IPO

What is an IPO?

An initial public offering is a proposal by the issuing company to the public to buy their stakes. This way, they intend to go public by getting listed on the stock market exchange. The transition from the private to the public company helps them to raise capital and fully realize their investments. A company usually opts for an IPO when it has reached its growth stage and ready to handle its responsibilities towards public shareholders. Some examples of the biggest global IPOs are Alibaba Group in 2014 raising $25 billion, SoftBank Group in 2018 raising $23.5 billion. In terms of Indian IPOs, Coal India’s in 2010 raised Rs. 15475 crores and Reliance Power’s IPO in 2008 raised a total of Rs. 11700 crores.

What are the benefits of investing in an IPO?

Early access to quality stocks

From the historical performance of the company, investing in the quality of stock at the IPO price level can be lucrative in the long run. For example: in India, there have been many IPOs in which governments sell their stake directly to the public.

Increased Transparency in prices

The process is strictly monitored by SEBI that works in the interest of retail investors. They compel the companies to follow high standards of disclosure and transparency. Also, the price is mentioned in the IPO order document.

Information symmetry

The information provided to the institutional investors is the same as given to the retail investors in the form of company prospectus. This is not true while investing in the secondary market where the big players have an edge over others.

Higher returns

The IPO price can be the lowest price the high-growth company can trade at. This may be the discounted price at which the IPO is issued and if invested it can yield high returns.

Why does a company issue an IPO?

The primary reason is to access investment from the general public.

Increases the chances of better credit borrowing with enhanced transparency.

The listed company can again raise capital from the market with FPO or first public offering.

It becomes easier for the company to attain high skilled employees by providing ESOPs in the public company.

Helps the company in advancing its prestige, public image, and exposure which will ultimately help in revenue generation

Frequently Asked Questions

How are IPO investments taxed?

When the IPO shares are allotted to you, the capital gains are taxed once you sell them. These taxes on the capital gains can be short-term or long-term depending on the time horizon you have kept the IPOs.

When to sell IPO's allotted shares?

While there is no full proof winning strategy, however for an excellent quality stock the listing day gains can raise up to 70% to 80%. You can stay in the stock for a long time investment horizon if you see the potential in the company.

How many investors fail to get shares on IPO?

An IPO can be oversubscribed or undersubscribed, depending on the number of subscriptions. It has been generally noted that popular stocks are subscribed to much more than available stocks and many investor fail to get any shares. For example: IPO was subscribed over 112 times, making it the most successful share sale.

Can I change/revise my bid?

Yes, you are allowed to change or revise the price or quantity of the bid simply by filling the modification form. You can also do the same by logging into your trading account. This, however, should be done within the date of closure.

How many days an does IPO remain open for the public?

Under Clause 8.8.1, Subscription list for public issues, IPO shall remain open for at least 3 working days and not more than 10 working days.

What is the difference between a book building and a fixed price issue?

Issuing an IPO can be done via the process of book building or fixed price or a combination of both. In fixed price, the price at which the securities are allotted or offered is predefined to the investors. While in book building, an indicative price range or band is given to the investor for bidding.

Can IPO be bought on margin?

Yes, if an investor is short on the required capital, they can take margin from their broker. Here, the investor only has to pay a small margin amount, and the remaining is funded by the lender.

Where to find IPO prospectus?

One can find the IPO prospectus on the SEBI’s website under Filings> Public Issue. Along with this, several other important information documents like Draft Red Herring prospectus, Red Herring Prospectus, and Final offer document can also be found on this website.

How to apply for an IPO?

You can easily apply for an IPO if you have a trading/demat account through online and offline process. In online mode, you have to log in to your account and enter the number of shares and its cut off the price you want to bid. Through offline mode, you can submit the ASBA application to the banking branch designated as Self Certified Syndicate Bank.

IPO Blogs

LIC IPO - Check Issue Date, Price, Lot Size & Details

Life Insurance Corporation of India (LIC) is the largest player in the life insurance segment in India. Its size is so significant that every 3 out of 4 life insurance policies sold are from LIC. The insurance giant has been around since 1956 and currently serves over 250 million people - more than a sixth of India’s pop....

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Facts to be studied before investing in an Initial Public Offering

The IPO (initial public offering) market in India has turned out to be very dynamic over the last few years. In a situation where many start-ups or established companies are coming up with an IPO, it turns out to be extremely vital to analyse the basics and different other factors of the IPO before hopping into the....

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What is an IPO and how does it work?

An initial public offering, or IPO, is the very first sale of stock issued by a company to the public. Prior to an IPO, the company is an unlisted company, with a relatively small number of shareholders made up primarily of early investors (such as founders, their families and friends) and professional investors (suc....

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Disclaimer The information contained in this file is provided for informational purposes only, and should not be construed as legal advice on any matter. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this file to the fullest extent permitted by law. Every effort is made to avoid errors. In spite of that, errors and discrepancies may creep in. It is expressly stated that neither Findoc Investmart Private Limited nor any of the contributors of updates will be responsible for any damage to anybody on the basis of this document. Readers are, therefore, requested to cross check with the original sources e.g. Government publications, Orders, Judgments etc., before taking any action or making any decision. These services are being provided through our group companies Findoc Capital Mart Pvt Ltd and Findoc Finvest Private Limited

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Important Message The information contained in this file is provided for informational purposes only, and should not be construed as legal advice on any matter. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this file to the fullest extent permitted by law. Every effort is made to avoid errors. In spite of that, errors and discrepancies may creep in. It is expressly stated that neither Findoc Investmart Private Limited nor any of the contributors of updates will be responsible for any damage to anybody on the basis of this document. Readers are, therefore, requested to cross check with the original sources e.g. Government publications, Orders, Judgments etc., before taking any action or making any decision. These services are being provided through our group companies Findoc Capital Mart Pvt Ltd and Findoc Finvest Private Limited

Attention Investors
  • 1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.
  • 2. Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge.
  • 3. Pay 20% upfront margin of the transaction value to trade in cash market segment.
  • 4. Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month.
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries forrefund as the money remains in investor's account."
Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactionsin your demat account directly from NSDLon thesame day.....issued in the interest of investors."
KYC is a one-time exercise while dealing in securities markets-once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary." | (As instructed by SEBI, We hereby declare that we do engage in proprietary trading in all segment across the exchange.)
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