Welcome to the IPO section of EzeeTrade™. Primarily, issues can be classified as a Public, Rights or preferential issues (also known as private placements). While public and rights issues involve a detailed procedure, private placements or preferential issues are relatively simpler. The classification of issues is as illustrated in the figure below:
Initial public offering (IPO) - An IPO is the official term for 'going public'. It occurs when a privately held company - owned, for example, by its founders plus perhaps its private equity investors - lists a proportion of its shares on a stock exchange. Companies that do an IPO are seeking equity capital to expand their businesses.
Follow on public offering (FPO) A follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.
Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.
Preferential Issue (PI) is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital.
FAQ on Issues By SEBI
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