An Initial Public Offering (IPO) marks a pivotal moment in a company’s journey from a privately held business to a publicly traded entity. It’s a major milestone that not only helps a company raise capital but also invites the investing public to become stakeholders in its growth.
What is and IPO?
An IPO is the process through which a private company offers its shares to the public for the first time. This allows the company to raise funds from a broader pool of investors, which can be used for various purposes such as expansion, research and development, paying off debt, or simply increasing its public profile.
Who regulates IPOs in India?
IPOs in India are regulated by SEBI (Securities and Exchange Board of India), which ensures transparency, investor protection, and fair market practices during the public issue process.
How can I apply for an IPO in India?
You can apply for an IPO online using your Demat account through platforms like Zerodha, Upstox, Groww, or your bank’s ASBA (Application Supported by Blocked Amount) facility.
What is ASBA in IPO application?
ASBA (Application Supported by Blocked Amount) is a process where the bid amount is blocked in your bank account until shares are allotted. If no shares are allotted, the money is unblocked without any deductions.
What is the minimum investment required in an IPO?
For retail investors, the minimum investment is usually the price band multiplied by the minimum lot size. Typically, this ranges from Rs 13,000 to Rs 15,000 depending on the IPO.
What is the difference between the price band and cut-off price?
Price Band is the range within which investors can bid for shares (e.g., Rs 150–Rs 160). Cut-off Price is the final price decided by the company based on demand, within the price band. Retail investors can select “cut-off” to ensure they bid at the finalized price.
Can IPO shares be oversubscribed?
Yes. If demand exceeds the available shares, an IPO is said to be oversubscribed. Allotment in such cases is done via a lottery system for retail investors.
Where can I check IPO allotment status?
You can check your allotment status on the registrar’s website (e.g., Link Intime, KFinTech) or through your broker or Demat account platform.
Are IPO investments risky?
Yes. IPOs can offer significant returns, but also carry risk due to volatility and limited financial history. It’s important to read the company’s Red Herring Prospectus (RHP) and understand the fundamentals before investing.
What is the difference between a Main Board IPO and an SME IPO?
A Main Board IPO is issued by larger, established companies and gets listed on major stock exchanges NSE and BSE. An SME IPO is offered by Small and Medium Enterprises and is listed on NSE Emerge or BSE SME, which are dedicated platforms for smaller companies.
Who can invest in Main Board and SME IPOs?
Both retail and institutional investors can apply for either type. However, SME IPOs may have lower liquidity and are more suited for informed or risk-tolerant investors.
What are the eligibility criteria for companies to list under each board?
Main Board IPOs require higher paid-up capital (Rs 10 crore or more), consistent profitability, and a solid financial track record. SME IPOs designed for companies with paid-up capital between Rs 1 crore and Rs 10 crore, with less stringent requirements.
How do the lot sizes differ between Main Board and SME IPOs?
Main Board IPOs have smaller lot sizes, usually requiring a minimum investment of Rs 13,000–Rs 15,000. SME IPOs often have larger lot sizes (e.g., 1 lot could cost Rs 120,000 or more), making them less accessible to casual retail investors.
Where are SME IPOs listed and traded?
SME IPOs are listed on dedicated SME platforms: NSE Emerge for the National Stock Exchange. BSE SME for the Bombay Stock Exchange.
Is there a difference in risk and return potential between Main Board and SME IPOs?
Yes. SME IPOs carry higher risk due to business size, limited liquidity, and less public information, but may offer higher returns if the company scales well. Main Board IPOs are relatively more stable, with better market visibility and analyst coverage.
Can SME IPOs move to the Main Board?
Yes. After meeting certain SEBI and exchange requirements (like profitability, net worth, market cap), an SME can migrate to the Main Board for better visibility and liquidity.
Are the IPO processes the same for both types?
The core process filing a DRHP, bidding through ASBA, and allotment is similar. However, SME IPOs may have merchant bankers instead of large underwriters and less marketing outreach compared to Main Board issues.
Do SME IPOs have lock-in periods for investors?
Yes. In SME IPOs, anchor investors, promoters, and certain categories of shareholders may have lock-in periods, as per SEBI regulations. Retail investors can usually sell shares after listing, but liquidity may be limited.