An IPO is short for an initial public offering.

It is when a company initially offers

shares of stocks to the public. It's also called "going public." An IPO is the first
time the owners of the company give up part of their ownership
to stockholders. Before that, the company is privately-owned.

The IPO process takes five steps:

 Selection of an investment bank

 Due diligence and filings
 Valuation
 Stabilization
 Transition to market competition.

Advantages 
The IPO is an exciting time for a company. It means it has become successful
enough to require a lot more capital to continue to grow. It's often the only way
for the company to get enough cash to fund a massive expansion. The funds
allow the company to invest in new capital equipment and infrastructure. It
may also pay off debt.

Stock shares are useful for mergers and acquisitions. If the company wants to
acquire another business, it can offer shares as a form of payment.

The IPO also allows the company to attract top talent because it can
offer stock options. They will enable the company to pay its executives fairly
low wages up front. In return, they have the promise that they can cash out
later with the IPO.

For the owners, it's finally time to cash in on all their hard work. These are
either private equity investors or senior management. They usually award
themselves a significant percentage of the initial shares of stock. They stand
to make millions the day the company goes public. Many also enjoy the
prestige of being listed on the New York Stock Exchange or NASDAQ.

For investors, it's called getting in on "the ground floor." That's because IPO
shares can skyrocket in value when they are first made available on the stock
market.

Disadvantages
The IPO process requires a lot of work. It can distract the company leaders
from their business. That can hurt profits. They also must hire an investment
bank, such as Goldman Sachs or Morgan Stanley. These investment firms are
tasked with guiding the company as it goes through the complexities of the
IPO process. Not surprisingly, these firms charge a hefty fee.
Second, the business owners may not be able to take many shares for
themselves. In some cases, the original investors might require them to put all
the money back into the company. Even if they take their shares, they may not
be able to sell them for years. That's because they could hurt the stock price if
they start selling large blocks and investors would see it as a lack of
confidence in the business.

Third, business owners could lose ownership control of the business because

the Board of Directors has the power to fire them.

Fourth, a public company faces intense scrutiny from regulators including

the Securities and Exchange Commission. Its managers must also adhere to
the Sarbanes-Oxley Act. A lot of details about the company's business and its
owners become public. That could give valuable information to competitors. 

What IPOs Mean to the Economy

The number of IPOs being issued is usually a sign of the stock market's and
economy's health. During a recession, IPOs drop because they aren't worth
the hassle when share prices are depressed. When the number of IPOs
increase, it can mean the economy is getting back on its feet again.

Largest IPOs

 Alibaba Group (BABA) in 2014 raising $25 billion

 Softbank Group (SFTBF) in 2018 raising $23.5 billion
 American Insurance Group (AIG) in 2006 raising $20.5 billion
 VISA (V) in 2008 raising $19.7 billion
 General Motors (GM) in 2010 raising $18.15 billion
 Facebook (FB) in 2012 raising $16.01 billion
IPO Performance Tracker
Listing
Listed Issue Day Listing Current
Company Name On Price Close Day Gain Price Profit/Loss

 SBI Cards and Mar 755 683.2 -9.51% 607.65 -19.52%

Payment 16,
Services Ltd 2020
IPO | Stock Quotes

 Prince Pipes Dec 178 166.6 -6.4% 101.5 -42.98%

and Fittings Ltd 30,
IPO | Stock Quotes 2019

 Ujjivan Small Dec 37 55.9 51.08% 27.4 -25.95%

Finance Bank Ltd 12,
IPO | Stock Quotes 2019

 CSB Bank Dec 4, 195 300.1 53.9% 113.6 -41.74%

Limited 2019
IPO | Stock Quotes

 Vishwaraj Oct 15, 60 60.35 0.58% 64.2 7%

Sugar Industries 2019
Ltd
IPO | Stock Quotes

 IRCTC Limited Oct 14, 320 728.6 127.69% 1031.5 222.34%

IPO | Stock Quotes 2019

 Sterling and Aug 780 725.35 -7.01% 80 -89.74%

Wilson Solar Ltd 20,
IPO | Stock Quotes 2019

 Spandana Aug 856 848.4 -0.89% 603.75 -29.47%

Sphoorty 19,
Financial Ltd 2019
IPO | Stock Quotes

 Affle (India) Aug 8, 745 875.1 17.46% 971.65 30.42%

Limited 2019
IPO | Stock Quotes

 IndiaMART Jul 4, 973 1302.55 33.87% 2021.9 107.8%

InterMESH 2019
Limited
IPO | Stock Quotes

 Neogen May 8, 215 263.55 22.58% 342.5 59.3%

Chemicals 2019
Limited
IPO | Stock Quotes
 Listing
Listed Issue Day Listing Current
Company Name On Price Close Day Gain Price Profit/Loss

 Polycab India Apr 16, 538 655 21.75% 734.75 36.57%

Limited 2019
IPO | Stock Quotes

 Metropolis Apr 15, 880 959.55 9.04% 1267.65 44.05%

Healthcare 2019
Limited
IPO | Stock Quotes

 Rail Vikas Apr 11, 19 19.05 0.26% 13.96 -26.53%

Nigam Limited 2019
IPO | Stock Quotes

 Embassy Apr 1, 300 314.1 4.7% 334.98 11.66%

Office Parks 2019
IPO |

 MSTC Limited Mar 120 114.2 -4.83% 82.95 -30.88%

IPO | Stock Quotes 29,
2019

 Chalet Hotels Feb 7, 280 290.4 3.71% 198.75 -29.02%

Limited 2019
IPO | Stock Quotes

 Xelpmoc Feb 4, 66 59.85 -9.32% 49.4 -25.15%

Design and Tech 2019
Limited
IPO | Stock Quotes

 Garden Reach Oct 10, 118 105.1 -10.93% 137.85 16.82%

Shipbuilders & 2018
Engineers
Limited
IPO | Stock Quotes

 Aavas Oct 8, 821 773.15 -5.83% 1180.5 43.79%

Financiers 2018
Limited
IPO | Stock Quotes

Types of Issue of Shares

Definition: A share is that smallest part, into which the overall capital of the company is
divided. Issue of shares is a process through which the company allocates fresh shares to the
new or existing shareholders. The issue of shares is made to both individuals, institutions or
body corporates.

Types of Issue of Shares

 There are a number of ways in which the shares of a company can be issued, as discussed
below:

1. Public Issue: Public issue or public offering refers to the issue of shares or convertible
securities in the primary market by the company’s promoters, so as to attract new investors for a
subscription.

In a public issue, the shares are offered for sale in order to raise capital from the general
public, for which the company issues a prospectus. The investors who want to subscribe for
the shares make an application to the company, which then allots shares to them. The entity
which makes an issue is called an Issuer.

o Initial Public Offer: Otherwise called an IPO, as its name suggests it is the sale of
company’s shares to the public at large for the very first time. It is an offer in which an unlisted or
privately held company makes a fresh issue of shares or convertible securities, or an already
listed company makes an issue of existing shares or convertible securities, for the first time to the
public at large.
In this way the unlisted or budding company lists its shares in the recognized stock
exchange and goes public, to raise funds for running the business. On the other hand,
established entities make IPO facilitate owners to sell some or all of their ownership to the
public.

o Further Public Offer: If an already listed company, which has gone through an IPO
offers new or in better words, additional shares to the public for sale, so as to expand their equity
base or pay off debts, it is known as Follow-on Public Offer or Further Public Offer (FPO)
 Right Issue: In a right issue, shares or convertible securities are offered to the
existing shareholders at a concessional rate, on a stipulated date, fixed by the company itself. The
main aim of issuing right shares is to raise additional funds by offering shares to the existing equity
shareholders, in the proportion of their holdings, rather than making a fresh issue.
 Composite Issue: A composite issue is one in which an already listed company offers
shares on the public-cum-rights basis and makes concurrent allotment of the shares.
 Bonus Issue: As the name itself suggests, it is the free additional shares distributed
to the current shareholders in the proportion of the fully paid-up equity shares held by them on a
particular date. The issue of these shares is made out of the company’s free reserves or securities
premium account.
 Private Placement: If a company offers shares to a selected group of investors which
can be mutual funds, banks, insurance companies, pension funds and so forth, to raise capital, is
called private placement.
o Preferential Issue: Preferential allotment is one in which a publicly listed enterprise
allots shares to a selected group of investors such as individuals, venture capitalists, companies
on preferential basis.
o Qualified Institutional Placement (QIP): If a listed organization offers equity shares
or non-convertible securities to a qualified institutional buyer for sale to raise capital. Here
qualified institutional buyer includes mutual funds, venture capital fund, public financial
institutions, insurance funds, scheduled commercial bank, pension funds, etc.
o Institutional Placement Programme (IPP): If a publicly listed company makes a
follow-on offer of equity shares or the promoters offers shares for sale, wherein the shares are
allotted to the QIB’s only, with the aim of achieving minimum public shareholding.
The company issues share in order to raise funds from the general public, so as to apply these
funds in business operations. However, they can also be issued to serve other purposes also,
as the money can be utilized in repaying debts, funding a new project, acquiring another
company.

What is Book Building?

Book building is the process by which an underwriter attempts to determine
the price at which an initial public offering (IPO) will be offered. An underwriter,
normally an investment bank, builds a book by inviting institutional investors
(fund managers et al.) to submit bids for the number of shares and the price(s)
they would be willing to pay for them.

Understanding Book Building

Book building has surpassed the 'fixed pricing' method, where the price is set
prior to investor participation, to become the de facto mechanism by which
companies price their IPOs. The process of price discovery involves
generating and recording investor demand for shares before arriving at an
issue price that will satisfy both the company offering the IPO and the market.
It is highly recommended by all the major stock exchanges as the most
efficient way to price securities.

The book building process comprises of these steps:

1. The issuing company hires an investment bank to act

as underwriter who is tasked with determining the price range the
security can be sold for and drafting a prospectus to send out to the
institutional investing community.
2. Invite investors, normally large scale buyers and fund managers, to
submit bids on the number of shares that they are interested in buying
and the prices that they would be willing to pay.
3. The book is 'built' by listing and evaluating the aggregated demand for
the issue from the submitted bids. The underwriter analyzes the
information then uses a weighted average to arrive at the final price for
the security, which is termed the 'cut off' price.
4. The underwriter has to, for the sake of transparency, publicize the
details of all the bids that were submitted.
5. Allocate the shares to the accepted bidders.

Even if the information collected during the book building suggests a particular
price point is best, that does not guarantee a large number of actual
purchases once the IPO is open to buyers. Further, it is not a requirement that
the IPO be offered at that price suggested during the analysis.
KEY TAKEAWAYS

 Book building is the process by which an underwriter attempts to

determine the price at which an initial public offering (IPO) will be
offered.
 The process of price discovery involves generating and recording
investor demand for shares before arriving at an issue price.
 Book building is the de facto mechanism by which companies price their
IPOs and is highly recommended by all the major stock exchanges as
the most efficient way to price securities.

SEBI
The Securities and Exchange Board of India (SEBI) was officially
appointed as the authority for regulating the financial markets in India on
12  April 1988. It was initially established as a non-statutory body, i.e. it
th

had no control over anything but later in 1992, it was declared an

autonomous body with statutory powers. SEBI plays an important role in
regulating the securities market of India.

Why was SEBI formed?

At the end of the 1970s and during 1980s, capital markets were
emerging as the new sensation among the individuals of India. Many
malpractices started taking place such as unofficial self- styled
merchant bankers, unofficial private placements, rigging of prices,
non-adherence of provisions of the Companies Act, violation of rules
and regulations of stock exchanges, delay in delivery of shares,
price rigging, etc.

Due to these malpractices, people started losing confidence in the

stock market. The government felt a sudden need to set up an
authority to regulate the working and reduce these malpractices. As
a result, the Government came up with the establishment of SEBI.

Role of SEBI
SEBI acts as a watchdog for all the capital market participants
and its main purpose is to provide such an environment for the
financial market enthusiasts that facilitate efficient and smooth
working of the securities market.
To make this happen, it ensures that the three main participants of
the financial market are taken care of, i.e. issuers of securities,
investor, and financial intermediaries.
Issuers of securities
These are entities in the corporate field that raise funds from
various sources in the market. SEBI makes sure that they get a
healthy and transparent environment for their needs.

Investor
Investors are the ones who keep the markets active. SEBI is
responsible for maintaining an environment that is free from
malpractices to restore the confidence of general public who invest
their hard earned money in the markets.

Financial Intermediaries
These are the people who act as middlemen between the issuers
and investors. They make the financial transactions smooth and
safe.