All that You Need to Know About IPOs

Published by Sharekhan Education | June 1, 2021

All that You Need to Know About IPOs

An IPO, also known as an Initial Public Offering, is a process by which a company can raise capital in the primary stock market by issuing shares for the first time. Through the process of IPO, the company can get the benefit of listing its shares in the stock exchanges and change its Private Ltd Company to Public. To offer an IPO the company takes the help of an investment banker who can manage all the processes related to launching an IPO like underwriting agreement, registration with SEBI, etc. Once the information disclosed to SEBI is deemed fit, it is allowed to launch an IPO.

A company would offer an IPO for several reasons, some of which are listed below:

1. Using the proceeds of the IPO for driving the future growth of the company such as investing in plant, property, and equipment, making acquisitions or fund the working capital requirement, repay loans, etc
2. Listing of shares in the market opens up a lot many opportunities such as discovering fair market valuation of the company through price discovery , ability to buy and sell shares in the exchange, and issuing of stock options (an employee benefit plan that gives workers ownership interest in the company through owning shares)
3. A publicly listed company gets more credibility as it follows corporate governance and due diligence, to adhere to the SEBI norms.
4. It can also pave the way for the future possibility of raising more money through shares that can be a much cheaper option compared to raising debt.

An investor who wishes to invest in the shares of an IPO should either read the disclosed information on the business from a prospectus issued by the company or follow ‘IPO flash reports’ issued by Sharekhan Research.

Some of the important points to look for in an IPO report or prospectus are:

1. Does the company have a fundamentally sound business?
2. Does the company have good financial health?
3. What is the purpose for which company is raising the money?
4. What is the standing of the company against its peers?
5. Is the company offering shares at a reasonably good valuation?

How do you apply for an IPO in a few easy steps?

1. Log on to the Share khan app
2. Click on the hamburger menu and under the Equity section select IPO option
3. From the list of current IPOs, select the IPO of your choice.
4. Fill in the application form with details such as Demat account number, Category, number of shares you wish to apply, UPI ID, read and accept the terms and conditions and click on the ‘Submit’ button
5. Re-check the filled-in details and click on the ‘Confirm order’ button.
6. Once Sharekhan receives details on your payment, you will receive a mandate to authenticate your bid amount.
7. Enter your UPI pin to authorize the payment. You will soon receive a confirmation about the blocked amount, and your IPO order will appear on the order book.
8. Click on IPO order if you wish to modify or cancel the order.

Simple isn’t it? For watching a video on filling the IPO through the mobile app, click on the following link https://youtu.be/KAFfeBT7xeA

If you would like to understand more about the concept of ‘investing in IPO and stocks’, then register for one of our free “Power Money Workshops”. And join our investing education program called “Stock Investor” to polish your investing skills. Not only do we teach you the step-by-step process of identifying fundamentally sound stocks, but you also learn how to invest like a professional. So, come and experience it yourself!

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