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Initial Public Offering IPO Interview Questions & Answers - Learning Mode

Initial Public Offering IPO Interview Questions & Answers - Learning Mode

An initial public offering (IPO) is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. After the IPO, when shares trade freely in the open market, money passes between public investors. Although IPO offers many advantages, there are also significant disadvantages, chief among these are the costs associated with the process and the requirement to disclose certain information that could prove helpful to competitors. The IPO process is colloquially known as going public.

Try Initial Public Offering IPO Interview Questions & Answers - Exam Mode

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Initial Public Offering IPO Interview Questions & Answers - Learning Mode
Try Initial Public Offering IPO Interview Questions & Answers - Exam Mode
Question: Is there any preference while doing the allotment of an IPO?

Answer: The allotment of IPOs to the Qualified Institutional Buyers (QIBs) is on a discretionary basis. The discretion is left to the Merchant Bankers who first disclose the parameters of judgment in the Red Herring Prospectus. There are no objective conditions stipulated as per the DIP Guidelines. The Merchant Bankers are free to set their criteria and mention the same in the Red Herring Prospectus. Source:
Question: Who decides the price band of an IPO?

Answer: It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price. Source:
Question: What is SEBI's Role in an Issue?

Answer: Any company making a public issue or a listed company making a rights issue of value of more than Rs.50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI's observation letter is three months only ie. the company has to open its issue within three months period. Source:
Question: What is Hard Underwriting in an IPO?

Answer: Hard underwriting is when an underwriter agrees to buy his commitment at its earliest stage. The underwriter guarantees a fixed amount to the issuer from the issue. Thus, in case the shares are not subscribed by investors, the issue is devolved on underwriters and they have to bring in the amount by subscribing to the shares. The underwriter bears a risk which is much higher in soft underwriting. Source:
Question: Can I apply for the IPO online?

Answer: As per the cyber rules of Government of India, this facility is not provided. Only in case of book building issues, the brokers can bid online on behalf of subscribers. Source:
Question: What are the relevant regulations and where do I find them related to IPOs?

Answer: The SEBI Manual is SEBI authorized publication that is a comprehensive databank of all relevant Acts, Rules, Regulations and Guidelines that are related to the functioning of the Board. The details pertaining to the Acts, Rules, Regulations, Guidelines and Circulars are placed on the SEBI website under the "Legal Framework" section. The periodic updates are uploaded onto the SEBI website regularly. Source:
Question: What is kn measurement?

Answer: The syndicate member returns the counterfoil with the signature, date and stamp of the syndicate member. The investor can retain this as a sufficient proof that the bids have been taken into account. Source:
Question: How does Book Building in IPO work?

Answer: Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at 'cut-off'. After the bidding process is complete, the Source:
Question: What are Disclosures and Investor protection guidelines for an IPO?

Answer: The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. Many amendments have been carried out in the same in line with the market dynamics and requirements. In 2000, SEBI issued "Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000" which is compilation of all circulars organized in chapter forms. These guidelines and amendments thereon are issued by SEBI India un Source:
Question: What is Open book/closed book in an IPO?

Answer: Presently, in IPO Issues made through book building, Issuers and merchant bankers are required to ensure online display of the demand and bids during the bidding period. This is the Open book system of book building. Here, the investor can be guided by the movements of the bids during the period in which the bid is kept open. Under closed book building, the book is not made public and the bidders will have to take a call on the price at which they intend to make a bid without having any informat Source:
Question: Does or can SEBI recommend an IPO issue?

Answer: SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document. Source:
Question: What is a Red Herring Prospectus for an IPO?

Answer: Red Herring Prospectus is a prospectus, which does not have details of either price or number of shares being offered, or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price or a pric Source:
Question: What is an Abridged IPO Prospectus?

Answer: Abridged Prospectus for an IPO means the memorandum as prescribed in Form 2A under sub-section (3) of section 56 of the Companies Act, 1956. It contains all the salient features of a prospectus. It accompanies the application form of public issues. Source:
Question: Is it compulsory for me to have a Demat Account?

Answer: As per the requirement, all the public issues of size in excess of Rs.10 crore, are to made compulsorily in the demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms. Source:
Question: Who are Qualified Institutional Buyers (QIBs) in case of IPOs?

Answer: Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a 'Qualified Institutional Buyer' shall mean:
a. Public financial institution as defined in section 4A of theCompanies Act, 1956;
b. Scheduled commercial banks;
c. Mutual funds;
d. Foreign institutional investor registered with SEBI;
e. Multi Source:

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Latest 20 Questions
Payment of time- barred debt is: (a) Valid (b) Void (c) Illegal (d) Voidable
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