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What is an Initial Public Offering (IPO)?
- An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time.
- It marks the transition of a company from private to public status.
Purpose of an IPO
- To raise capital for expansion, debt repayment, or new projects.
- To provide exit opportunities for early investors, founders, or venture capitalists.
- To increase market visibility and corporate credibility.
Key Regulators
- In India, IPOs are regulated by SEBI (Securities and Exchange Board of India).
Types of IPO Pricing
- Fixed Price Issue: Price determined in advance.
- Book Building Issue: Investors bid within a price band, and final price is determined by demand.
IPO Investor Categories
- Qualified Institutional Buyers (QIBs)
- QIBs include entities like mutual funds, FIIs/FPIs, insurance companies, pension funds, banks.
- Non-Institutional Investors (NII) / High Net-Worth Individuals (HNI)
- Investors who apply for more than ₹2 lakh worth of shares fall under the NII/HNI category.
- Retail Individual Investors (RII)
- Retail investors apply for shares up to ₹2 lakh in value.
- Anchor Investors
- A type of QIB who invests before the IPO opens to the public.
- They must hold a portion of their shares for a lock-in period.
Why in News?
- SEBIi proposes relaxation in pre-IPO lock-in regulations for pledged shares.
