Complete Initial Public Offering (IPO) Guide

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An Initial Public Offering (IPO) refers to the process through which a company raises capital by issuing shares to the public for the first time, i.e. primary market. A company can come up with an IPO for various reasons like funding expansion, access to capital, goodwill, growth, diversification, etc.

An IPO is an important step in the history of a company as a privately-held company becomes a publicly traded entity through the process of an IPO. An IPO offers the first chance to investors to invest in the shares of the company, after which the shares are listed in the secondary market from where traders/investors can buy and sell shares among themselves.

The IPO process involves various steps like selecting an investment bank or an underwriter, due diligence and filings, pricing, valuation, and many more steps after which a company issues a prospectus and goes public. The regulatory authority, Securities and Exchange Board of India, (SEBI) scrutinizes each application for an IPO by the company carefully and after ensuring that all the eligibility criteria have been fulfilled, the company is allowed to go ahead with the issue.

Once the IPO is finalized, the company along with its underwriters determines the number of shares to be allotted in total. In case the issue is over-subscribed, partial allotments are made. Investors are notified if an allotment of shares has been made to them or not.

According to data submitted by ibef.org, “In 2020-21, India witnessed a significant rise in start-ups and established private companies joining the IPO league. The recent Global IPO trends by EY reveals that IPO volumes increased 163% in H1 2021, while its proceeds grew 245% YoY.”

Continuing the high momentum of IPOs, the year 2021 has seen an increasing trend of companies going public and garnering massive public attention. As an investor, you stand a great chance to earn from the bumper listing gains if you pick the right IPOs.

Various companies like Zomato, CarTrade Tech Limited, Krsnaa Diagnostics Limited, Tatva Chintan Pharma Chem Limited, Rolex Rings Limited, Devyani International Limited, GR Infraprojects Limited, India Pesticides Limited, Nazara Technologies limited among the others came up with an IPO this year.

In a recent IPO of India’s leading food delivery and restaurant discovery platform, Zomato, there was a lot of market frenzy created as the company went on to raise about Rs. 9,400 crore (US$ 1.27 billion), and ended up receiving applications worth Rs. 3.5 lakh crore (US$ 47.13 billion). In July 2021, Zomato was listed on the stock markets with50% premium to its issue price of Rs.76.

An IPO is considered to have a successful listing if the company’s market capitalization is equal to or greater than the market capitalization of other companies who are its competitors in the industry.

Investors look forward to investing in companies that are able to demonstrate business excellence and offer sustainable growth to the shareholders in the long run. An IPO is a lucrative investment opportunity and investors can gain crucially from IPOs and even reap high dividends in the years to come.

If you wish to apply for an IPO, you need a trading and demat account. To open a Trading & Demat account, you need to submit some documents like your Aadhar Card Number, PAN Number, address and other identity proofs. Various intermediaries and stockbrokers facilitate the opening of Demat account for potential investors.

mastertrust’s simplified and transparent platform facilitates opening of a trading and demat account with utmost ease and convenience

After undergoing a primary verification process and submission of personal details, your account will be opened and you will get access to all its features tobuy and sell securities online. mastertrust’s platform is completely secure, simplified and also provides you an option of real-time tracking of market movements.

Once you apply for an IPO, your amount will be blocked according to the application supported by the blocked amount (ASBA) facility that allows banks to block money at the time of placing bids by investors. Now, you are required to bid a price from the price range decided by the company and your bid amount is blocked by the bank until the final allotment.

On completion of all the aforesaid steps, shares may be allotted to investors depending on the demand for the IPO in the market. If you get a full allotment of shares, you will receive a confirmation allotment note (CAN) within 6 working days from the closure of the IPO. Once the shares of the company are listed on the stock exchange/s, you can trade in them as per your wish.

For expert assistance on how to invest in IPO, IPO investment, upcoming IPOs, contact mastertrust.

mastertrust also has a plethora of services to choose from that allow instant and secure trading.