INTRODUCTION ON IPO
IPO full form is initial public offering in which the shares of the company are sold to institutional investors and majorly the retail investors. The basic IPO meaning is that it is a public offering that can be used to raise capital for different companies and to make sure that the existing holdings or the future capital are raised by becoming publicly traded. The stock market stimulates a minimum free float in both absolute terms and proportions. Though IPO is accompanied with many benefits, it also has some costly requirements like the banking and legal fees and all the required fees to disclose important information. Investing in the share market helps in raising capital that is IPO.
POINTS ON HOW TO INVEST IN IPO
There is a particular IPO process that the investor should follow while investing in an IPO. A particular procedure is supposed to be followed while investing in this offering which has a few steps to keep in mind. Nowadays, most people prefer to invest in the upcoming IPO online and the steps to be followed are-
- The first step is to make a decision in which one has to choose for the IPO that they wish to apply for and a very easy way to decide is by going through a few companies’ prospectuses that can be found on the security and exchange board website. The prospectus gives clear detail about the business plan and the followed purpose.
- The next step is to arrange the funds for the account. For the people who do not have sufficient funds, few of the banks and companies can lend the money at a particular interest rate.
- A Demat account is a pre-requirement to put in an application for IPO. Demat account is a facility to store financial securities and stocks electronically. This can be linked with a trading account by submitting a few of the documents like the PAN card, Aadhar card, and identity proofs.
- The application process can be followed by using a trading account or the existing bank account. Once the Demat account is activated, one needs to be aware of the various facilities which are compulsory to complete the IPO application process. The facility of ASBA eliminates all the needs for physical documents and drafts.
- While applying for the shares, one needs to bid as per the lot size which is mentioned in the corporation’s prospectus. The lot size is the minimum quantity of shares that one has to apply for while applying for the IPO. A bid price is also set in which the upper price is called the cap price and the lowest price is the floor price. The bidding can be revised during the application of IPO.
- The demand for the number of shares may or may not exceed the normal share market demand. A possibility also occurs in which one may get fewer shares than what they aimed for or sometimes, they may fail to get any shares.
The other available features of IPO include the Allotment status, Grey market premiums, and the performance tracker. The ultimate USP of an IPO for investors is the enormous potential to earn profit through growth prospective of companies. Investing in an initial public offering is a multifaceted process and an investment purely based on luck without ground work will not yield the desired profits. So, pick the scrip or company after a thorough audit and understanding, if you are looking for returns that speak for themselves.