Important keywords: Initial Public Offering (IPO), Underwriting, Raise capital, Business expansion, Repay debts, Acquire companies, Reward stakeholders, Shareholders, Invest.

Introduction:

It is a process where shares are assigned to underwriting firms during an initial public offering (IPO) and then distributed to the general public. In this article, we will discuss the concept of allotment of shares and how it works in India.

Headings:

1. What is the Allotment of Shares?
2. How does Allotment work in an IPO?
3. Reasons for a Company to Issue New Shares
4. Benefits of Allotment of Shares
5. Conclusion

What is the Allotment of Shares?

It refers to the process where shares of a company are assigned to underwriting firms during an IPO, and then the remaining shares are distributed to the general public. The underwriting firms are allotted a specific number of shares to sell to the public.

How does It work in an IPO?

Before the shares are made available to the public, the company issuing the shares appoints underwriters. The underwriters agree to purchase a specific number of shares at a set price and then sell them to the public. Once the underwriters have been allotted a specific number of shares, the remaining shares are then allocated to other firms that have participated in the IPO and have won the right to sell them.

Reasons for a Company to Issue New Shares:

There are several reasons why a company may choose to issue new shares, such as raising capital for business expansion, financing operations, or repaying short or long-term debts. Companies can also issue new shares to fund an acquisition or reward existing shareholders.

Benefits of Allotment of Shares:

It provides companies with a way to raise capital for business expansion, financing operations, or repaying debts. Shareholders can also choose to purchase new shares in proportion to the value of cash they would receive as dividends. Allotment of shares also benefits the underwriting firms that are allotted shares, as they have the opportunity to sell them to the general public.

Key takeaways:

• It refers to the portion of shares that are allocated to an underwriting participant during an Initial Public Offering (IPO).
• Companies issue new shares to raise capital for business expansion, finance operations, repay debts, acquire other companies, or reward existing stakeholders.
• Existing shareholders can purchase new shares in proportion to the value of cash they would receive as dividends.

Conclusion:

It is an essential process in the IPO of a company. It allows underwriting firms to purchase a specific number of shares, and the remaining shares are then distributed to the general public. Companies can issue new shares to raise capital, reward shareholders, or fund acquisitions. Allotment of shares benefits both the company and the underwriting firms.

Read More: Notification No. 11/2022 – Integrated Tax (Rate): Rescinds notification No. 47/2017- Integrated Tax (Rate)

Official Income Tax Return filing website: https://www.incometax.gov.in/iec/foportal/
Official GST common portal website: https://www.gst.gov.in/