Initial public offering

The first sale of a company's shares to the public, after which they are listed and traded.

An Indian issue can combine two things. Money from a fresh issue goes to the company. An offer for sale lets existing holders sell, and the company receives nothing from it. That split is disclosed, and it changes what the transaction is for.

Lock-in rules limit early selling. For promoters, the minimum contribution, 20% of the post-issue capital, is locked for 18 months, or three years where most of the fresh money funds capital expenditure; promoter shares above that, and other pre-issue shares, are locked for six months; and anchor investors are locked for 30 days on half their allotment and 90 days on the rest. Those expiry dates are predictable supply.

Read the objects of the fresh issue before anything else in the document.

Three documents matter and they arrive in order: the draft offer document, filed months ahead and the most useful; the red herring, complete except for the price, with the price band announced by advertisement at least two working days before the issue opens; and the prospectus, carrying the final price. You can do almost all the analysis from the first one, well before the marketing starts.