Any corporation requires capital (funds) to finance its operations and to engage in its own long-term investments.
To acquire these funds, a company raises money through the sale of securities in the company's name to common public thus making them a shareholder of the company.
This process of selling shares to the general public, on a securities exchange, for the first time is termed as IPO(Initial Public Offer).
Through this process, a private company transforms into a public company.
Therefore, a company raising money through IPO is also called as a company going public.
A company coming out with an IPO can do so by either fixing the price for the issue (calledfixed price) or setting a floor price or a price band within which an investor can bid for the issue (price discovery through book building process).
How to buy an IPO through SBISMART? sbi ASBA step by step guide
It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document.
The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.
An investor can place bids for the issue in multiples of the bid lot as specified by the company.
The period for which bidding will be open is minimum 3 working days and maximum 10 working days.
The investor is entitled to receive a Confirmatory Allotment Note (CAN) in case he has been allotted shares or a refund as applicable within 15 days from the date of closure of the issue.