Green Shoe Option

Recently, the Food Corporation of India (FCI) is set to raise short-term debt of Rs. 50,000 crore from scheduled banks for a three-month tenure, with a green shoe option to mop up an additional Rs. 25,000 crore.

Meaning of Green Shoe Option

  • A green shoe option is a clause contained in the underwriting agreement of an IPO.
  • This option permits the underwriters to buy up to an additional 15% of the shares at the offer price if public demand for the shares exceeds expectations and the shares trade above their offering price.
  • It is also known as an over-allotment provision.
  • Introduction in India: ....
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