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Lock In

Updated on March 18, 2023

IPO is an excellent mode for a company to raise capital and increase public participation in the share capital. The price for the shares is determined based on the demand for the shares and the price set by the company along with the underwriters. Investors of the IPO also have to adhere to the lock-in period as per the regulations of the Companies Act, 2013 and SEBI.

Meaning of Lock-in period

The term lock-in period refers to the period of holding the shares or securities issued by a company for a stipulated period of time. During this period, investors cannot dispose off or sell their holdings in the open market. This provision is levied to safeguard the interest of retail shareholders in the event of major offloading of shares by institutional investors in the open market.

Important points to note about Lock-in period

Lock-in period allows a company to organize its finances and stabilize them before its shares are traded in the open market.

The applicable lock-in period is different for different classes of investors as power SEBI regulations. Promoters have to adhere to a lock-in period of 3 years, anchor investors on the other hand are required to meet the lock-in period of 90 days.