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Wednesday, January 30, 2008

Procedure for listing of an IPO in Stock Exchanges

Procedure for IPO listing is as follows

1) Company decide to go public and raise fund from the market. They decide upon the Total amount to be raised from the Market. They get clarification from SEBI. This amount is broken down in number of shares by deciding the Face Value (FV).

2) As per the norms of the SEBI the FV is to be multiple of 5. Normal practice is keeping this @Rs 10. Other denominations that are followed are Rs 5 and Rs 15. This depends on the Strength of the company and the permission of SEBI. Rs 10 is commonly used because calculation becomes simple and it can also be broken in percentage terminology whithout using decimals and complex numbers.

3) Now the No of shares to be introduced in the Market is Decided. In IPO the demand and supply of the market forces leeds to an open and close price which is normally reflected as the Price Band... That becmes the initial offer price to public.

4) Depending upon the response (i.e: Demand) of the Stock as IPO, when it is opend on Secondary Market the price is decided. Normally those IPOs which have gone oversubscribed obviously does have lesser supply in the Market and the entire marketbecomes Bullish on this stock. So, again there becomes price appreciation of the Stock in the share market.

5) the combined collection of the firm from IPO and Secondary Market operations becomes the Market Capitalisation of the firm, from which a share of Profitability is distributed among the share holders in the form of Dividend (when to announce depends on the business conditions)The parameter of Dividend Distribution has nothing to do with the FV so if you will calculate it from his basic you will never reach to any conclusion.

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