IPO

An IPO or initial public offering is the process by which a privately held company, or a company owned by the government such as LIC, raises funds by offering shares to the public or to new investors.

Following the IPO, the company is listed on the stock exchange.

Which companies can come out with an IPO?

In order to protect investors, Sebi has laid down rules that require companies to meet certain criteria before they can go to the public to raise funds.

Among other conditions, the company must have net tangible assets of at least Rs 3 crore, and net worth of Rs 1 crore in each of the preceding three full years, and it must have a minimum average pre-tax profit of Rs 15 crore in at least three of the immediately preceding five years.

Who can invest in an IPO?

There are various categories of investors who can invest in an IPO. Qualified institutional buyers (QIBs) is a category of investors that includes foreign portfolio investors (FPIs), mutual funds, commercial banks, insurance companies, pension funds, etc.

All individuals who invest up to Rs 2 lakh in an issue are classified as retail investors. Retail investors investing above Rs 2 lakh are classified as high net worth individuals.

You have to be 18 years of age to become an investor. A brokerage account is needed to invest, and you have to be at least 18 years old to have one.