The initial few fundamental concepts that investors must learn about before they begin their stock market investments are things like IPO and FPO .
There is also the option of corporate bond issuance through which a company can raise money.
What Is IPO?
IPO or ‘Initial public offering’ is when a company chooses to announce that it is going public for the first time. Going public, in the world of financial markets, means that the company will now offer its shares to the public at large while also being ready to get listed on the majority of stock exchanges in the country. We have two exchanges: National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
IPO Process in India
As an investor, you must have endeavored to find a suitable opportunity for investing in IPOs.
To start the initial public offering process, the company will take the help of financial experts ,
This IPO step involves the preparation of a registration statement along with the draft prospectus, also known as Red Herring Prospectus (RHP). Submission of RHP is mandatory, as per the Companies Act
Verification by SEBI:
Market regulator, SEBI then verifies the disclosure of facts by the company. If the application is approved, the company can announce a date for its IPO.
Making An Application To The Stock Exchange
The make an application to the stock exchange for floating its initial issue.
Pricing of IPO
The company can now initiate pricing of IPO either through Fixed Price IPO or by Book Binding Offering. In the case of Fixed Price Offering,
Allotment of Shares
Once the IPO price is finalised, the company along with the underwriters will determine the number of shares to be allotted to each investor. In the case of over-subscription, partial allotments will be made.
Benefits of investing in IPOs?
Now that we understand what IPOs are, let us review why you as an investor should invest in them. Here are some of the primary reasons why investing in IPOs might be a beneficial move for you:
By investing in the IPO shares of a company, you as an investor can gain a crucial advantage. By making the right IPO investment at an early stage,
IPO investments are also a good option for investors looking for long-term investments in the market. This is because by investing in the IPO shares of a company,
IPOs are also a more transparent form of investment since their price per security has to be explicitly stated for all public investors.
How Do You Invest in IPO Shares?
In order to invest in IPO shares, you must first open a demat account as well as a trading account. The trading account allows you to trade in the shares of your choosing while the demat account holds your purchased shares in an electronic format.
An important thing to note is that only demat accounts are typically required to purchase shares in an IPO.