What is IPO: Complete information for new investors
With the popularity of IPOs in the stock market, many young investors are curious to know what they are and whether they are a good investment option or not. The stock market in India is running at its all-time high and will reach new highs in the future too. In this blog, we will understand the IPO in detail.
Major IPOs of this year
The IPOs were Mankind Pharma Ltd.,Netweb Technologies India Ltd.,
Concord Biotech Ltd., India Shelter Finance Corporation Ltd., and RR Kabel Ltd., which has been in the news for its excellent performance and rising share price,. Although IPOs should be understood if you are new to the stock market,.
what is IPo?
Private companies make initial public offerings (IPOs) of shares to the public for the first time through the stock exchange. Companies benefit from IPOs as it gives them a chance to increase their market cap and raise funds to improve the firm.
A private company turns into a public company after the IPO is issued, which means the general public owns the equity shares of the firm. An IPO is essential to helping a business grow and raise funds.
When it comes to IPOs, the term subscription refers to the number of times people have bought shares of the company. For example, if the company was selling one thousand equity shares but bids came in for two thousand shares, it means the issue has been subscribed to twice.
Not all bidders will be able to get Rs 1000 to participate in the company’s IPO. This is IPO allotment. The company releases the allotment list after the IPO period is over.
The company set the share price and lot size for customers before the IPO. Lot size refers to the minimum number of shares an investor must purchase to protect the equity of the company.
About IPO allotment and subscription
The most important thing in a first public offering is the IPO subscription status. The above-mentioned IPO subscription is the number of times an issue has been subscribed to by the public.
The IPO membership status indicates the status of your investment. When it comes to larger companies, subscriptions on the first day often double or triple the issue size. Membership status tells whether you can join the company or not.
This is where IPo allotment comes into play. Once you invest, you have to wait a few days to see if you get any shares of the company or not.
IPO allotment often happens a day after the issue closes. If you are not given any shares, you will get the money back. Otherwise, the shares of the company will be credited to your demat account. The allotment of shares for a company is done by the IPO registrar.
IPO Price Band and GMP
The issue price of an initial public offering refers to the price at which a company’s shares will be sold before trading begins on a public exchange. Offering price is also a term.
But the issue price is very different from the price band. The IPO price band shows the price range of shares eligible for customer bid. The company and the underwriters of the issue set the band price, and each investor’s price may be different. The costs for qualified institutional investors will be different from the costs for retail investors.
Gray Market Premium (GMP) What can a company’s IPO be like? The GPM IPO of the company is issued before its listing on the stock market. The premium is the difference between the issue price of a company and the trading price of the shares in the gray market.
How do I invest in an IPO?
The biggest concern when making an IPo purchase is having an account at the brokerage or mobile app that handles IPo orders. During an IPO, one can buy from their stock broker or underwriter (IPO manager bank).
Also, you need to maintain a demat account with Motilal Oswal, Sherkhan, HDFC, Kotak, ICICI, and other brokerage companies that host most of the IPO orders in India.
Advantages and disadvantages of investing in IPO
A major advantage of an IPO is that it helps a company raise large sums of money, which gives it a chance to expand. Customers can see good returns on their investments. As the company and its revenues grow, share prices also increase.
One disadvantage of investing in an IPO, however, is that the investments are often large and risky. Companies set the IPO lot size and share price, allowing customers to invest in lots. Also, investing in the stock market carries a risk factor as there is no guarantee of returns.
Good information sir 👍