What is IPO? Complete information about this is going to be told here. Do you also want to know about What is IPO?
So let us know what is IPO and how to invest in IPO? Should we invest in IPO or not ? If you keep up to date on the stock market , then you must have heard about IPO .
Often many companies issue their IPO. You must also be thinking about investing in IPO, but then you must be thinking that how to invest in IPO?
Read this article and know what are IPOs in the stock market and other important things related to IPOs .
What is IPO?
IPO (Initial Public Offering) is a process by which a private company can sell its shares publicly to the general public. This company can be a new or even an old company which decides to get listed on an exchange and hence it goes public.
The going public or going public of a company means that now the shares of this company can be issued to the common people and these people can buy and sell them in the stock market. A company can bring IPO more than once and it happens under the primary market.
If you want to know more simply, then it will be said that through IPO, the company collects funds and spends that fund for the growth of the company. In return, the people who buy the IPO get a stake in the company. Meaning when you buy shares of a company, you are the owner of the purchased part of that company.
Why does a company bring an IPO?
To reduce the debt of the company: When the debt of a company is high, then in this situation the company issues IPO. Companies consider it easier to pay off the debt by selling some shares of their company than to repay the loan by taking a loan from a bank. In this way the company also pays the debt and the company also gets new investors.
For Company Expansion: If a company feels that it is continuously developing and performing well in the market and needs expansion i.e. now the company has to increase its business in other cities also and for this extra resources are needed then this In this situation the company issues IPO.
Although the company can also take a loan from any bank, but the bank has to return the interest along with the loan amount. But if the company collects funds through IPO , then it does not have to return any kind of bank loan and does not have to pay any kind of interest.
Why Read IPO Prospectus:
The company issuing the Initial Public Offering also issues a prospectus for its IPO. It should be read thoroughly before making any kind of investment. In IPO prospectus, all the information about the company and IPO is given.
By reading the prospectus of the IPO, investors can get an idea of where the company will use the capital from the IPO and whether the company will be able to generate better returns or not.
Types of IPO
If you want to invest in IPO , then you should be aware of different types of IPO.
There are mainly two types of Initial Public Offering (IPO) :-
Fix Price IPO
Any company that is about to issue an IPO, discusses with the Investment Bank about the price of the IPO before issuing the IPO and decides the price of the IPO to be issued. Investors can subscribe to IPO only at that fixed price.
Book Building IPO
In this type of IPO, the company, together with the Investment Bank, decides a price band for the IPO. When the price band of the IPO is decided, after that it is issued. After this, the investor subscribes his bid from that decided price band.
How to Invest in IPO?
So friends till now we have known what is IPO and why IPO is issued. Now we will know how can I invest in IPO?
The IPO issuer opens its IPO for investors for 3-10 days. Meaning when any IPO comes, any investor can buy it within 3 to 10 days. Some companies keep their IPO issuance period for only 3 days and some keep more than three days.
You can invest in an IPO within these specified days by visiting the company’s official website or through a Registered Brokerage . If Fix Price is IPO then you have to apply for IPO at the same Fix Price and if IPO is Book Building then you have to bid on that Book Building Issue only.
What is the IPO Allotment Process – IPO Allotment
When the IPO opening closes, the company allots the IPO. In this process, the company allots the IPO to all the investors and after the IPO is allotted to the investors, the shares get listed in the stock market.
After listing in the stock market, shares are bought and sold in the secondary market. Unless the shares are listed on the stock market, you cannot sell them. Once the shares are listed in the stock market, the money and the shares are exchanged between the two investors.
Once listed, you can buy or sell shares according to the timing of the stock market.
All types of IPOs in India are supervised and monitored by SEBI (Securities & Exchange Board of India).