IPO: IPO stands for Initial Public Offering. Whenever a company sells its Share to Common Man then it is Known that Initial Public Offering. Every Company needs funds to Upscale its Business. So instead of Taking a Loan from the Market, it Sells some of its equity share to the public and gets funds for its business. This process is known as IPO or Initial Public Offering.
Who can Invest in IPO?
Any person who is having a Demat Account can Invest in IPO.
How Much Amount you can Invest in IPO?
You can Invest Easily in an IPO. Usually, IPO’s are open for 3-10 Days. Currently, the IPO of Every Company is Opened for 3 Days. The company itself decides the Share Price. Lot Size is also Decided Accordingly. The maximum price of a Lot is Less than Rs 15,000.
How can you invest in IPO?
Any investor Can Invest in IPO Through the official website of the company or Through the Registered Broker. You can Also Invest Through Mobile App. Common Retail Investor can not Buy More than Shares of Worth Rs 2 Lakh. I.e he/she can not buy More than 13 Lots.
How the Price of Shares is Decided in IPO
Before Filling for IPO Company Hires IPO Managers these IPO managers Do the Complete analysis of Company and do the Meeting with Promoters of Company, Existing Shareholders of Company. In that Meeting Minimum and Maximum Price Band of a Share is Fixed
Things to Remember while Investing in IPO?
1- Look at Draft Red Hearing Prospectus: Every Company Files DHRP with SEBI. In DHRP Company tells where they will Invest the Fund which they will get Through IPO. Along With Investor also knowns about the Risk Through DHRP
2- Where Company will Utilize the Fund from IPO: Most Companies use IPO funds in finishing the debt and to Increase the business. If Company does this then you will definitely get the return.
3- Understand the Business of the Company: Before applying for IPO investors should understand the Business of the Company. What are the growth Prospects in Company? If Business of company is good and there is a chance of Growth in Future. Then you can invest in that IPO.
4- Background of Promoter and Management Team: An Investor should know the Promoter of the Company. How he runs the Company in the past. Also What type of Management hew Hires. In a Company’s growth, Management plays an Important Role.
5- Capacity of Company in the Market: Company should have a good Business Model. If Company Performs well after the IPO then Investor would get a Good Return.
6- Strength and Strategy of Company: In DRHP company tells about its Strength and Strategy. Through this, you will get to know about the Position of Company in Industry.
7- Financial Health and Valuation of Company: In Its DRHP Filing company tells about its Financial Health and Valuation. You should look at the Balance Sheet of the Company. How Much Profit Company is Coming. Revenue of Company. Does the Profit is Increasing with Time or Not.
8- Compare with the Other Companies of the Same Segment: Investors should always compare the IPO Bringing Company to its peers. You should Compare the P/E Ratio of IPO Bringing Company and all the Existing Companies of the Segment. If IPO is Coming at High P/E Ratio than Other Companies then you should avoid investing in IPO.
9- Risk Factor: This is the Important Criteria if You are Investing in the IPO of a Company. You should know the risk involved in the Company. Risk Factor means that whether there is any Case is not Registered against Company. Business of Company will sustain in Future or not. You can About the Risk Factor through DRHP
10- Clear with Your Purpose of Investment: An Investor should Clear that for what purpose he/she is Investing in IPO. whether he/she is investing for Listing gain or Long Term Investment. Listing Gain Depends on the Current market Sentiment. Long Term Investment Depens upon Company Growth and Working of Company.
How Much Time it will Take for Share Allotment after IPO gets Closed and When Shares will get List in Share Market
After Public Issue gets Closed You will get a Share Allotment after 3 Working Days. Shares will come in your Demat Account after 3 Days. If we talk about Listing in Share Market then Share will be listed in BSE or NSE after 6 Working Days.
How does Share get allotted after IPO gets Closed
Suppose any Company Brings the issue of only 100 Shares. This issue is now Oversubscribed 2 Times i.e. it receives the bid for 200 Shares. Then Share Allotment is done through Computerized Lottery. For Example if any Investor bid for 10 Shares then he might get 5 Shares or full 10 Shares or No Share.
Does Share Listing on Excahnge after IPO deepnds on Market Mood
Yes, Share Listing Depends Upon Market Mood. If Market Sentiment is Positive Then Share will be List at Higher Price than IPO Price . This listing is known as Premium Listing. If Share List at Lower Price than the IPO Price. Then it is called as Discount Listing.
Investors Categories Under Which they can Invest in IPO
Reatil Investors– These Investors can Invest Upto 13 Lots or Upto 2 Lakh Rupees.
HNI– These are Termed as High Net Worth Individuals. They can Invest more than Retail Investors.
QIB– It stands for Qualified Institutional Buyers. These are The main Players of Stock Market. They Trade in High Volume in Share Market. QIB Includes Pension Funds, Mutual Funds, Insurance Companies and Investment Banks.
If IPO is Unsubscribed or Under Subscribed then what Happens
If any IPO is Unsubscribed or Under Subscribed then in that case Company can Roll Back it’s IPO. According to SEBI Rules if any IPO is Subscribed less than 90% Then it is Considered Fail.
New Age Companies i.e. Internet Based Companies are Bringing there IPO.
Last Month Zomato which is Online Food Delievery made itself Public. Zomato Bring Out it’s IPO From 14-16 July 2021. IPO of Zomato is Over Subscribed . Zomato IPO Subscribed 38 Times. Issue Price of Zomato was Rs 72-26. On Listing Day it was Listed at Rs 116. So per Share Investor gets Rs 40 Profit Per Share.
Why IPO are Getting So Much Subscription
Currently IPO are getting so much Subscription because Retail Investors are Increasing and also they are Getting Educating regarding Fundamental Analysis of Company. In Coming Days PAYTM and LIC are Bringing it’s IPO in Coming Days.
What SEBI is doing to increase the Contribution of Retail Investor in IPO.
In Current Scenario Retail Investors Contribution is Incresing in IPO. But this Number is Lower as Comparison to Total Subscription. To Incraese the Retail Investor Contribution SEBI is in Mood of Changing in Lot Size. SEBi is Planning to Reduce the Minimum Lot Size to Half of Current Lot Size. Currently One Lot Size is Rs 15,000 and SEBI is Planning to Reduce this to Rs 7,500- Rs 8,000