LIC IPO
IPO : Initial Public Offer
Recently on 1st February 2020 during Budget presentation honorable Finance Minister Ms. Nirmala Sitharaman has announced to dis-invest up to Rs.100000 crore. Out of this target only Rs.18000 crore has been raised so far this year. Hence Govt has decided to dis-invest 10% of holding of LIC out of 100% holding through IPO.
Let us understand what is IPO and how it works.
IPO: Initial public offer means when a company offer financial instrument to raise capital first time to the general public will be called as IPO.
Companies need funds for various reasons, it may be for expansion of their existing business or may be it required for acquisition of other business or to repay existing debt to make the organisation debt free.
Types of Funds: Two type of funds can be raised from public:
i) Owners Fund
ii) Borrowed Fund
i) Owners fund: Most of the company raise their capital through owners fund. It means those who invest their surplus fund with the company will get share of the ownership in the business.Companies has no further burden to By this way companies dilute their share capital with public.
Products are : Equity Share,Preference Shares etc.
ii) Borrowed Funds: By this way companies borrow funds from banks or public to meet their short term need. They have to pay interest for using funds till the period.Don't need to dilute share capital. After certain period company becomes debt free when they pay back the whole fund.
Products are : Debentures , Bonds etc.
When companies raise capital from mass public for the first time will be called IPO. IPO can be done for issuing Equity shares,Bonds, Debentures etc.
Note: In the case of LIC dis-investment it will be called as OFS (Offer for sale) not exactly IPO. Because government selling their own 10% share out of whole 100% holding and the proceeds will go directly to the government account not in companies account. Yes as this process is happening first time to the public then it can be called as IPO.
Recently on 1st February 2020 during Budget presentation honorable Finance Minister Ms. Nirmala Sitharaman has announced to dis-invest up to Rs.100000 crore. Out of this target only Rs.18000 crore has been raised so far this year. Hence Govt has decided to dis-invest 10% of holding of LIC out of 100% holding through IPO.
Let us understand what is IPO and how it works.
IPO: Initial public offer means when a company offer financial instrument to raise capital first time to the general public will be called as IPO.
Companies need funds for various reasons, it may be for expansion of their existing business or may be it required for acquisition of other business or to repay existing debt to make the organisation debt free.
Types of Funds: Two type of funds can be raised from public:
i) Owners Fund
ii) Borrowed Fund
i) Owners fund: Most of the company raise their capital through owners fund. It means those who invest their surplus fund with the company will get share of the ownership in the business.Companies has no further burden to By this way companies dilute their share capital with public.
Products are : Equity Share,Preference Shares etc.
ii) Borrowed Funds: By this way companies borrow funds from banks or public to meet their short term need. They have to pay interest for using funds till the period.Don't need to dilute share capital. After certain period company becomes debt free when they pay back the whole fund.
Products are : Debentures , Bonds etc.
When companies raise capital from mass public for the first time will be called IPO. IPO can be done for issuing Equity shares,Bonds, Debentures etc.
Note: In the case of LIC dis-investment it will be called as OFS (Offer for sale) not exactly IPO. Because government selling their own 10% share out of whole 100% holding and the proceeds will go directly to the government account not in companies account. Yes as this process is happening first time to the public then it can be called as IPO.
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