SEBI announced new Initial public offer (IPO) rules for retail investors. Now for distributing the shares to retail investor, number of application count instead of number of shares applied for. SEBI wants more and more investor to enter in the stock market. Government is doing all its efforts for call people in the share market. The two new announcements
1- Basic service demat account(BSDA)
2- Rajiv Gandhi equity saving scheme
Is the part of it. Now this rule will definitely woo the investor for the primary market specially those who forgot to invest in the IPO after Reliance Power failure in 2008.
What is new rule?
The new rule is that the company will count no. of application for allot the shares to the retail investors instead of number of shares applied for.
Old rule was the company will count no. of shares applied and distribute the shares according to it. Like the IPO subscribed 12 times in retail category. There is always a lot system in IPO market. If one has subscribe for IPO with higher limit (Which is 2 lakh now), he applies for 18 lot estimate. The company will give shares 1.5 lot to that investor. In other words the issue price is 100 rupees and lot of 100 shares. The lot price is 10000. One can apply for 19 lots means can apply for 190000 rupees application. If the issue subscribe 10 times, the investor will get 190 shares for his application.
New rule with example
New rule is that no. of application will count. So in this case issue subscribe will come with the no. of application and not with no. of shares. Like in one IPO the no of shares are 100000 for retail category. In old case, if the shares applied are 1000000, the issue subscribed 10 times. But in new case if the application received 1000000, then the issue will be subscribed 10 times.
Now one can apply for minimum lot. There are same chances for share allotment for full amount application and for minimum amount application if the IPO subscribed heavily. Most IPO subscribed heavily so impact is clear Apply for minimum lots and maximum application.
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