ABC Limited came out with an IPO of 10,00,000 shares, including 4,00,000 shares as offer for sale by an existing investor @ ₹ 200 each. 35% of the issue was reserved for retail investors who were given a discount of 5%.

CS Professional · Capital Commodity and Money Market · PYQS · December 2017
ABC Limited came out with an IPO of 10,00,000 shares, including 4,00,000 shares as offer for sale by an existing investor @ ₹ 200 each. 35% of the issue was reserved for retail investors who were given a discount of 5%. The Company incurred an expense of ₹ 70 lacs in completing the issue. Calculate the net amount received by the company from this IPO.

Answer & Explanation:

Total Issue Size = 10,00,000 Shares Price Per Share = ₹ 200 per Share Shares reserved for retail (35%) = 3,50,000 Shares Discount to be given to reverse shares @ 5% on ₹ 200 i.e. ₹ 10 per share amounting to ₹ 35,00,000 Total Proceeds without Considering Discount to Retail Investor (10 Lacs x 200) = ₹ 20,00,00,000 Less: Discount to Retails Investor = ₹ 35,00,000 Net Proceeds = ₹ 19,65,00,000 Less: Expenses = ₹ 70,00,000 Funds Received by the Company = ₹ 18,95,00,000 Less: 40% to be given to the existing investor = ₹ 7,58,00,000 Net Receipt of Funds by the Company = ₹ 11,37,00,000

Topics: Capital Market

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