Is There Still Enough Appetite for Ipos ?
Conchita asks:
Reliance Energy has gone all out to woo investors for the initial public offer (IPO) of its subsidiary, Reliance Power. It offered shares to retail investors at a 5% discount to the price band of Rs 405-450, and “staggered payment” option in this IPO.
Accordingly, retail investors need to pay only 25% of the total investment amount at the time of submitting the application and the rest at the time of allotment on first call,
This option brings a level playing field for retail investors vis-à-vis qualified institutional buyers(QIBs), who are allowed to bid in an IPO with just 10% margin while submitting the bids in a public issue. Prominent public issues, which enabled the staggered payment options in recent times include ICICI Bank and Reliance Petroleum.
In an IPO , for the retail investor there is an option where an applicant can withdraw their applications anytime before allotment of shares / securities by the company ,as there is a demand from the public to withdraw from the Reliance Power IPO , before its listed, seeing the adverse market situation.
According to SEBI Guidelines, in an IPO, companies invite applications for shares sought to be enlisted by them in a Stock Exchange. The subscription in an IPO can either through book-built process by inviting bids from the prospective investors or on a fixed price basis. Issue of securities in an IPO is, inter alia, governed by SEBI (Disclosures and Investors Protection) Guidelines, 2002 - popularly known as SEBI DIP Guidelines.
SEBI DIP Guideline at Para no 11A.7.7 also provides that an applicant can withdraw applications in a public issue. Thus, in a book-built issue the applicants can withdraw their applications anytime before allotment of shares / securities by the company. This is emanating from the fundamental principle under Law of Contracts that an offer can be revoked before acceptance. The bids made by the bidders (applicants) is an offer made and allotment of securities by the companies only brings into a binding contract between the bidder and the company and, therefore, an application in a public issue can be withdrawn by the applicant depending upon the market scenario post subscription/closure of the IPO but before allotment even if the application money has been realized by the company. However, as per Clause 11.3.4.1 of the SEBI DIP Guidelines, only Qualified Institutional Bidders (QIBs) are not allowed to withdraw their bid after the closure of the bid. This is to prevent any possible manipulation of the IPO subscription by the QIBs.
Instances have happened in our country where investors have withdrawn their applications in an IPO. IPO made by Purvankara Projects, Deccan Airlines, Cairn Energy, Housing Development Infrastructure Limited, IVR Prime, KPR Mills, have seen withdrawal of applications by retailers and HNI categories before allotment.
Reliance Energy has gone all out to woo investors for the initial public offer (IPO) of its subsidiary, Reliance Power. It offered shares to retail investors at a 5% discount to the price band of Rs 405-450, and “staggered payment” option in this IPO.
Accordingly, retail investors need to pay only 25% of the total investment amount at the time of submitting the application and the rest at the time of allotment on first call,
This option brings a level playing field for retail investors vis-à-vis qualified institutional buyers(QIBs), who are allowed to bid in an IPO with just 10% margin while submitting the bids in a public issue. Prominent public issues, which enabled the staggered payment options in recent times include ICICI Bank and Reliance Petroleum.
In an IPO , for the retail investor there is an option where an applicant can withdraw their applications anytime before allotment of shares / securities by the company ,as there is a demand from the public to withdraw from the Reliance Power IPO , before its listed, seeing the adverse market situation.
According to SEBI Guidelines, in an IPO, companies invite applications for shares sought to be enlisted by them in a Stock Exchange. The subscription in an IPO can either through book-built process by inviting bids from the prospective investors or on a fixed price basis. Issue of securities in an IPO is, inter alia, governed by SEBI (Disclosures and Investors Protection) Guidelines, 2002 - popularly known as SEBI DIP Guidelines.
SEBI DIP Guideline at Para no 11A.7.7 also provides that an applicant can withdraw applications in a public issue. Thus, in a book-built issue the applicants can withdraw their applications anytime before allotment of shares / securities by the company. This is emanating from the fundamental principle under Law of Contracts that an offer can be revoked before acceptance. The bids made by the bidders (applicants) is an offer made and allotment of securities by the companies only brings into a binding contract between the bidder and the company and, therefore, an application in a public issue can be withdrawn by the applicant depending upon the market scenario post subscription/closure of the IPO but before allotment even if the application money has been realized by the company. However, as per Clause 11.3.4.1 of the SEBI DIP Guidelines, only Qualified Institutional Bidders (QIBs) are not allowed to withdraw their bid after the closure of the bid. This is to prevent any possible manipulation of the IPO subscription by the QIBs.
Instances have happened in our country where investors have withdrawn their applications in an IPO. IPO made by Purvankara Projects, Deccan Airlines, Cairn Energy, Housing Development Infrastructure Limited, IVR Prime, KPR Mills, have seen withdrawal of applications by retailers and HNI categories before allotment.
