IPO means Initial Public Offering. It is a process by which a privately held company becomes a publicly-traded company by offering its shares to the public for the first time. A private company that has a handful of shareholders shares the ownership by going public by trading its shares. Through the IPO, the company gets its name listed on the stock exchange. A private company goes in for an IPO to raise capital to expand its operations, and also use the opportunity to reduce promoter and create value for them.

At the time of the IPO, shares are allocated to different investor categories such as Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs) and Retail Individual Investors (RIIs). When the demand is greater than the allocation that is the number of shares applied is more than what the issue size is open for, it is known as oversubscription. So, if the IPO has 5 times subscriptions; it is known as the IPO is over-subscribed five times. As an individual investor, you are allowed to invest in small lots worth Rs 10,000-15,000. As a retail investor, you can apply for a maximum of Rs 2 lakh in an IPO. Example of a recent IPO being that of Nazara Technologies which opened on May 17, 2021 with the issue price at Rs 1,101.

IPO (Initial Public Offering)

When a listed company further issues securities to the public it is said to be making a Follow-on Public Offer (FPO). The listed company does so to raise additional equity capital to meet the company&rsquo;s need for expansion or further dilution of promoter holding. Each of these two types is known as diluting offer or non-diluting offer. In case of a diluting offer, the funds raised do not change the company&rsquo;s value, which means there is a decrease in the per-share earnings of the company.

In case of non-dilutive offering, the capital raised goes to the founders or large shareholders of the company and not the company, which means the per-share earnings of the company, remains unaffected. In March, 2021, Ashapuri Gold Ornament Ltd. Came up with an FPO between March 3 and 8, 2021, with the offer price of Rs 81. The FPO was mostly towards the expansion of the company&rsquo;s operations.

FPO (Follow-on Public Offering)

When a company offers existing shareholders the chance to buy additional shares for a reduced price, it is known as rights issue. Usually the discounted price will stand for a specified time frame, after which it is returned to normal. Normally a company offers a rights issue to raise capital and use the existing investor base, which is mostly used to clear its debts or acquire new assets without the need to take out a loan from a bank.

In recent times, the RIL (Reliance Industries Ltd) rights issue has been in the news, since May 2020, when the company announced its grand rights issue. The offer price of Rs 1,257 per share, at a ratio of 1:15, which means for every 15 existing shares, one would get one new share, the unique aspect of this rights issue is that subscribers had to pay 25% on application, with the rest to be submitted in subsequent calls. The first call of Rs 314.25 per partly paid-up equity share (including a premium of Rs 311.75 per share) would be payable on the aforesaid shares from May 17, 2021 to May 31, 2021.

The rights issue provides an opportunity for current shareholders to increase their stake in a company at a reduced cost, which helps them to increase their exposure to a company&rsquo;s stock&ndash; which could be good or bad, depending on a company&rsquo;s profit and loss statement. Remember, the share purchase under the rights issue depends on the current holdings of the shareholder, which means that they can only buy finite number of shares.

Rights Issue

Typically, when a company makes profit, it chooses to either reinvest all of its profit back into the business or pay some portion or the whole of it back to shareholders in the form of a dividend. Dividend is hence, the portion of profit that a company chooses to return to its shareholders, usually expressed as a percentage.Dividends usually come in the form of either a one-off or regular cash payments, but can also be paid in the form of further shares of the stock of the company. Recently, HDFC Life announced a 20.2% dividend on April 26, 2021 with the record date for the dividend being July 1, 2021.

Dividend 

Think of bonus as another form of rewards that shareholders receive from the company in which they have invested. Bonus shares are additional shares given by the company to existing shareholders at no additional cost. Bonus is classified as a corporate action to revamp the existing cash reserve of a company to bring the deployed capital of the company in sync with the issued capital. When a company makes profit, it results in an increase in its employed capital, this surplus is distributed through increasing the number of issued shares, also known as issued capital.

It is for this reason that a bonus share issue does not impact the net assets of a company. It does not involve any cash flow. It simply means that the number of shares issued by the company &ndash; called share capital &ndash; has increased. Typically, a bonus share issue underlines the sound financial health of the company. It reflects that the company is in a strong position to issue additional equities. It means that the company has made profits.

Issuing bonus shares, increases the issued share capital of the company, this decreases the stock price, making the stock more affordable for retail investors. A 1:1 bonus means that an existing shareholder will get one share for each share held by him. For example, Pilani Investment, which announced a 2:5 bonus, means, existing shareholders would get 2 new shares for every 5 shares held in the company, as announced by the company on Jan 2, 2021.

Bonus

This is yet another corporate action where a company repurchases its own shares from existing shareholders. Companies going in for a buyback sweeten the deal by offering buyback at a price higher than the prevailing trading price of its shares. Buyback of shares can be done either through the open market or through tender offer route. Under the open market mechanism, the company can buy back its shares from the secondary marker. On the other hand, during buyback of shares via tender offers, shareholders can submit or tender portions of their shares within a stipulated time.

Most often when a company has got excess cash in hand but cannot locate suitable projects to invest in and it may choose to go for a share buyback that enables it to put the surplus cash to good use. This way, through buybacks, it becomes easier for a company to consolidate its hold over the business. Wipro announced buyback through a tender process between Dec 29, 2020 and Jan 11, 2021 with the offer price at Rs 400. The share price of Wirpo which was way under Rs 400 in the days to the opening of the buyback (about Rs 380 - 385), but close to the closing date, the share price surged way past the buyback price, touching Rs 450 on Jan 14, and is currently trading at Rs 511 on May 19, 2021.

Buyback 

Stock split is the division in the face value of the shares of companies from say Rs 100 to Rs 10 and so on. So, in 1:10 split, shares of Rs 10 face value may be reduced to face value of Re 1. In such case, you will have 10 times the initial number of share held. However, the price of shares would also fall proportionately after the split but the total value of your holding remains the same. As a shareholder you are entitled to receive additional shares on account of the split, as and when it is proposed by the board of directors and approved by shareholders in general meeting of the company.

One of the reasons for a stock split is to increase liquidity because after the split, the share price of the company goes down, making it affordable for investors to invest. Stock split also increases the shareholder base and indicates perception of future growth in the company. Do not confuse between stock split and bonus; in case of bonus, the face value doesn&rsquo;t change, but in case of stock split the face value of the share goes down. So, there is no change in future dividends in case of bonus, however, in case of a stock split, future bonus does go down because the face value goes down. Stocks of Emerald Leisures will split from face value of Rs 10 to Rs 5 on May 24, 2021.

Stock Split

Corporate actions such as dividend and bonus depend on dates such as ex-dividend, dividend record date, book closure start data, book closure end date etc. These dates determine which shareholder receives benefits from such announcements and who are over looked. For instance, when a company declares a dividend, it sets a record date when you must be on the company&#39;s books as a shareholder to receive the dividend.

However, when one buys shares, the delivery of shares occurs only after T+2 days, which is the second trading day after the transaction date. The concept of ex-dividend date plays a role here.

The ex-dividend date addresses the issue of T+2 delivery date. The ex-dividend date is fixed as 2 trading prior to the record date. Next comes the book closure date, which is the period when no transfer of share requests is entertained by the registrar. For example; if you buy shares during the book closure or if you buy shares just prior to the book closure, then you will get the actual delivery of shares only after the book closure periods ends.

So, when does on actually receive the dividend payouts? In case your bank mandate is registered with the registrar then the dividend amount will be automatically credited to your bank account. However, if you are holding physical shares or if your bank mandate is not registered then your dividend cheque will be mailed to you at your registered address. The date of payment of dividend will depend on whether the payout is an interim dividend or it is a final dividend. In case of interim dividend, the payout to the shareholders has to happen within 30 days from the date of the announcement of the dividend. However, in case of final dividend, the actual payment of dividend only has to be made within 30 days of the Annual General Meeting (AGM).

<table border="1" cellpadding="1" cellspacing="1">
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			Date with corporate actions
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			&nbsp; Declaration Date&nbsp; 
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			<td>
			&nbsp; Ex-Dividend Date&nbsp; 
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			<td>
			&nbsp; Record Date
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			&nbsp; Payable Date
			</td>
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			<td>
			&nbsp; Friday, 7/5/2021
			</td>
			<td>
			&nbsp; Friday, 14/5/2021
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			<td>
			&nbsp; Monday, 17/5/2021
			</td>
			<td>
			&nbsp; Tuesday, 18/5/2021
			</td>
		</tr>
	</tbody>
</table>

Declaration, ex-dividend date, record date and payable date 

Companies that are listed on stock exchanges have to mandatorily comply with the SEBI LODR (Listing Obligations and Disclosure Requirements) regulations. These regulations are part of corporate governance and actions that need to be reported to the regulator and is a way to maintain necessary checks and balances and greater independence of all key gate-keepers including boards and auditors. Based on the LODR regulations, there are quarterly, half-yearly and annual results that need to be declared and submitted with the regulator in the prescribed format.

Submissions include statement detailing number of investor complaints received, disposed and those that are unsolved, shareholding pattern, audited and unaudited results (quarterly, half-yearly and annual) within stipulated timelines. Annual account statements detailing all aspects of the business, including subsidiaries and any other necessary document as required by compliance needs to be submitted at regular intervals.

Company Results 

Of the financial statement submitted to regulator, only the annual company financial statements are audited whereas quarterly and half yearly statements are unaudited.Audited financials are more costly and are recorded as per the company laws whereas unaudited ones are cheap and recorded as per the management&rsquo;s discretion. Moreover, audited financial statements are reported by the company in its annual report for each year whereas unaudited financial statements are reported by the company during the whole year as per the respective period.

As an investor, you should be able to make this distinction, because some of the unaudited data may be discrepancies that get corrected during the course of the year and are less reliable compared to the audited data. Think of the unaudited data as a perspective, with the audited data offering the real state of the company and its financials.

Financial Events

IPO (Initial Public Offering)