Question 1

What is Initial Public Offering (IPO)?

Accepted Answer

An Initial Public Offering (IPO) is the process through which a private company offers its shares to
the public for the first time. This process is referred to as "going public". It allows a company to
raise money from the stock market by selling its shares (and proportionate ownership) to the new
investors.

Through an IPO, companies can generate capital that can be used for expansion, paying off debt, or
funding new projects. In return, the investors who buy the shares gain ownership in the company and
can benefit from future profits. These benefits can be in the form of dividends or the appreciation
of the price of the share that can be sold at a profit.

IPO meaning is important to know for both businesses and investors. While it provides companies with
access to a larger pool of funds, it also allows the public to invest in businesses they believe
will grow in value. For companies, IPOs also mean complying with stricter regulations and reporting
standards as they become publicly listed entities. This process helps companies grow and expand
while offering investors opportunities to participate in the company's future success.

Question 2

How does an IPO work?

Accepted Answer

An IPO (Initial Public Offering) is the process by which a private company offers its shares to the
public for the first time. Here's how the IPO process works, step by step:

1. Hiring Investment Banks: The first step in the IPO process is hiring investment banks (also
    known as underwriters) that will help the company through the complex journey of going public.
    These banks help the company with the preparation and filing of necessary documents.
 2. Regulatory Approval: The company must submit its IPO application to the regulatory body, which
    in India is the Securities and Exchange Board of India (SEBI). SEBI reviews the company's
    financials and approves the IPO based on compliance with regulations.
 3. Creating the Prospectus: Once SEBI gives the green light, the company prepares a prospectus,
    which includes detailed information about the company, its business model, financials, and how
    it plans to use the money raised from the IPO. This document is then shared with the public.
 4. Marketing the IPO: The company and its underwriters market the IPO to attract potential
    investors. This is done through roadshows, advertisements, and investor meetings to generate
    interest in buying the shares.
 5. Setting the IPO Price: The price at which the company's shares will be sold is determined next.
    It could be a fixed price or a price band within which investors can bid for shares. This is
    called price discovery.
 6. Share Allotment: Investors can apply for shares during the IPO's subscription period. Based on
    demand, the shares are then allotted to investors.
 7. Listing on the Stock Exchange: After the share allotment, the company gets listed on the stock
    exchange. The shares begin trading publicly, and the company officially becomes public.

The IPO process helps companies raise capital and allows investors to own a part of the company.
However, being publicly listed also means adhering to stricter regulations and greater transparency.

Question 3

What is the benefit of investing in IPOs?

Accepted Answer

The key benefits of IPO investment include:

1. Early Investment Opportunity: When you invest in an IPO, you get the chance to buy shares of a
    company at their initial offering price than can appreciate once the shares start trading on the
    stock market.
 2. Potential for High Returns: Historically, many companies experience a rise in their stock price
    shortly after going public, benefiting their IPO investors.
 3. Access to Growing Companies: IPO investment allows you to invest in companies that are in the
    early stages of their journey that might have high growth potential.
 4. Market Visibility: Once a company goes public, it gains increased market visibility, which can
    result in greater liquidity for its shares making them easier to trade than shares of private
    companies.
 5. Diversification: Investing in IPOs allows you to add new companies and industries to your
    investment portfolio, helping you diversify your holdings and spread risk.

Question 4

What are the important things to keep in mind before applying for an IPO?

Accepted Answer

Here are some key points to consider before you apply for an IPO:

1. Research the Company: Before making an IPO investment, thoroughly research the company's
    business model, financial health, and future growth potential. Read the company's prospectus,
    which provides detailed information about its operations, management, and risk factors.
 2. Understand the Industry: Look at the overall industry in which the company operates to
    understand growth prospects and prevalent challenges.
 3. Evaluate the IPO Price: Assess whether the price at which the shares are offered is reasonable.
    Compare it with the company's earnings and financial position. Sometimes, IPOs can be overpriced
    due to market hype.
 4. Review the Company's Financials: Analyse the company's revenue, profits, and debt. Healthy
    financials usually indicate a stable business. Avoid IPO investment in companies with weak or
    inconsistent financial performance.
 5. Risk Factors: Every company outlines the risks involved in its business within the prospectus.
    It's important to carefully review these risks and decide if you're comfortable investing.
 6. Lock-in Period: Many IPOs come with a lock-in period for certain types of shares. Check if you
    can sell your shares immediately after listing or if there are restrictions.
 7. Market Conditions: The state of the overall market can affect the success of an IPO. In bullish
    markets, IPO investments may perform well, but in bearish conditions, the returns may not be as
    favourable.
 8. Company's Use of Funds: Understand how the company plans to use the funds raised from the IPO.
    Whether it's for expansion, reducing debt, or other activities, it's important to see if the
    company has a sound plan.

Question 5

What is the Process of Investing in an IPO Online?

Accepted Answer

Investing in an IPO online is quite simple. Here's the step-by-step IPO process:

1. Open a Demat and Trading Account: To start the IPO investment process, you need a Demat and
    trading account with a SEBI-registered broker, such as m.Stock that offers a seamless and secure
    online platform for IPO applications.
 2. Check IPO Eligibility: You must:
    Be an Indian resident with a PAN card.
    Have a valid bank account and Demat account.
    Ensure you have sufficient funds in your linked bank account.
 3. Log in to the Trading Platform: Log in to your broker's trading platform and navigate to the IPO
    section. Top platforms like m.Stock give a detailed description of all ongoing and upcoming IPOs
    so that you can make an informed decision.
 4. Select the IPO: Do thorough research, evaluate the company's prospectus, and choose the IPO you
    wish to apply for from the list of active IPOs.
 5. Enter Bid Details: Select the number of shares (or lots) you wish to bid for.
 6. Complete the Payment: Once you submit your application, the required amount is blocked via ASBA
    (Application Supported by Blocked Amount) until the shares are allotted.
 7. Wait for Allotment: After the IPO closes, the shares are allotted and transferred to your demat
    account. In case of non-allotment, the blocked amount is released back to your bank account.

Question 6

Is a Demat account compulsory to invest in an IPO?

Accepted Answer

Yes, SEBI (Securities and Exchange Board of India) laws mandate each applicant to own a trading and
Demat account while applying for an IPO.

Question 7

How to check IPO allotment status?

Accepted Answer

Here's how you can check the IPO allotment status online:

1. Registrar's Website: The company's registrar is responsible for managing the IPO allotment. You
    can visit the registrar's website and check the IPO status by entering your PAN number,
    application number, or Demat account number.
 2. Stock Exchange Website: You can also check the IPO allotment status on the websites of stock
    exchanges like BSE or NSE.
    Visit the BSE or NSE website.
    Go to the IPO section.
    Select the IPO you applied for.
    Enter your PAN number or application number to see if the shares were allotted.
 3. Central Depositories: India's central depositories like NSDL and CDSL, and stock exchanges like
    the NSE and the BSE send regular alerts on your registered email, and as SMS on your registered
    mobile informing number keeping you informed regarding the allotment status.
 4. Broker's Platform: Some brokers, like m.Stock, provide an option to check the IPO status
    directly through their online platforms. Log in to your trading account, navigate to the IPO
    section, and check the allotment status.

Documents Required to Check IPO Allotment Status:
PAN Number: This is essential for tracking your application.
Application Number: The number assigned when you apply for the IPO.
Demat Account Number: Sometimes required when checking on the registrar's website or broker
platform.

Question 8

What happens if I do not get IPO allotment?

Accepted Answer

If you do not receive an IPO allotment, the blocked amount in your bank account will be released
back to you. The refund process is typically done within 2-5 working days after the allotment date.
The funds are released automatically through the ASBA (Application Supported by Blocked Amount)
system.

Once the amount is unblocked, it is returned to your bank account, and you will also receive an
email and SMS confirmation for the same. To check if you have received an allotment, you can monitor
your IPO status online through the registrar's website, stock exchange platform, or broker's site.

Question 9

What is the Initial Public Offering (IPO) subscription period?

Accepted Answer

The IPO subscription period is the specific time frame during which investors can apply to buy
shares of a company going public. Typically, the IPO period lasts for 3 to 5 working days.

The subscription window usually opens at 10:00 AM on the first day and closes at 5:00 PM on the last
day. During this time, both retail and institutional investors can submit their applications for the
IPO shares.

Once the IPO subscription period ends, no further applications are accepted, and the company
processes the allotment based on demand. Investors can check the allotment status after this period
closes.

Question 10

Why does a company launch an IPO?

Accepted Answer

A company launches an Initial Public Offering (IPO) to raise capital by offering shares to the
public for the first time. Through an IPO launch, the company sells a portion of its ownership to
investors, generating significant funds. These funds can be used for various purposes such as
expanding operations, paying off debts, investing in new projects, or improving infrastructure.

IPOs also enhance the company's visibility and credibility in the market. By becoming publicly
listed, the company gains access to a larger pool of investors and future funding opportunities.
Additionally, an IPO allows early investors and shareholders, including founders and employees, to
sell some of their shares, providing liquidity.

Overall, launching an IPO helps companies achieve growth while allowing the public to invest in
their success.

Question 11

How to check upcoming IPOs?

Accepted Answer

To stay updated on upcoming IPOs, you can use several sources, including dedicated sections on
financial websites and brokerage platforms like m.Stock.

1. m.Stock Platform: m.Stock offers a user-friendly section dedicated to upcoming IPOs. Here's how
    you can check for the latest IPOs:
    Log In: Access your m.Stock account using your credentials.
    Navigate to IPO Section: Go to the "IPO" tab on the homepage or main menu.
    View Upcoming IPOs: The section will display a list of upcoming IPOs, including details such as
    the issue date, price band, and the company name.
    The best part is, m.Stock also allows you invest in latest IPOs easily and conveniently using a
    single click.
 2. Stock Exchange Websites: Websites like BSE and NSE also provide information on upcoming IPOs.
    you can check their IPO sections for the latest updates.
 3. Financial News Websites: Online financial platforms and news websites often have dedicated
    sections for latest IPOs and announcements.
 4. Brokerage Alerts: Many brokers send notifications or emails about upcoming IPOs, which you can
    subscribe to.

By regularly checking these sources, you can stay informed about new IPOs and make timely investment
decisions.

Question 12

What does market lot size mean, and what are the minimum and maximum lot sizes?

Accepted Answer

When a company launches its IPO in share market, it divides the total shares it intends to offer to
the public. In the case of IPO stocks, investors may not purchase any quantity of shares, unlike
regular stock trading. They must instead purchase the shares in lots. The company fixes the maximum
and minimum lot size before launching the IPO. This is known as market lot size or IPO bid lot. For
instance, let's say the company sets a lot size of 10 shares for each lot. The minimum lot you can
purchase is 1, and the maximum you can purchase is 10. This essentially means that if you buy 1 lot,
the minimum number of shares you can get is 10, and you cannot buy more than 10 lots or 100 IPO
shares. Thus, if you wish to buy 75 shares, you cannot do so. You must choose to buy 7 or 8 lots,
i.e., 70 or 80 shares, whichever is the closest to the multiple of 10, which makes up 1 lot.

Question 13

What is the market lot size in an IPO?

Accepted Answer

The minimum number of shares that an investor needs to apply for is referred to as the market lot
size. Investors can bid for multiple lots (with a maximum cap decided by the company).

Question 14

What is Book Building in the IPO investment Process?

Accepted Answer

Book Building is defined as the process through which an underwriter - typically an investment bank,
attempts to determine the IPO offering price. It is also known as the process of price discovery,
which enables underwriters to understand the demand for shares of the company before arriving at an
issue price. The underwriter essentially builds a book by inviting various institutional investors
like fund managers and others to submit their bids for the number of shares they would be willing to
purchase and share prices they would be willing to pay if they purchased the company's shares on a
public platform. Book building is thus the de facto mechanism by which companies price their IPO in
the share market. All major stock exchanges worldwide recommend book building as the most efficient
method to price securities.

Question 15

What is the Basis of Allotment or Basis of Allocation in IPO investments?

Accepted Answer

Let's say the IPO offered 10,000 shares to the public and received a total bid for exactly 10,000
shares. In this case, the IPO allocation is simple and each investor gets the lot of shares they had
bid for. However, the IPO allotment process is different when an IPO is oversubscribed.
Oversubscription occurs when the demand for shares exceeds the number of shares available. For
example, 10,000 shares were on offer but 20,000 bids were received. This basis of allotment is
determined by the company's registrar after the IPO launch and finalisation of the subscription
data.

The IPO Allotment procedure covers important details, such as:

1. Category-wise Allocation: It explains how shares are distributed across different investor
    categories like retail, institutional, and non-institutional investors.
 2. Allotment Ratios: It details the ratio of applicants to shares allotted. For example, 1 out of 5
    applicants may receive shares if the IPO is oversubscribed.
 3. IPO Price: The final issue price of the shares, which may differ from the price band initially
    announced.
 4. IPO Allocation Status: Information on how many shares were allocated to each investor, depending
    on the category and demand.

The IPO allotment process is a fair, transparent, and regulated approach to distributing shares
during an IPO. The registrar publishes the Basis of Allotment on their website a few days after the
issue closes. Investors can use this document to check whether they received an allotment based on
their application size and demand.

Question 16

What is the meaning of DP in the IPO form, and what is its role in IPO trading?

Accepted Answer

The abbreviation DP in the investment market denotes a Depository Participant. There are two major
depositories in India - the National Securities Depository Limited (NSDL) and the Central Depository
Services Limited or the CDSL. Both depositories have their own network of depository participants
that serve as a link between them and the securities issuing companies. Essentially, a DP is simply
a financial institution such as a brokerage house (like Mirae Asset) or Bank registered with the
SEBI. Anyone interested in investing in market securities, including IPOs, must open a Demat and
trading account with a DP and specify the DP ID on the Initial Public Offering application form.

Question 17

Can I apply for share "buybacks" on m.Stock?

Accepted Answer

Yes, Share "Buyback" i.e., repurchase of shares by the issuing company itself and "Tender offer /
Delisting" is available on m.Stock platforms.

Question 18

Who qualifies as retail investors for IPO?

Accepted Answer

Retail Individual Investors (RIIs) in an IPO are individual investors or Hindu Undivided Family
(HUF) who apply for shares up to a maximum investment of ₹ 2 lakh. Unlike other types of investors,
retail investors typically invest smaller amounts and are eligible for a specific quota in the IPO
allotment process.

Benefits for Retail Investors in IPO Investment:

1. Dedicated Quota: 35% of the total shares are reserved for retail investors, increasing their
    chances of getting an allotment. However, this is valid for companies that have shown profits
    for the previous 3 consecutive years. If not, then the quota is set at 10%.
 2. Cut-off Price Option: Retail investors can apply at the cut-off price which allows them to bid
    without specifying a price.
 3. Discounts: Some IPOs may offer discounted prices for retail investors, making it more attractive
    to invest in an IPO.

Question 19

What is the price band of an Initial Public Offering (IPO)?

Accepted Answer

The IPO price band refers to the range of prices within which investors can place bids for shares
during an IPO. It consists of a floor price (minimum bid price) and a cap price (maximum bid price).
Investors can choose to bid at any price within this range. Importance of the Price Band:

1. It provides flexibility to investors in deciding how much they are willing to pay.
 2. The final issue price is determined based on the demand and bids placed within the price band.
 3. It helps balance demand and supply, ensuring a fair and efficient allocation process.

The IPO price band is calculated based on several factors, such as the company's valuation, growth
potential, market conditions, and input from underwriters. This helps companies ensure they raise
adequate capital while attracting a wide range of investors.

Question 20

Where can I find the DRHP to research the IPO company?

Accepted Answer

DRHPs are available online on SEBI's website: https://www.sebi.gov.in/index.html

Question 21

How do I decide which IPO to invest in?

Accepted Answer

Before investing in an IPO, check the company’s background, financial health, business model, and
future plans. Read the DRHP (Draft Red Herring Prospectus) carefully, look at industry trends, and
review expert analysis. Also consider the IPO price, valuation, and how previous IPOs in the sector
have performed. Investing in well-known, stable businesses is usually a safer option.

Question 22

What factors influence IPO allotment chances?

Accepted Answer

IPO allotment depends on how oversubscribed the issue is. In retail categories, allotment is usually
done through a lottery system if demand exceeds supply. Applying with the maximum permissible lot
size, avoiding last-minute applications, and using a single PAN-linked demat account may improve
your chances. However, allotment is not guaranteed even if you meet all conditions.

Question 23

Are IPO investments suitable for long-term goals?

Accepted Answer

Yes, some IPOs can be good for long-term wealth creation, but not all. It depends on the company’s
growth potential and financial strength. Always assess whether the business aligns with your
investment goals. Short-term listing gains are common, but long-term returns depend on how well the
company performs post-listing and how the broader market behaves.

Question 24

Can I sell IPO shares immediately after listing?

Accepted Answer

Yes, it is possible to sell IPO shares on the day they get listed, provided they are credited to
your demat account and there’s no lock-in clause. This is called booking “listing gains.” However,
if your goal is long-term growth, you may choose to hold the shares. Be aware that share prices can
fluctuate sharply on listing day due to high market activity.

Question 25

How is the latest IPO performance tracked post-listing?

Accepted Answer

You can track IPO performance after listing on stock exchange websites like NSE or BSE, or through
trading apps like m.Stock. These platforms show real-time price movements, volume data, charts, and
overall performance trends. Financial news sites and market experts also provide post-listing
reviews and performance analysis for recently listed companies.

Question 26

Can I invest in multiple IPOs at the same time?

Accepted Answer

Yes, you can apply for multiple IPOs at the same time, as long as you meet the eligibility criteria
and have enough funds in your account. Each IPO application must be made using a valid PAN and
linked demat account. Ensure your bank account has sufficient balance to avoid rejection during the
ASBA process.

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