An initial public offering (IPO) refers to the process of offering shares of a private corporation or company to the public in a new stock issuance.

Through the process of IPO, a privately held company will get transformed into a public company. The public share issuance allows a company to raise capital from public investors. 

●     Entering into IPO is a huge step for a company. It gives them the ability to raise a lot of money along with the opportunity to grow and expand. 

●     When a private company is matured enough to accommodate public stakeholders and face the stubborn exchange regulations they will express the interest in the public.

●     Companies can qualify for IPO with strong fundamentals and proven profitability potential along with market competition and their ability to meet the listing requirements.

● The increased transparency and share listing credibility play a key role in obtaining better terms when seeking borrowed funds.

●     IPO’s are priced through underwriting due diligence.

●     When a company goes public, the previously owned private share ownership converts to public ownership, and the existing private shareholders’ shares become worth the public trading price.

●     The number of shares the company sells and the price for which shares sell are the generating factors for the company’s new shareholders’ equity value.

5 Simple Steps to Invest In An IPO

1. Research

Before investing in an IPO the investor must ensure they had gone through the prospectus. It helps the investors to form an informed idea about the company’s business plan and its purpose for raising stocks in the market. 

2. Opening a Demat-cum-trading account

You can only invest in an IPO if you are a Demat-cum-trading account holder. A Demat account can be opened with a PAN card, Adhar card, bank account details, and other identification proofs. The Demat account will help the investors to keep their shares and securities in electronic format.

3. Application 

An individual can apply for an IPO through his existing bank account or using a trading account. For applying through a bank account, it is mandatory to enable 

Application Supported by Blocked Account (ASBA) facility. ASBA is an application that enables the banks to arrest funds in the applicant’s bank account.

4. Bidding 

Bidding is necessary when applying for shares in an IPO. This is carried out according to the lot size quoted in the company’s prospectus. A lot size is the minimum number of shares an investor has to apply for in an IPO. And also there will be a price range for applying, so investors have to bid for at least 1 lot within the price range.

5. Allotment 

If a popular company comes up with IPO there will be a high demand for their shares. If applications received are more than available, then shares are allotted to the investors randomly. Also, there are situations when the investor can’t get the number of shares he had demanded. In these cases, the banks unlock the arrested funds either entirely or partially.

The investor receives a Confirmatory Allotment Note (CAN) in 6 working days if they get the number of shares they demanded. After the shares have been allotted, they are credited to the investor’s Demat account.

Once every step is carried out successfully the investor has to wait for the listings of the stocks in the share market. It is generally done within seven days after the shares are finalized.

List of recent IPO’S in 2020

UTI AMC 

Bector Foods Limited or Cremica IPO

Burger King IPO

Gland Pharma IPO

Equitas Small Finance Bank IPO

Mazagon Dock Shipbuilders IPO

Antony Waste Handling IPO