Why in the News?
OpenAI has announced its readiness for a future Initial Public Offering (IPO).
Laws Governing IPOs in India:
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What is an IPO?
- Definition: An IPO is when a private company offers its shares to the public for the first time.
- Objective: It marks the company’s move to become a publicly listed company on a stock exchange.
- End Goal: Through an IPO, companies raise money from investors, and the public gets a chance to become shareholders.
How is an IPO Listed in India?
- Regulatory Filing: A company must file an offer document with SEBI (Securities and Exchange Board of India).
- Offer Document Includes:
- Details of the company and promoters.
- Financial history and business goals.
- The reason for raising capital and IPO structure.
- SEBI Approval: After review, SEBI gives permission for the listing process to begin.
IPO Eligibility & Pricing:
- Eligibility Criteria (SEBI Rules):
- Minimum Rs 3 crore in tangible assets in the last 3 years.
- Minimum Rs 1 crore in net worth each year for 3 years.
- Rs 15 crore average pre-tax profit in at least 3 out of the last 5 years.
- Who sets the Price:
- The company and its merchant banker decide the price based on valuation.
- Factors include assets, profits, and future growth.
- SEBI does NOT fix IPO prices.
Who can invest in an IPO?
- Eligibility: Anyone 18 years or older with a brokerage account can apply.
- Investor Categories:
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- Qualified Institutional Buyers (QIBs): Mutual funds, banks, insurance firms, FPIs, etc.
- Retail Investors: Individuals investing up to Rs 2 lakh.
- High Net Worth Individuals (HNIs): Investing more than Rs 2 lakh.
| [UPSC 2025] Consider the following statements:
I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom. II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time. III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard. Which of the statements given above are correct? Options: (a) I and II only* (b) II and III only (c) I and III only (d) I, II and III |
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