What is the life cycle of an IPO prospectus?

Short Answer

IPO prospectus is the document which gives information to the investors about the company statistics before they issue shares in public. It is mainly a 3 step process. For detailed description, read through the blog below.

Detailed Answer

Around a hundred-page document which gives details about a corporation or firm like its financial data for the past three years, its clients, issue time and details, strengths, and weakness of the firm, etc which is offered by an IPO of a private company is called as IPO Prospectus. Therefore, it can be said that it has all the essential data that can help the investors to decide if they would like to invest in that specific company or not. It is basically a Legal document which is used by the firm so as to promote its shares. At the beginning of the offer period, a prospectus is issued, and each participant must evaluate it prior to investing in any company. A Prospectus is declaimed by the FCA and signed off, and the board of directors are held accountable for its information.

The life cycle of IPO Prospectus consists of 3 steps:

  1. Draft Offer Document
  1. Offer Document
  1. Red herring prospectus

Stage 1: Draft Offer Document

  • It is the document which is organized by the book building or the issuer which consists of all the information which an individual need to know of the public issue.
  • After this, the document is sent to the Securities and Exchange Board of India (SEBI) for analysis and review.
  • This document contains information such as the details of its business, financial data, its policies, risk involved, the reason of the company on why they are issuing an IPO, etc.
  • After examining the document, SEBI makes decisions regarding the document of whether it should be processed further or it should have some changes to be made before it being sent for IPO processing.
  • The draft document can be found in the Reports section of SEBI's website.
  • SEBI takes 30 days to process the details sent by the corporation and then gives it verdict whether anything information is to be changed or it is approved.
  • Hence, it is then listed with securities in the trading market for a minimum of 21 days.
  • It is also necessary to make a public announcement either on the day of submitting the ‘draft offer document’ or the day after in the English and Hindi national newspaper and one regional newspaper based upon where are they registering the document.

Stage 2: Offer Document

  • After the clearance of Draft Offer Document by SEBI, it is called as Offer document and its promoted for later IPO processing.
  • This is the modified document after all the details are confirmed from SEBI as per details mentioned in the ‘Draft Offer Document’.
  • 'Offer document' shall be sent to the issuing magistrate and to the trading platforms where the issuer company is prepared to list.
  • It is called a ‘Prospectus’ for public issue but ‘Letter of Offer’ for right shares issue.

Stage 3: Red Herring Prospectus

  • Once the offer document gets acceptance from stock exchanges, the firm of the corporation adds details such as the price of issue, issue document, size of the issue so that its goes onto the public platform with all the details.
  • The minimum amount of time between the filing of the application declaration and its implementation status is 15 days.
  • In book building issue of IPO, this stage also takes part in the price discovery of an IPO as none of the details regarding the same are not shared before and price cannot be analysed as the bidding it done later.
Tagged With: lifecycleipoprospectusipo prospectussteps
Categories: IPO Basics
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Related FAQs

What is the life cycle of an IPO? Process

An IPO or Initial Public Offering is where for the first time an earlier unlisted company sells new or existing securities and offers them to the public in the primary market.

How to apply IPO in Zerodha? Buy IPO Online

If you are a Zerodha customer, you can apply for IPO online through Zerodha Console (Zerodha Back-office). The process for applying an IPO process has been explained in detail above. Here are few other answers to important queries that you may want to learn.

Where do I get an IPO application form?

An IPO application form can be procured from a syndicate office member of the IPO or a stockbroker. You can download and print the IPO forms.

How to Check IPO allotment in Zerodha?

There are many ways to check the IPO allotment status but Zerodha doesn't provide this facility on their website. To check the allotment status you can visit the website of the registrar of the IPO, for example, Link Intime, Karvy. With the help of a PAN number, you can easily check the status.

Can I apply in an IPO through multiple applications on same name?

No, a person cannot apply for a single IPO more than ones. There are strict rules and regulations followed in this matter. However, his/her family members can apply for the IPO under their name provided they have a demat account and PAN number.

Can I revise or cancel my IPO application?

There is a subscription period for every IPO. You can make the changes or cancel your IPO applciation within this period. Post this; there is nothing that can be done.

How many IPO applications can I submit through online net banking from one bank account?

There are about 5 IPO applications that can submit through online net banking from one bank account. However, the number can change immensely from one bank to another.

What information should I keep after I submit the IPO application form?

There are few documents such as a photocopy of the IPO applciation, cheque copy, and the reference number of applciation if submitted online.

How to increase IPO allotment chance?

Subscribing for an IPO with multiple accounts, avoiding last-day applications, and choosing minimum bids are few ways to increase IPO allotment chances.

Is it mandatory to have a Demat account to apply in an IPO?

Yes and no at the same time. Although you can apply for an IPO without a Demat Account in some cases, the allotted shares are tradable through a Demat Account, Thus, a Demat account is recommended for an IPO.