What is an IPO and How Does it Work in India?

An Initial Public Offering (IPO) is the process through which private companies transition to becoming publicly traded entities by offering their securities to the general public. This entails filing draft papers, known as Draft Red Herring Prospectus (DRHP), with SEBI for approval. Once approved, the company files the final Red Herring Prospectus (RHP) along with necessary documents, setting the IPO launch date and providing required information.

Who Determines the Price Band in an IPO?

The price band of an IPO is decided by the IPO lead managers, also known as merchant bankers or syndicate members. After finalization, the content is validated by SEBI through the IPO Prospectus.

Differentiating Between IPO Cut-off Price and Floor Price?

In a Book Building Public Issue (IPO), the minimum bid price is termed as the Floor Price, while the cut-off price is the point at which investors agree to acquire shares at the company’s determined price.