Initial Public Offering (IPO)

Hyundai Motor India launched India’s biggest IPO of Rs 27,856 crore on October 15 which  was closed on Thursday with an oversubscription of 2.37 percent.

About IPO

• Public Issue: When a company raises funds by selling or issuing its equity shares to the public through an offer document 
• Initial Public Offerings (IPO) : It is a type of issue where an unlisted company raises capital by making a fresh issue of securities or offering its existing securities for sale to the public for the first time.
  • An unlisted company is one whose shares are not traded on a public stock exchange.
  • “Listed Company” means a company which has any of its securities offered through an offer document listed on a recognised stock exchange and also includes
    Public Sector Undertakings whose securities are listed on a recognised stock exchange.
• Further Public Offer (FPO) / Follow-on Public Offer (FPO): When a listed company wants additional capital, it makes either a fresh issue of securities or an offer for sale of existing securities to the public 
• Offer for sale (OFS) : Under the offer for sale method, securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers.
  • Special mechanism through which the promoters can sell their stake in the market.

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Regulations of IPO

• The Security and Exchange board of India (SEBI) has laid down rules that require companies to meet certain criteria before they can go to the public to raise funds.
  • Company must have net tangible assets of at least Rs 3 crore, and 
  • Net worth of Rs 1 crore in each of the preceding three full years,  and 
  • Must have a minimum average pre-tax profit of Rs 15 crore in at least three of the immediately preceding five years.
• Who is Allowed to Invest in an IPO?
  • Qualified Institutional Buyers (QIBs): This is a category of institutional investors that includes Foreign Portfolio Investors (FPIs), mutual funds, commercial banks, insurance companies, pension funds, etc.
  • Retail investors: All individuals who invest up to Rs 2 lakh in an issue 
  • High net worth individuals: Retail investors investing above Rs 2 lakh 

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