IPO investing in just 1 click

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.

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 share market. All major stock exchanges worldwide recommend book building as the most efficient method to price securities.

Once the IPO is launched, the IPO registrar publishes and releases a document to the stock exchanges and interested investors comprising information about the IPO's final price, the bidding or demand information, and the share allotment or allocation ratio. This document is known as the Basis of Allotment, also referred to as the basis of allocation. As an investor, you must bear in mind that this document is categorised based on the categories of interested investors and the number of shares they have applied for. You can get the detailed information of the IPO, including the total number of applications received along with the allocation details, in this document. A crucial component of this document is the allotment ratio which provides insight on whether the IPO is oversubscribed, and if it is, by how many times. These details are critical because they allow you to assess the number of eligible applicants who will be allotted IPO shares from the actual number of applicants. For instance, if the allotment ratio is 1:8, it means that one applicant out of every eight will receive one lot of shares. If the allotment ratio is labelled as FIRM, all applicants will certainly receive some shares.

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.

Currently share "Buyback" i.e., repurchase of shares by the issuing company itself and "Tender offer / Delisting" is not available on m.Stock platforms. We are working on bringing these and other features to you soon.