What is Initial Public Offering (IPO) Full form of the IPO Process of IPO Allotment of IPO How to apply in IPO
Table of Contents
What is Initial Public Offering (IPO)
An Initial Public Offering [IPO] refers to the process of offering shares of a private corporation to the public in new stock insurance. An IPO allows a company to raise capital from public investors.
Purpose of an Initial Public Offering (IPO)
Companies and Startups typically issue an IPO to raise capital to pay off debts, funds growth initiatives, raise their holding or create liquidity by selling all or a portion of their private shares as part of the IPO.
An IPO or the Initial Public Offering is the process through which a privately held company becomes a publicly-traded company by providing its shares in the stock market for the first time. Through the IPO, Investors in the stock market can invest in the company. IPO helps the company listed on the stock market exchange which is also known as “going public.”
An IPO enables you to be a part of a company’s success journey. It can be quite profitable to apply for a company with good potential and the ability to perform well in the future.
Subscribing an Initial Public Offering (IPO)
When anyone Bid or subscribe to an IPO, means he she or they agrees to invest or purchase shares of the company at the offering price before it begins listed or starts trading on the secondary market. The Initial offered price is determined by the Registrar of the company based on the past present and future potential performance of the company.
Before subscribing to an Initial Public Offering (IPO)
While subscribing to any public offering (IPO) one should do his homework which means you have to study the background of the company, financial strength, their past performance, nature of business, future goals, objectives, end-use of the fund drawing from the market all these things one can get in the Red Herring Prospectus (RHP) available on NSE/BSE Website and before bidding one can consult to is financial advisor before investing.
How to Apply in Initial Public Offering (IPO)
One must have a Demat cum Trading account before applying to any issue. Demate account is used to store the shares and other financial securities whereas trading accounts are used to transact those securities in the market. one can open this account by submitting an Aadhaar card, Pan card, financial statement, and Photograph.
After having a Demat account an investor can apply through its Trading account and Bank account through ASBA (Application Supported By Blocked Account) facility. It is mandatory for every applicant. In this method, the amount is blocked by the applicant’s bank according to the quantity bid by the investor. For retail investors, it is capped at Rs 2,00,000(Two Lakh Rupees). The ASBA application is made available in both Demat and physical form to the Investor. No other mode is made available to the investor to apply in the issue like through Cheque and Demand Draft. While applying to the issue one must put the Demat account, Pan Card, and Bank account detail correctly to participate in the subscription. The investor has to Bid according to Lot size and the Price band as mentioned in the RHP with the stipulated time.
Allotment
After the bidding process is done the allotment process start. Here the one who is lucky gets the allotment. This process is done by the machine randomly. The investor gets the CAN(Confirmatory Allotment Note)in their registered Mobile Number and Email Address within five to six-day of the IPO process. After the stock has been allocated it gets credited to the investor’s Demate account.
Once the share credit part is done the investor has to wait for the listing of the share to the stock market for trading. This process is normally carried out after six to seven days of the IPO process. While the Unlucky Investor gets their amount unblocked in their account after the allotment process is over. In both cases, the investor gets the Confirmation through Email and SMS else the investor can also check their allotment status to the Registrar Website just by putting the Application Id or Pan number of its.
3 thoughts on “Investment in the stock market: Initial Public Offering (IPO) Method”