An IPO is an Initial Public Offer made by a company (issuer) offering shares or debentures or other tradable security to the public at large. An IPO is either for
a) Fresh issue of capital, where the funds are received by the issuing Company.
b) Offer for Sale – where the existing shareholders (usually promoters), sell their holding, in which case the funds do not go to the company but only to the offering shareholders.
c) Combination of a) and b) above.
Fixed Price Offer, is an issue in which the price of the security offered is fixed by the issuer. Investor is required to make application for the desired quantity of shares at the fixed offer price.. On the other hand, in a Book Built Issue, Price is discovered through the bidding mechanism. Usually, a band (range) of the price is announced, and interested investors apply or bid for the security within this band i.e. the application can be for any price within this range
A bid in the context of Public offer of shares, is offer made by investor to the issuer for requisite quantity of securities at a price. The investor can choose any price within the specified price band of the issue. The price at which he wants to apply is the bid price. A bid is applicable only in case of book-building IPO.
IPO comprises of offer for subscription made by such company whose shares are not listed on any stock exchange for trading. Whereas FPO is offer made by already listed company to issue additional securities. For already listed company, investor may decide to buy from the market or subscribe to the offer made by the Company.
a) Qualified Institutional Bidders (QIBs) - who are the domestic and foreign institutions (which are registered with SEBI) which are eligible to apply in the public offers. These institutions normally apply for very large amounts.
b) Retail Investors - The investors who invest up to maximum of Rs.2,00,000 (Rs. Two Hundred Thousand), are defined as Retail Investors.
c) Non Institutional Investors - Those Investors who are neither in the QIB Category nor in the Retail Investor Category are defined as Non Institutional Investors.
Note: In some IPOs a certain number of shares issued are reserved for employees of the issuing company.
SEBI (Securities' Exchange Board Of India) issues guidelines, which specifies the percentage of the total securities offered for each category of investors, from time to time. Currently, in any IPO, the allocation is usually - QIB - 50% HNI - 15% and Retail - 35% or QIB - 60% HNI - 10% and Retail - 30% of the Net Issue.
A BLRM is the Book Running Lead Manager, who manages the entire IPO exercise and acts as the guide to the issuer in all matters relating to the public issue. The BRLM, should be a SEBI- registered Category I or II Merchant Banker, and is responsible for preparing and filing the Offer Document of Issue with SEBI & Registrar of Companies (ROC).The BRLM ensures that all information presented before the investing public is proper. The BRLM advises the company on the price band, the timing of the issue etc. BRLM is required to market the issue. The BRLM also co-ordinates between the company and other intermediaries like registrars, legal advisors, bankers etc.
A Syndicate Member/Broker is a member of the Stock Exchange to whom the investor has to submit the IPO Bid/Application form. The Syndicate Member / Broker receives the bid and uploads the same on to the electronic book of the stock exchange. Bids which are not uploaded into the electronic book are not considered for the purpose of allotment. The Syndicate Member/Broker , then submits the bid with cheque to the bankers. In case of online application, , the Syndicate Member/Broker generates the electronic application form and submits the same to the registrar with proof of having paid the bid amount.
ASBA is the acronym for Applications Supported by Blocked Amounts. Investor is required to approach his banker to block the amount from his account for the application. This amount remains blocked in investor’s bank account and investor earns interest on the blocked amount. Investor’s banker then prepares bid based on the blocked amount and uploads the bid into the electronic book of the exchange. Post allotment process, registrar passes on necessary instruction to Investor’s banker to debit investor’s amount against allotment made, if any, and unblock the balance amount.
An SCSB is a Self Certified Syndicate Bank, who has systems in place, including the ability to upload the BID to the stock exchange system. Can a retail investor revise his/her bid?
Yes, a retail investor can revise his/her bid any number of times during the issue period.
A retail investor can bid at any price within the price band or can bid at cut-off. Cut-off means the investor is ready to pay whatever price is decided by the company at the end of the book building process. While making the application at Cut off, the investor is required to pay the amount at the highest price band.. The excess amount, in case the price discovered is lower, is refunded. Cut-off option can be exercised only by Retail Investors and Employees of the issuing company applying in the Employee Category. Cut off option can be exercised through ASBA also.
A Bid-lot is the pre-determined number of shares which have to be applied for by an investor. It is different for each issue. There is a minimum lot size which is pre-decided by the company and mentioned in the application form. Eg: Minimum bid lot in IPO of XYZ co. - 10 Bid-lot Multiples of 10 Price Band - 100-120. It means that a retail investor cannot apply for less than 10 shares in that particular issue. The application for more than 10 shares has to be in multiples of 10 like 20,30,40,etc
Based on demand at various prices, Issuer Company, in consultation with BRLMs decides the final price of the offer. The price thus finalized is called discovered price.
As per SEBI guidelines shares allotted out of IPOs / FPOs can be given to investors only in demat mode hence it is mandatory to have demat account. Application not having demat account or improper demat account is rejected.
The DP-ID + Client ID, is the definitive identification of the applicant. Demat account fed into electronic bid file, is used to credit shares as well as remit refund. Registrar is required to process application based on bid file and in absence of any other possible validation, wrong but valid demat account, can lead to wrong refund / credit of shares. bid file, Thus it is very important that the Demat Account Number is stated correctly in the application form.
As per SEBI guidelines, all applicants are required to provide their PAN while applying in an Issue. Application without PAN or with invalid PAN is rejected. Investors are requested to ensure that their DP account is updated with proper PAN details.
Your Demat Account Number and PAN is clearly written without any smudging or overwriting.
Your payment details like cheque number, or account number in case of ASBA , etc. are clearly written.
Your bid is for the proper bid lot and a price within the bid range.
The order of names in the application is the same as in your DP account. The application form is signed.
A Registrar to an Issue is a SEBI-registered entity, qualified to act as such, and who electronically processes all the applications and carries out the allotment process, as per the rules/prospectus. The Registrar is responsible for complying with the time deadlines of updating the electronic credit of shares to the successful applicants, despatching/uploading of refunds and attending to all investor related queries after the issue is completed. Usually, the Registrar continues to work with the company, even after the IPO, as its Registrar and Transfer Agent.
The Registrar’s role in an IPO can be divided into three phases:
Pre-IPO, when the Registrar completes all preparatory work for the IPO, including instructing the escrow / ASBA bankers about the procedures they have to follow and the timelines to which they have to adhere.
Post IPO closure but pre Listing –, during which the Registrar receives the Final BID file from the exchanges, validates the same, coordinates with the bankers to ensure that final collection certificates are received, all cheque returned cases are accounted, and withdrawals if any are taken note of . The Registrar identifies all other technical defects. The Registrar after considering all the rejects, withdrawals etc., and after reconciling the bank receipts, with the Final Bid file, prepares the basis of allotment in conjunction with the BRLMs and Issuer , and submits this basis for approval to the Stock Exchange. Upon approval by the Stock Exchange, the Registrar proceeds with the allotment of shares, ensures that the electronic files for credit of shares and refunds are properly prepared and ensures the completion of all these processes including over printing / despatch of allotment advices/ refunds within the prescribed time limits.
Post allotment / listing phase during which the Registrar attends to all the complaints and strives for speedy resolution of the same.
As per current norms, the newly issued shares have to be listed , on or before the 12th working day after the issue is closed. Working backwards, this would generally mean that the allotment process and uploading of the shares, sending of refunds etc. have to be completed within 10 working days from the date of closure of the issue.
On the home page you would find the block 'IPO Allotment Status '. Click on and you would get the page. Select the desired company. Choose the option depending on whether your account is with NSDL or CDSL. Enter the details as per the option whether you want full details or only allotment details. Submit the same, and within moments the results would be displayed to you on the screen.
Credit to your demat account does not happen, if
a) Your demat account is not active and there is a bar on accepting credits to your account.
b) Your demat account number is not accepted by the system as a result of mismatch of data.
c) Your demat account as provided in bid file is erroneous
Ensure that your DP account is active and is in ready state for receiving credits. Provide a copy of your Client Master to Registrar to enable upload of your allotted shares in your account. Copy can be sent by Fax/Scanned image.
A Refund Order is the value instrument being the difference between the amount remitted by you along with your application and the amount due from you on account of the allotted shares * issue price.
Refund are effected in the following ways:
Through Physical refund orders, which are despatched by Speed Post or Registered Post, to the address as mentioned in your DP account.
Through Electronic files uploaded by the refund banker for RTGS (Real Time Gross Settlements) in case of very high value instruments.
Through direct credit to account in case the refund banker and your bank are the same.
Through NECS in case you have opted for the same by registering your account details with your DP, and your bank location is covered by the NECS system.
The Registrar has to despatch the Refund order and upload the electronic credit/NECS within 12 working days after the Issue Closure. (Normally before the end of business hours on the 10th working day after the issue closes.
You can enable this facility by giving a simple instruction to your DP ( as per their format) with the details of MICR code etc. Your DP would be able to guide you in this matter. Once you submit this instruction in the proper manner, the DP would effect this on the system, and thereafter you can expect refund thru NECS, provided that your bank location is covered by the NECS system.
Once refund data is made available to refund bankers and are uploaded by them into clearing system, the banking channel usually takes two to six days.. Please note that the Registrar to Issue has no control what so ever, after handing over the NECS data to Refund banker.
You should do the following:
a) Check up your DP account to find out the Bank details mentioned therein. Ensure that your DP account is always updated with proper Bank details.
b) Check with the bank branch as mentioned in your DP account whether the money is received at the branch - you should take the NECS advice with you for confirmation. In case branch has received the same but credited to some other account, ensure that immediate corrective action is taken.
c) In case the branch has not received the credit, request your bank personnel, to ensure that the credit flows to the branch and to your account immediately.
d) Kindly note that if your bank account is not credited, your bank has to confirm the same to the refund banker. Only on receipt of such confirmation the refund banker will be in a position to initiate process of issuance of physical warrant. Refund bank requires five/six days to prepare and hand over physical refund instrument to registrar after receipt of intimation from your bank.
You can trade in new shares after they are listed and after ensuring that the allotted shares have been credited into your Demat Account. As per current rules, you cannot affect any off market transfers from your account till the shares are listed.
A record date is reference date for freezing list of shareholders who become eligible to receive corporate benefit like rights entitlement, Bonus shares, dividend etc. . Investors holding shares in demat mode have to ensure that their DP account shows shares held as on that date.
CAF is the acronym for Composite Application Form. The CAF is sent to all the shareholders as on the record date, informing about their holding, the number of shares to which they are entitled to apply as rights, and the price of the rights shares. The CAF also contains part B C & D, which contains the parts where the renouncee can apply, and the part containing the split request.
Renouncement can be for part or for full portion of the entitlement
In case shareholder renounces full / part of his holding, he becomes ineligible to apply for additional shares.
In the event a shareholder wishes to renounce a part of his / her entitlement or wishes to renounce the full entitlement in favour of more than one third party, a request can be made to split the entitlement form (CAF) into as many denominations as required. For eg: if there is an entitlement for 5000 shares as rights, a split request can be made for 5 forms of 1000 shares each.
Applicants will have to send Original CAF duly signed by registered shareholder in Part ‘D’ meant for split, specifying the denomination of split of the entitlement and send the same to the Registrar’s office, within the time specified.
It is not necessary to apply only in the CAF sent. The shareholder can apply on plain paper format, which should contain all the essential fields. Forms can also be downloaded from the company’s or Link Intime’s website.
The DP-ID + Client ID, is the definitive identification of the applicant. It is based on the Demat Account, that allotted shares are credited and refunds processed. A wrong but valid demat account no. can result in shares being credited to a different account and refund if any being sent to that account holder. Thus it is very important that the Demat Account Number is started correctly in the application form.
However in case if Rights Issue , if the Demat Account is inactive the shares are allotted in Physical format.
In a Company Fixed Deposit, a certain sum of money is deposited with a company which is registered under the Indian Companies Act for a specified period of time, usually six months to 5 years, for earning a fixed rate of interest. Companies offer attractive rates of interest under their Schemes for varying periods either on cumulative or non cumulative basis. Tax will be deducted at the source, if the interest income earned by a Depositor exceeds Rs.5000/- in a Financial Year as per the current rules.
Individuals either singly or jointly can apply for investing in a Company FD. The First holder is considered for the purpose of payment of interest and tax. Apart from individuals, some companies also accept FDs from HUFs, Trusts, Associations,
Usually PAN Card details of the sole/first applicant are collected by Companies for Tax purposes. Under the current Income Tax Rules, if PAN is not provided to the Company, the Company will have to deduct Tax at a higher rate and TDS exemption will not be available even if a declaration is submitted as provided in the later paragraph.
Generally Companies registered under the Indian Companies Act, offer to accept monies under their FD Schemes. These Companies can be Manufacturing Companies (whose schemes are covered under the Companies Act), Housing Finance Companies (Covered under National Housing Bank Rules) or Non Banking Finance Companies (NBFCs coming under the RBI purview).
Usually, two types of FD scheme are on offer:
# Cumulative Scheme: In a cumulative scheme interest as well as the principal amount is paid only on the maturity of the FD. Interest accrued on the FD is compounded monthly/quarterly etc. as per the FD Scheme.
# Non-Cumulative Scheme: In Non-cumulative scheme the interest is paid in a periodical manner as per the terms of the FD scheme (Monthly, Quarterly, Half-yearly and yearly basis). The principal amount is paid on maturity.
Generally most Companies offer extra benefits in the form of higher interest rates to Senior Citizens and other special categories. The additional interest rate as well as categories may again differ from company to company.
Some Companies offer Senior Citizen Benefits to individuals above the age of 60 years also. However as per current Income Tax rules, individuals above the age of 65 years are considered as Senior Citizens for income tax purposes.
No, there is no auto renewal facility available on company FD’s. In order to renew the existing FD, the investor has to send a fresh application along with the duly signed FDR in general 15 days prior to the date of maturity.
Renewal of FD and payment of further interest on matured FDs will be at the sole discretion of the company.
The original fixed deposit receipt duly discharged on a revenue stamp should be submitted to the Company/Registrars (Link Intime) as mentioned on the FD along with a covering letter giving all details to effect the payment.
Yes, the FD amount can be withdrawn before maturity as per the discretion of the Company. However incase of premature withdrawal of FD, interest would be payable as per the provision of the FD Scheme of the Company. Generally Pre-mature withdrawal of FD is not permitted within 6 months.
If you are not a Tax payer, you may submit a Declaration in Form 15G/H for each Financial Year as applicable to you with the registrars before the interest falls due, so as to avoid TDS deduction
