Sunday , 25 June 2017

IPO – FAQ Cont………………

How many days is the issue open?

Answer:  Book Building IPO remains open for 3 to 7 days and may extend for another 3 days in case of revision in price if issue remain unsubscribe in initially decided days. Number of days issue remain open is decided by the issuer company and its issue lead manager.

Right issues remain open for minimum 30 day and no longer then 60 days.

What is Basis of Allocation or Basis of Allotment?

Answer:  Basis of Allotment or Basis of Allocation is a document publishes by registrar of an IPO to stock exchanges and IPO investors. This document provides information about final price fixed for an IPO, issue subscription (bidding) information or demand of an IPO and share allocation ratio.

The IPO allotment information is categorized by number of shares applied by an applicant. For each such category detail bidding information is provided in this document including number of valid application received, total number of share applied, ratio of the allotment and number of shares allocated to the applicants.

Ratio of the allotment is a critical field for IPO’s oversubscribed multiple times. This field tells how many applicants will receive single lot of shares among a certain number of applicants. For example, ratio 1:8 means only one out of eight applicant received one lot of shares; ratio value ‘FIRM’ means all the applicants are eligible to receive certain amount of share.

Can I revise or cancel my IPO application?

Answer:  Book Building IPO: Yes an investor can revise bided quantity and price of an already applied Book Building IPO anytime if the issue is still open for subscription. Investor has to fill a revision form and give it to the syndicate member.

Where do I get an IPO application form?

Answer:  Investor can get the IPO Application Forms from:

1) Nearest stock broker office or

2) From the syndicate member office of an IPO. Syndicate members are usually banks or other financial institutions (i.e. SBI). List of syndicate members of an IPO are published in IPO Prospectus.

IPO application forms are available for free. Filled application can be submitted to any stock broker office or syndicate member office.

Can a minor apply in IPO?

Answer:  Some companies allow minors to bid for their IPO and other doesn’t. So it depends on IPO to IPO. This information is usually provided under section “Who can apply?” of the IPO Prospectus.

For example:

Religare Enterprises Limited IPO prospectus says:

Indian national’s resident in India who are majors, or in the names of their minor children as natural/legal guardians in single or joint names (not more than three) can bid for this IPO.

Power Grid Corporation of India Limited IPO prospectus says:

Bidders are advised to note that Bids are liable to be rejected on, inter alia, the following technical grounds – Bids by persons not competent to contract under the Indian Contract Act, 1872, including minors and persons of unsound mind etc.

Investor has to disclose age of the applicant in IPO Application Form.

Can a person apply in the non-institutional bidder category of an IPO?

Answer:  Yes an individual investor can apply in Non Institutional Investors category of an IPO.

“Individual investors, NRI’s, companies, trusts etc who bid for more then Rs 2 lakhs are known as Non-institutional bidders. They need not to register with SEBI like RII’s. Non-institutional bidders have an allocation of 15% of shares of the total issue size in Book Build IPO’s.”

There are few advantages and disadvantages for retail investor to apply under non-institutional category of the IPO.

Advantage is that there is no upper cap on application amount. An individual investor can bid for any amount in this category where there is limit of Rs 200’000 in Retail category.

Disadvantage is that only 15% of total shares are part of Non Institutional Investors category. The Retail Individual Investors (RIIs) category has 35% of total shares available for investors. This means that Non Institutional category oversubscribed heavily and chances of getting allotment are much lesser.

What is the minimum & maximum investment one could do in HNI category?

Answer:  Any bid made by the Retail Investor in excess of Rs 2,00,000 is considered in the HNI category (Non Institutional Investors category of IPO).

Thus minimum investment amount for HNIs in an IPO is Rs 2,00,000 and the maximum investment amount is the max amount in the Non Institutional Investors of the IPO.

Can I place a buy order during after hour session before the listing date of an IPO?

Answer:  No, you can not place the buy/sell order for shares which are not yet listed in stock exchange. Shares can only be traded after they get listed on stock exchange.

Remember that this is not the case in grey market or over the counter trades. Share holders can trader shares on personal basis before they get listed in stock exchanges. As stock exchanges are not involved in these deals, they are not responsible for any failure in the deal.

How one can apply in IPO’s online?

Answer:  To apply in IPO’s online an investor has to open an account with financial institution that provides this facility.

Most of the banks and stock brokers allow its account holders to apply in IPOs online.  Few popular banks and brokers are ICICI, HDFC, Religare, Motilal Oswal Securities etc. You can find more detail about these brokers at:

http://www.theequitymarkets.com/broker_comparison.htm

There is almost none paperwork involves in applying IPO’s online.

Please note that applying in IPO online doesn’t give you guarantee to receive the refund amount through ECS or direct deposit in your account. Refunds are processed by the registrar of the public issues and its up to them to choose the way they want to refund your money back which may include refund through cheques.

Why does the retail Individual Investor RII bidding status is not getting updated every hour?

Answer:  IPO subscription detail or bidding status for book building IPO is provided by the stock exchanges when IPO is open for bidding. NSE and BSE websites usually publish this information.

Only part of bidding status gets updated every hour and remaining information is made available at the end of the day.

Usually Total Bids Received, Total Bids Received at Cut-off Price and total number of times issue is subscribed information is updated every hour.

The detail bidding status including category wise bidding detail (i.e detail for Qualified Institutional Buyers (QIBs) – Foreign Institutional Investors (FIIs), Domestic Financial Institutions (Banks/ Financial Institutions(FIs)/ Insurance Companies), Mutual Funds, Non Institutional Investors – Corporates, Individuals (Other than RIIs), Retail Individual Investors (RIIs) etc.) is updated once in a day.

What are the determining factors for the selection of an ipo to invest?

1. The issue size has to be big, the bigger the issue, the higher is the capability of the promoters.

2. Money begets more money, so if they have raised more money, be sure, they will be able to earn more.

3. A higher promoters stake is a must, instills a sense of responsibility.

4. A background check on the promoters capabilities

5. Size of projects in the pipeline, will indicate the scalability of the company

6. Last but not the least, in big companies, look for long term wealth creation and not speculative gains.

How much tax I have to pay on returns (capital gains) for a particular IPO?

Answer:  If any Capital Asset (stock, property, precious metal etc) is sold or transferred, the profits arising out of such sale are taxable as capital gains in the year in which the transfer takes place.

Capital Assets are of two types i.e., long term and short term.

Shares, debentures and mutual funds are considered as Long-term capital assets when they are held for more than 12 months before they are sold or transferred. If they are sold or transferred before 12 months they are considered as short-term capital.

Different rates of tax apply for gains on transfer of the long term and short-term capital assets. Gains on short-term capital asset are taxed as regular income.

If an investor sells IPO allocated shares with in 12 month of IPO Allotment, he comes under short-term capital gains. All such gains are taxed along with the investor’s regular income i.e tax on his salary etc.

For long term capital gains and more detail about taxation in India visit:

http://incometaxindia.gov.in/general/computation.asp

What is the procedure to withdraw from an IPO?

To withdraw from IPO the applicant have to inform the registrar of the issue in written within 7 days of IPO closing or can also make stop payment of the cheque (if applied through paper form).

Which are the reliable sources for me to get information about response to issues?

In the case of book-built issues, the exchanges (BSE/NSE) display the data regarding the bids obtained (on a consolidated basis between both these exchanges). The data regarding the bids is also available category wise. After the price has been determined on the basis of bidding, the statutory public advertisement containing, inter alia, the price as well as a table showing the number of securities and the amount payable by an investor, based on the price determined, is issued.

How do I know if I am allotted the shares? And by what timeframe will I get a refund if I am not allotted?

The investor is entitled to receive a Confirmatory Allotment Note (CAN) in case he has been allotted shares within 15 days from the date of closure of a book Built issue. The registrar has to ensure that the demat credit or refund as applicable is completed within 15 days of the closure of the book built issue.

How long will it take after the issue for the shares to get listed?

The listing on the stock exchanges is done within 7 days from the finalization of the issue. Ideally, it would be around 3 weeks after the closure of the book built issue. In case of fixed price issue, it would be around 37 days after closure of the issue.

What is the recourse available to the investor in case of issue complaints?

Most of the issue complaints pertain to non-receipt of refund or allotment, or delay in receipt of refund or allotment and payment of interest thereon. These complaints shall be made to the post issue Lead Manager, who in turn will take up the matter with registrar to redress the complaints. In case the investor does not receive any reply within a reasonable time, investor may complain to SEBI, Office of investors Assistance.

How will the investor confirm that bonus/rights entitlement is credited into the account?

An allotment advice will be sent by the issuer for bonus/rights entitlement. The transaction statement given by the DP, will also show the bonus/rights credit into the account. The quantity shown in the advice and transaction statement should match.

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