What is an IPO?
IPO is a short name for the phrase Initial Public Offer. There are following types of Public Offers.
1. Initial Public Offer (IPO)
2. Follow-on Public Offer (FPO)
3. Offer for Sale (OFS)
4. Composite Public Offer (CPO)

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1.2  What is Book Building?
There are two types of book built Issues.

1. 100% Book Built.  Where all categories of buyers bid during the time issue is open.
2. 75% Book Built.  Where only QIBs and NIBs bid during the first phase the issue is open.  After the price discovery, the remaining 25% issue size is open as a fixed price issue for 3 more working days for retail investors.

There are mainly 3 types of investors besides reserved categories and the allotment ratio is devised separately for each such category.

i. Qualified Institutional Buyer (QIB)
It means:

• public financial institution as defined in section 4A of the Companies Act 1956.
• scheduled commercial banks;
• mutual funds;
• foreign institutional investor registered with SEBI;
• multilateral and bilateral development financial institutions;
• venture capital funds registered with SEBI;
• foreign venture capital investors registered with SEBI;
• state industrial development corporations;
• insurance companies registered with the Insurance Regulatory and Development Authority (IRDA);
• provident funds with minimum corpus of Rs. 25 Crores;
• pension funds with minimum corpus of Rs. 25 Crores).

Generally 50% of the Issue Size is allocated to QIBs and are not allowed to bid at Cutoff Price, as they are mainly responsible for Price Discovery.

Note: The Allotment to the QIBs is done proportionately.  The subscription ratio in the category is applied for the allotment. (See Page 299 of DIP Guidelines November 2007)

ii. Non-Institutional Buyers (NIB / HNI)
Those investors who bid for greater than Rs.1,00,000 in amount are in this Category.

Generally 15% of the Issue Size is allocated to NIBs and are not allowed to bid at Cutoff Price, as they are mainly responsible for Price Discovery.

iii. Retail Buyers
Those Investors who bid for Rs.1,00,000/- or less in amount are in this category

Generally 35% of the Issue Size is allocated to Retail Investors.  They are allowed to bid at Cut-Off Price.

Note: For Procedure of Allotment to Categories other than QIBs See Page no. 294 of DIP Guidelines November 2007.

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1.6  What is the revision of Bid?
The bidder may revise the price at which he/she has bidded earlier. The price revision has to be done before the Issue closes. In the application, there are revision-forms included with the same application number. The bidder is at the liberty to revise the price upwards, than bidded earlier. The downward revision is not allowed.

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1.9  How is Issue Price Discovered?
The price for which maximum percent of shares, (at or over the issue size), is received is the price discovered and is decided as the Issue Price.  The allocation of shares is priced by this Issue Price.

Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purpose of illustration and is not specific to any Issue) The Bidders can bid at any price within the Price Band. For instance, assume a Price Band of Rs. 60/- to Rs. 72/- per Equity Share, Issue size of 5,400 Equity Shares and receipt of five Bids from the Bidders. A graphical representation of the consolidated demand and price will be made available at the websites of the BSE (www.bseindia.com) and the NSE (www.nseindia.com) during the Bidding/Issue Period. The illustrative book as set forth below shows the demand for the Equity Shares of the Company at various prices and is collated from Bids from various investors.

1.10  What are Technical Rejections?
The application is excluded from the allotment process, if certain technical defects are found in the applications received.  The Technical Rejections commonly used are listed below.

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3.1  Follow-on Public Offer (FPO)
When the Co. has already been formed through an IPO for part of the total Authorised share Capital and wants to come up with another Public Offer for balance shares out of the Authorised Capital or Additional Authorised Capital i.e. New Shares for a new Project, the Company launches FPO 

The FPO can be launched in two ways i.e. Book Built way or Fixed Price Issue.

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3.2  Offer for Sale (OFS)
When some of the promoters want to offer part of their shares to public, they offer these shares to Public by way of either bidding for price discovery or by fixed price issue.  The issue is just like any other Issue, only the amount so collected is paid to the Promoters/ Directors, whose shares are offered for sale, i.e. there is no project involved and the shares are not new shares.

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3.3  Composite Public Offer (CPO)
An Issuer my decide to offer shares to the existing share holders for a price lower than envisaged issue price or price band.  For this purpose, the Issuer will launch a Composite Issue i.e. a combination of Right and Public Issue.  The Right Issue will precede the Public Issue by 30 days, i.e the minimum time a Right Issue is Open.  It is mandatory to allot shares for the composite issue together and finish all activities in the time line provided for the Public Issue.  In case of Under Subscription in any of the component of the Composite issue i.e. Right or Public, the balance shares in the offer will spill over to other oversubscribed component unless specifically mentioned in the offer letter.

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What is a Fixed Price Issue?
When the Issue Price is fixed before the Issue Opens, it is called Fixed Price Issue. Unlike Bidding, the applications are accepted by the bank branches designated for collection.  The Issue is open for 3 to 7 days and all the activities up to dispatch or Refund are completed within 30 days from the date the Issue closes.

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What is the use of IPO for a common Investor?
It is the chance to get the shares for a new company for an initial price.  In future, if Co. performs, the share price might be too high for a common investor.

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1. Correct and current Address.
2. Correct and Currently used Bank Account Number, Name of the Bank and Branch is updated in the Demat Account
3. The 9 digit MICR Code of the bank branch.  This Code can be seen on the bank’s latest cheque leaf, after the cheque No. Using this code, the refund banker can transfer refund amount to the receiver’s bank account, eliminating the postal delays and loss of refund order in transit.  The transfer of funds is done through ECS Credit Service (See ECS FAQ) and is applicable only for the 15 cities where RBI has offices.  The Cities are as follows.
   
   

   City	Code	City	Code
   Delhi	110	Bangalore	560
   Chandigarh	160	Chennai	600
   Kanpur	208	Trivandrum	695
   Jaipur	302	Kolkata	700
   Ahmedabad	380	Bhubaneshwar	751
   Mumbai	400	Guwahati	781
   Nagpur	440	Patna	800
   Hyderabad	500

   
   In case of high amount refund, it would be better to find and write the currently used IFSC code of the bank branch in the application.  IFSC: Indian Financial System Code (IFSC) is an alpha-numeric code designed to uniquely identify bank branches in India. This is an 11 -digit code with the first four digits are characters representing the bank code, e.g. Bank Of Baroda may be coded as “BARB”, the fifth digit is a control character, and the last 6 digits is a number which identifies the branch.)
   
   By using this code, the refund banker can transfer high amounts directly to the receivers bank account within one hour through RTGS i.e. Real Time Gross Settlement.(See RTGS FAQ) 
4. The names in the application are same as in the demat account no. written on the application.  Also they are in same order in case of joint names.
5. The address and bank details should be written on application also if space provided for additional information.
6. The investor has to write the age with out fail.  Also the application has to be signed by all applicants.
7. In case of Body corporate, it is necessary to affix Co. Stamp before signing.
8. The PAN (Permanent Account No.- by Income Tax Dept.) is clearly written and a copy of the PAN Card is attached to the Application for application amount higher than Rs.49,999/-
9. The investors, who apply online through several online trading accounts, should ensure that their own Demat No. is printed on the application.
10. Ensure that the cheque / DD with the application are from a local bank.  Non Local cheques will not be accepted by the banker where the bid applications are deposited and will be treated as Cheque Returned Unpaid by the banker.

Please note that all your information i.e. address, bank account details etc. are down loaded from your demat account for the refund or credit activities and any flaw left in the demat account will hamper your chances of allotment and further credit of shares or refund.

After taking above precautions, if you want to increase your chances of allotment, envisage and apply in a category of shares in which there might be least number of applications.  Then your chances of allotment will automatically increase.

You are advised, not to apply more than once (except in case of bid revision), in same or different categories.  Such applications will not be considered for allotment and are liable to be rejected on the date of the submission.

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What should I do if I do not get the credit of allotted shares in my demat account after allotment?
You must quickly contact the Registrar to the Issue and ensure correction to the Demat No.  After receiving the correction, the registrar will give the credit within 3 to 7 days.

Do not make deals or trade the shares on assurances, until they are actually credited to your demat account.

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What is the guarantee that I will earn Profit when I sell the shares or get dividend in future?
There is no guarantee. You should use good advice from knowledgeable people and your intuition before applying.

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How do I ensure succession for my shares while applying for the shares?
You can provide nominee details in the demat account.  Also there is space provided for entering the nominee name in the application.

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