Here is a look at six smart things to know about funding for IPOs
1) An individual can take a loan to apply for shares in an equity IPO. The lender finances a part of the amount, while the balance, which is the margin, is to be provided by the investor.
2) NBFCs and banks usually offer funding for IPOs. As per the RBI guidelines, banks can provide a maximum loan of Rs 10 lakh. In case of NBFCs, the quantum of loan depends on the issue.
3) The lending rates depend on the prevailing trends in interest rates as well as IPO features, such as the expected over-subscription and listing premium.
4) The tenure of the loan is usually between 10 and 15 days, depending on the time it takes for the allotment to be complete and the shares listed on the stock exchange
5) The borrower typically executes a PoA in favour of the lender to operate the demat account. In case of a default, the lender may sell the holding to cut lending losses.
6) The risk arises from the fact that the borrower benefits from the transaction only if he is able to liquidate the allotted shares at a price that is adequate for covering the borrowing cost.
Economic Times
1) An individual can take a loan to apply for shares in an equity IPO. The lender finances a part of the amount, while the balance, which is the margin, is to be provided by the investor.
2) NBFCs and banks usually offer funding for IPOs. As per the RBI guidelines, banks can provide a maximum loan of Rs 10 lakh. In case of NBFCs, the quantum of loan depends on the issue.
3) The lending rates depend on the prevailing trends in interest rates as well as IPO features, such as the expected over-subscription and listing premium.
4) The tenure of the loan is usually between 10 and 15 days, depending on the time it takes for the allotment to be complete and the shares listed on the stock exchange
5) The borrower typically executes a PoA in favour of the lender to operate the demat account. In case of a default, the lender may sell the holding to cut lending losses.
6) The risk arises from the fact that the borrower benefits from the transaction only if he is able to liquidate the allotted shares at a price that is adequate for covering the borrowing cost.
Economic Times
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