IPO stands for initial public offer , whereby a newly incorpoprated limited company issue its share of equity to the public. The compnay may have been working for past few years but when it enters the stock market and get enlist at stock exchange such as BSE , NSE etc it has to offer the authorised equity to the public in form of shares with face value (Generally 10/5/2/1) at par or premium , discount as per the financial position, goodwill and need of the company.A part of the total equity is issued to the promotor which is generally above 50% to be the authorised promotor and to hold the power of execution of various operations of the compnay. Karvy and many other such companies act as a lead manager of the compnay who whereby takes the entire charge of the public issue ruight from the stage of filing draft with SEBI for approval , to advertisement for suscription of the issue , finalising the price band , issue date etc.The allotment , payment receipt , final despatch of share certificate as per the allotment to the shareholders all jobs are done by the lead manager , who charge a handsome fee for the same.
Nowdays within 26 days of issue closure the allotment process is to be completed and the stock is listed at exchange on day or another after allotment. The refunds of unalloted applicants are to be sent within 10days after listing.In older days refunds were sent via cheque though it is now mandatory to be sent via ECS with an postal intimation regarding allotment result and its credit at clients dp directly as per the information provided in apllication form and refunds of the unalloted part at his bank via ecs as informed in the application form.
In order to make the process of listing faster SEBI has made it mandatory
1. To have PAN card for apllication.
2. To have DP account for share allotment , as no physiccal share to be issued and transacted anymore.
3. To Send refunds via ECS
After listing of the stock is done , it is permited to be trade in secondary market where buyers could buy the stock from the exisiting shareholder but not from the company. The stopck keep on trading every day several time hands change and titlte of ownership keep updated in the records of the comapny. In case of dividend , bonus , split a particular record date is finalsied and as on date the ownership belongs to whomever person is entilted to receive the credit of dividend , bonus and split may be he may sell off the share after the record date is crossed.
FPO stands for follow on public offer whereby a primarly listed compnay makes an additional public offer of it equity. In case the authorised capital of the company is not being fully issued in the capital market the compnay has the right to make an additional issue of public offer of the remaing portion of the authorised capital whereby passed intially or has been sanctioned later. This is done in case of need of capital in the company for several reasons such as development , acquisitions , research etc. When the authorised capital is sanctioned meaning the amount the company could raise from the capital market by issue of shares some company do not take the entire sum from the market by issuing total equity but keep a part of the authorised of equity and issue it later wqhen there is need of capital and that additional issue offering it's share to public is called FPO
The difference in getting allotment at IPO / FPO and buying it from the secondary market is that the price of allotment in IPO/FPO are more reasonable then the price at which the stock is traded in secondary market , so trader in order to encash short term profit apply for IPO/FPO and after getting allotment sell at secondary market to earn the difference in price.