Nykaa Founder Falguni Nayar Becomes Billionaire Post IPO!
Paytm IPO flop may become uglier in days to come!
With this IPO News making headlines in November 2021, IPO is clearly making and breaking people.
It has for years, and it continues to!
Hence, it is indeed important to briefly understand these topics “What is IPO, IPO Definition, IPO News, How to invest in IPO?” and much more about IPO more than ever.
Yes, Initial Public Offering or IPO can be significant for a business. It is a process that allows a private company to become a public listed company. Simply put, it allows a private company to raise money from the public by getting listed on the Stock Exchange.
Now, a frequently asked question is “What is an IPO and how is it different from shares in the market?”
Well, as you know IPO allows a brand to welcome public investments in the brand. IPO includes the first-ever stocks to the public. The IPO is applied for in the primary market. At the same time, shares already listed in the stock exchange are purchased in the secondary market.
Similarly, an answer to “What are the difference between IPO and listed stocks?” would be that a listed stock has already gone through the process of an IPO and is listed on the stock market exchange.
Now, IPOs have been giving phenomenal results in the past few years. The 2021’s biggest hit has been Falguni Nayar founded Nykaa’s IPO which made her the second self-made Indian female Billionaire in the world. But at the same time, there are a lot of factors that one needs to keep in mind before investing in an IPO.
Initial Public Offering is not just a term but an actual offering made to the public by using the services for intermediaries called underwriters. So, the new shares are created and underwritten wherein the underwriter facilitate the process for a commission.
Now, the network of the underwriter includes investment banks, broker-dealers, mutual funds, and insurance companies. In a “Roadshow” before IPO, top executives offer the institutional investors to set a realistic price of the share.
Before you become an investor and put your hard-earned money into an IPO, understand the business of the company. Research is the keyword here. Red Herring Prospectus helps you with the same as it includes the company's income statements and other important documents. It helps one understand whether the IPO will be worth investing in. You should be aware of the kind of business the company is involved in.
The key to ensuring that your IPO has a higher chance of success is to shortlist them after understanding the business model and the promoter’s experience. It allows one to understand if the executives have the potential to drive the company towards new heights. A company must have a stable promoter group and top management.
Understand the company’s debt-equity ratio, company’s earnings per share (EPS), cash flow, return on capital employed, and other key financial ratios to ensure financial soundness before you decide on investment. At the same time, go through the Red Herring prospectus to ensure that you are well aware of the risk factors like litigation, etc which may affect the operations of the business in the upcoming days.
Once you are well aware of the threats that hurt your investment, it is important to define and make the investment based on the goals you have in mind. If it is solely to make sure that you want to invest in IPO, it is not a great idea. One must focus on investing in brands with good fundamentals and IPOs which are in sync with their financial goals and risk appetite.
Another guideline for beginner investors in IPO is to not decide to invest with borrowed funds with anticipation of quick gains. As we see in Paytm IPO’s case, it can go downhill. At the same time, one must not invest in an IPO on the first day after opening. They should wait for the second or third day and invest after assessing the public response.
To buy IPO, one needs an ASBA facility in their bank, which is mandatory for IPO bidding by the Securities and Exchange Board of India or SEBI.
You can go ahead and Log-in into your net-banking account
Visit the investments section, click on the IPO/e-IPO option.
Next, you need to fill out your depository details and bank account details to complete the verification process
A page will appear with the title ‘Invest in IPO’
You can now select the IPO for which you would like to apply
Enter the number of shares and the ‘bid price’ for which you wish to apply for.
Make sure that you read the ‘Terms and Conditions’ document before placing the bid
Confirm and place your order by clicking on ‘Apply Now
After successful approval, the required amount will be blocked in your bank account.
On allotment, the blocked amount will be deducted from your bank account and shared are credited into your Demat account.
We hope that you got an insight into "What is IPO" and other crucial aspects surrounding IPO or Initial Public Offering through this blog.
We would love to know your queries or thoughts about the IPO in comments section.
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