Whenever a company plans to raise capital from the public, it is done through an IPO. IPO or Initial Public offering is the process by which a company sells its shares to the public for the first time for raising capital. After the IPO, the company is listed on the exchanges and one can trade in its shares.
IPO is a very long and complicated process. The company hires and investment bankers who manages the complete IPO process. Some of the entities required for launching an IPO include:
· Syndicate Members – These members collect bids from retail and institutional investors for the IPO. Syndicate members are usually brokers. These bids are then entered in an electronic bidding system, which generates a TRS or transaction registration slip.
· Bankers to the issue – These bankers are responsible for the collection of application form along with the payments and forward the same to the registrars. Bankers are also responsible for refunding the money to the investors whose applications are rejected fully or partially.
· Registrars – The application forms received from bankers are processed and registered by registrars. All the documents required for allocation of shares are prepared and maintained by the registrars. Registrars are also responsible for transferring shares to the respective DEMAT accounts of eligible investors.
· Underwriters – Underwriters are special investor who subscribe to those shares and securities which are not subscribed by shareholders. Underwriters are usually stockbrokers and merchant bankers who are registered as an underwriter with SEBI.
AN investor can apply for shares in an IPO through ASBA process. ASBA or Application Suported by Blocked Account is the only process authorized by SEBI for applying through an IPO. When an investor applied for an IPO through ASBA, the required amount for purchasing shares is blocked from his bank account. If the shares are allotted to him, the amount is transferred to the share issuing company. IN case shares are not allotted, the blocked amount is released back to the bank account of the investor.
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