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 What is an IPO?

IPO means Initial Public offer. It's a process by which a company follows rules and regulations of SEBI (several participants are there in IPO like SEBI), gets listed in the stock market for the first time, and issues IPO (stock, bond) to public and collect money from public. After IPO process is completed, IPOs are traded by public in the exchanges.

Example:
MCX (Multi Commodity Exchange), state-of-the-art electronic commodity futures exchange was started in 2003, and it became very popular for trading commodity futures. In 2012, it needed money for its operations, expansion and it issued its IPO through the stock exchanges. Let us discuss the important things in IPO.



MCX IPO Brief Details Explanation
Symbol - Series = MCX EQ

MCX is the symbol when it trades in exchanges, and it will trade under equity series.

Issue Period = Feb 22,2012 to Feb 24,2012

IPO will be issued between Feb 22, 2012 to Feb 24, 2012. You have to buy this IPO within that period. Most of the stock brokers have facilities to buy IPOs electronically.

Issue Size = Public offer of 6,427,378 equity shares of Rs. 10.(including Anchor Portion of 9,26,606 equity shares)

The no of shares are issued to the public. Total amount collected by IPO = Total number of shares issued multiplied by share price.

Issue Type = 100% Book Building

Start to end IPO process by which prices are determined, shares are allocated, money returned back to investors etc.

Price Range = Rs 860 to Rs 1032/-

Price of the share will be between 860 rupees and 1032 rupees. This will be decided during the book building process.

Face Value = Rs.10/-

The par value of the share.

Tick Size = Re. 1/-

When it starts trading in the exchanges, the minimum difference between buy price and sell price will be 1 rupee. I.e. A buyer will ask for 1111 and a seller will request for 1112 rupees.

Maximum Subscription Amount for Retail Investor = Rs.200000 (2 lakhs)

Maximum amount you can invest for this IPO.

Market Lot = 6 Equity Shares

You have to buy in lots basis. Let us consider the maximum price of 1,032 per share for MCX. So 1 lot size (6 shares price) = 6,192. Maximum lots you can apply = Maximum subscription amount/lot size = 2, 00,000/6,192=32.29 lots. So you can apply for 32 lots and If you are allotted 32 lots, then you get 32 lots * 6 shares = 192 shares.

Minimum Order Quantity = 6 Equity Shares

The minimum quantity that you can apply is 1 lot - 6 shares.

  • Book Running Lead Manager = Edelweiss Financial Services Limited, Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited.
  • Rating Agency = CRISIL Limited.
  • Syndicate Member = Edelweiss Securities Limited, SMC Global Securities Limited and Sunidhi Securities & Finance Limited.
  • Registrar = Karvy Computershare Private Limited.

Lead Managers, Rating Agency, Syndicate Members, Registrar has a role from start to end of the IPO process. To get more in details, go to www.nseindia.com.

Few roles are:

  • Preparing the documents and submitting to SEBI to get IPO approval
  • After SEBI approves, distributing the forms
  • Coordinating with exchanges
  • Estimating the price of the share
  • No of shares to be allocated for each application
  • To store shares in their demat accounts
  • refunding the amount to applicants, if they did not get shares to their invested amount.

After book building process is completed,

  • MCX price is fixed as 1032 by REGISTRAR.
  • Before the IPO is traded by public in the exchanges, You would have got 192 shares in your demat account for your IPO investment of 2 lakhs.

MCX started trading on 9th March 2012 in National Stock Exchange and details taken from NSE are shown below.

Symbol Series Date Previous Close Open Price High Price Low Price Close Price Total Traded Quantity
MCX EQ 9-Mar-12 1032 1408 1428.55 1282.2 1296.7 7941567

Previous Close = 1032: The price fixed in book building process.
Open Price = 1408: When market opened, the first traded price of MCX.
High Price = 1428.55: The highest traded price on that day.
Low Price = 1282.2: The lowest traded price on that day.
Close Price = 1296.7: The final traded price on that day.

If you have sold your 192 shares even at the lowest price, then your
Gross Profit
= no of shares * (sold price - bought price)
= 192 * (1282.2-1032)= 192 (250.2)
= 48,038.40 rupees (Forty eight thousand and thirty eight rupees and forty paise only.

The chances of getting 192 shares in your demat account depends on the demand from the investors. If it is oversubscribed several times, then you may get few lots and your profit will be less.

NOTE:
Several stock prices have fallen down on the opening day.
This report was taken on 3rd April. You can see how MCX has traded in the last one year.

Date Series Symbol ISIN Face Value 52 Week Low 52 Week High Last Traded Price
3-Apr-13 EQ MCX INE745G01035 10 824.95 1617.9 917

All you have to know is how to book profits and exit.








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