With the avail of an IPO, companies are able to raise fairness capital by issuing shares to the general populace. This can besides be done by selling off the shares of the existing shareholders without raising any new capital. A company that offers shares to the public is in no room obligated to repay the capital to the investors ( public ). The company offering its shares is referred to as the issuer. The issue of shares is done with the avail of investment banks. once the IPO is done, the shares of the company are traded in the open market. These shares can then be further sold by investors through tradings in the secondary market.
What is the need for an IPO?
IPO is an avenue through which companies can access capital and grow. The main aim of an IPO is to raise money by borrowing through the publish of shares to the public. This is known as the first public invitation in the store markets and therefore the name IPO. Buying these shares allows the investor an ownership in the company in accordance with the value of the shares owned.
The process of an IPO in India
a. In India, it is the Securities and Exchange Board ( SEBI ) that regulates the march of an IPO and companies hoping to issue shares through an IPO have to first register with SEBI
b. A company must submit the necessity documents with the SEBI which then is analysed and is approved alone when the SEBI is convinced
c. While SEBI evaluates the application, the company is required to prepare its course catalog, stating that the approval from SEBI is pending
d. On getting the approval from SEBI, the company is required to determine the partake price of the shares to be issued and disclose the act of shares it plans to issue
f. The company must decide between the two types of IPO issues
one. Fixed Price IPO is one where the company decides in promote the price of the shares
two. Book Building IPO is where the company provides a image of prices and there is a bid for shares within that price scope.
g. The shares are made public once the company decides the type of IPO they want to go with. The interested investors submit their applications and once the party receives the subscriptions from the public, it allots the shares
h. The company immediately lists the shares on the stock market and post the issue in the primary market, it gets listed in the secondary commercialize. These are then open for trade on a daily business .
How to Buy Shares from an IPO?
Step 1: You may acquire the forcible application human body from a broker or a distributor or a bank branch. The lapp can be accessed on-line
Step 2: You can then fill the mannequin with your details, both personal and bank and demat score refer
Step 3: Provide your sum investment amount
Step 4: The shares will be allotted within 10 days from the date of closure ( of the extend )
Important considerations before an IPO subscription
It is crucial to know of the market dynamic before investing in shares. Read the course catalog issued by the company and go throughout the fiscal details. These will shed fall on the amount of money the party intends to raise and the types of shares they plan to issue. It is knowing to besides understand how the party plans to use the money raised from the IPO and its expansion plans. All these will help an investor make an informed decision .
The Risk and Reward
When you subscribe to a plowshare during an IPO, you become one of the first gear shareholders of the company. As the party flourishes, the plowshare price will rise and you will stand to profit. But there is besides the risk of the standard markets. The returns on your investing will depend on the growth potential of the company and if the company fails, you will risk losing your money. peculiarly in the encase of unlisted companies, one has to be identical careful as these companies are not required to publish their financials and therefore, you can ’ t analyze their past performance .
IPO investments carry the gamble of market fluctuations and must be undertaken after careful consideration. If you are uncertain about investing, visit ClearTax where we have a list of handpicked investment options for you to pick from.
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