prescribed under Section 173(1) of Companies Act 1956.

·        . The provisions of this section is applicable to all companies (both Private and Public Company including Listed company).

 

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