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Questions and Answers
What is a key characteristic of a Fresh Issue of shares?
What is a key characteristic of a Fresh Issue of shares?
- New shares are issued to public investors. (correct)
- Existing shares are sold to the public.
- Funds go to existing shareholders.
- Only preferred shareholders can subscribe.
In which type of issue do the funds from investors go to existing shareholders rather than the company?
In which type of issue do the funds from investors go to existing shareholders rather than the company?
- Bonus Issue
- Offer for Sale (correct)
- Fresh Issue
- Rights Issue
What defines a Follow on Public Offer (FPO)?
What defines a Follow on Public Offer (FPO)?
- A company filing for bankruptcy.
- A new public offering by a company that has already undergone an IPO. (correct)
- The issuance of bonds to new investors.
- A situation where only existing shareholders can participate.
Which of the following best describes a Rights Issue?
Which of the following best describes a Rights Issue?
What is a Bonus Issue?
What is a Bonus Issue?
What document must companies file with SEBI to raise funds from the public?
What document must companies file with SEBI to raise funds from the public?
Which of the following investors are typically targeted in a Preferential Issue?
Which of the following investors are typically targeted in a Preferential Issue?
Who would typically benefit from a Rights Issue?
Who would typically benefit from a Rights Issue?
What is the primary purpose of utilizing Unified Payment Interface (UPI) in the IPO investment process?
What is the primary purpose of utilizing Unified Payment Interface (UPI) in the IPO investment process?
What information must be included in the application form when applying for shares during a public issue?
What information must be included in the application form when applying for shares during a public issue?
What happens to the funds in an investor's account if their share application is not allocated?
What happens to the funds in an investor's account if their share application is not allocated?
Which aspect must be carefully considered before applying for shares in a public issue?
Which aspect must be carefully considered before applying for shares in a public issue?
Who is responsible for authorizing the payment during the IPO application process when using ASBA?
Who is responsible for authorizing the payment during the IPO application process when using ASBA?
What is a key restriction when applying for investments in Public Issues?
What is a key restriction when applying for investments in Public Issues?
Which payment mechanism allows investors to invest in IPOs without directly debiting their accounts at the time of application?
Which payment mechanism allows investors to invest in IPOs without directly debiting their accounts at the time of application?
Which type of account is essential for receiving shares after a successful IPO application?
Which type of account is essential for receiving shares after a successful IPO application?
What is required for the blocking of funds during the investment process?
What is required for the blocking of funds during the investment process?
Which of the following banks can be used to create a UPI ID for investing in IPOs?
Which of the following banks can be used to create a UPI ID for investing in IPOs?
What happens to excess money after shares are allocated?
What happens to excess money after shares are allocated?
Which of the following statements about UPI applications for IPOs is false?
Which of the following statements about UPI applications for IPOs is false?
What are Annual Maintenance Charges (AMC) related to?
What are Annual Maintenance Charges (AMC) related to?
Which method is specifically prohibited a priori in IPO applications using UPI?
Which method is specifically prohibited a priori in IPO applications using UPI?
What is the correct action if an investor wishes to invest more than Rs. 2 Lakhs in an IPO via UPI?
What is the correct action if an investor wishes to invest more than Rs. 2 Lakhs in an IPO via UPI?
What is the full form of ASBA in the context of IPO applications?
What is the full form of ASBA in the context of IPO applications?
Study Notes
IPO Types
- Fresh Issue of Shares: New shares issued by the company to public investors, raising funds for company purposes.
- Offer for Sale: Existing shareholders sell their shares to the public; funds go to the sellers, not the company.
Follow-on Public Offer (FPO)
- Issued by companies that have previously conducted an IPO, introducing new securities to the public.
Modes of Issue
- Preferential Issue: Securities issued to a selected group, like promoters or strategic investors, rather than the general public.
- Rights Issue: Existing shareholders are granted the right to purchase newly issued shares proportionate to their holdings.
- Bonus Issue: Additional shares issued to existing shareholders at no extra cost, based on their current shareholdings.
Regulatory Requirements
- Companies must file a draft red herring prospectus with SEBI to raise public funds.
- It is advisable to maintain a demat account for holding securities, with some exceptions for legal heirs.
Investing Process in Primary Market
- Shares can be purchased directly from companies during public offers by completing an application form and paying during the offer period.
- Application forms require investor details such as name, address, number of shares, and bank details.
- Two payment methods include Application Supported by Blocked Amount (ASBA) and Unified Payment Interface (UPI).
Allocation and Fund Blocking
- The IPO listing process takes six working days post-issue closure.
- Funds for applied shares get blocked in investor accounts; if not allocated, these funds are released.
- The blocking of funds is facilitated by an escrow/sponsor bank after investor authorization.
Payment Process
- Once allocated, funds are debited from the investor's account while any excess amount is unblocked.
- Payment authorization occurs using the UPI PIN provided during the blocking process.
UPI Usage for IPO Investment
- UPI ID must be created with banks listed as Self-Certified Syndicate Banks (SCSBs) by SEBI.
- Use only specified mobile apps and UPI handles for application submissions.
- Applications must be submitted through authorized members like Syndicate Members or Registered Stock Brokers.
- Application limit for IPO via UPI is ₹2 Lakhs per transaction for retail individual investors.
- Third-party UPI IDs or bank accounts are not permitted for allocations.
Glossary of Terms
- AMC: Annual Maintenance Charges.
- ASBA: Application Supported by Blocked Amount.
- BSDA: Basic Services Demat Account.
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Description
This quiz explores the various forms that an Initial Public Offering (IPO) can take, including fresh issues of shares and offers for sale. Understand how each form affects both the company and its investors. Test your knowledge on the mechanisms used in IPOs.
