Frequently Asked Questions on IPO

Through an initial public offering (IPO), a privately held company can get listed on the stock exchange and make its shares available for public purchase.

In the sections below, we will explore frequently asked questions on IPOs for investors and companies. This list will help us understand the process better and prepare for investing in an IPO.

Here are ten IPO FAQs to note.

IPO FAQ 1: When can I expect credit for my IPO shares in the Demat account?

The exact timeline for credit cannot be specified, as each company has a different one. However, ideally, investors can expect to receive the credit in their Demat accounts before the listing dates of the said shares. Once listed, these assets can then be traded by the investors.

IPO FAQ 2: How can I withdraw from an IPO?

Here is a step-by-step method for IPO application withdrawal:

• Log in to the broker's account (the account from which the application was submitted).
• Next, you must go to the 'order book' section and select the IPO.
• Now, click on 'withdraw'.
• The blocked money can be expected to be released within a couple of days once withdrawn.
• However, please note that withdrawal can only happen during the bidding period.
• If the specific IPO does not have the online withdrawal option, consider contacting the bank or broker (the source that helped with the application).

IPO FAQ 3: Is there a difference between the fixed price and book-building method?

When launching an IPO, a company can opt for one of the following options:

1. Fixed price method: In this method, the offering price of the IPO is set before it opens for subscription to the public.
2. Book-building method: This is like a price discovery mechanism with the company setting an upper and lower limit while launching the IPO. Investors can bid within this range for subscriptions.
3. A combination of both methods

IPO FAQ 4: Is there a difference between the 'floor price' and the 'cut-off price' in the book-building method?

Floor price refers to the minimum price point at which the bidders can order using the book-building method. The cut-off price, on the other hand, refers to the highest price point at which the company allots its shares and the investor buys the said shares.

IPO FAQ 5: Do I need to have a PAN card to apply for an IPO?

It is mandatory to have a PAN card to apply for an initial public offering. Investors need to ensure the details of the PAN are added correctly in the form to avoid cancellation of the application.

IPO FAQ 6: How long does an IPO remain open for subscription?

As per clause 8.8.1, the subscription list for public offerings should remain open for a minimum of three working days and not exceed ten working days.

IPO FAQ 7: Can I sell my stocks before an IPO is listed on the stock exchange?

No, investors cannot sell their shares before an IPO is listed on the stock exchange. They must wait for the listing to trade assets.

IPO FAQ 8: Can I use BHIM for an IPO application?

Yes, SEBI has approved the use of BHIM UPI ID for IPO applications.

• You need to specify your ID in the application form to proceed.
• Your broker will request to block the funds, and you must approve the block mandate in your BHIM UPI app.
• As the final step, the applied amount will be blocked in your bank account and debited post-allotment.

IPO FAQ 9: Can I apply for an IPO through multiple applications?

Investors cannot apply for an IPO through different applications using the same name. This is not permitted. Hence, the applications will be rejected if tried. However, one option is to use the Demat accounts of your family members to apply. No account should be repeated, and all members should have unique accounts for this option.

IPO FAQ 10: What do ‘Market Lot Size’ and ‘Minimum Order Quantity’ mean?

A market lot size or minimum order quantity refers to the lowest number of shares an investor can apply for once a company launches an IPO. For example, if a company has specified 100 shares as the minimum order quantity, the investor can only purchase in multiples of 100—100, 200, 300 shares, and so on.

IPOs provide companies with an opportunity to raise capital during economic downturns when traditional lending is constrained or when they wish to expand their business. Through IPOs, they can get listed on major stock exchanges, enhancing their appeal to prospective investors and improving company transparency.

• An initial public offering (IPO) is the process by which a company can get listed on the stock exchange and sell its shares to the public to become shareholders.
• IPO enables companies to raise funds for business expansion, absorb smaller players, advance research, pay off debts, and raise their profile in the market for the public.