IPO stands for ‘Initial Public Offering’ that are the public shares issued by any first-time listed company in the stock market. IPOs are issued by the companies when it seeks to raise funds from the public or to get their shares listed on the stock exchange for the first time. In both cases, the general public is made enable to buy and sell their shares on the NSE and BSE. The IPOs are a great way for many companies to go public through the help of investment banks that take cares of all the processes. In this blog, you can check the IPO details, invest in them, make a profit, and some easy ways of investing.
Why do companies issue IPO?
Companies issue IPO due to the following reasons.
- To raise money from the public market.
- Increase the liquidity of the stocks by getting listed on the exchange.
- Increase the credibility and brand value of the company.
- Creating multiple financing opportunities
Benefits of investing in IPO:
Check out some of the benefits of investing money in an IPO in the stock market.
- First mover advantage: When reputed and long-playing companies list their IPOs, there is a very good chance of them being listed on the exchange for many years. This gives you a head start to purchase the shares at a low price which might go up very soon after trading in the secondary market.
- High returns: Any companies which are planning to list on the exchange are surely eyeing a scale-up, and their prospects are good. This means that you can make high returns trading in that stock once you pick it at the start at a lower band price.
- Listing gains: Listing gains is a concept which means that when the opening price of the listed company stocks is higher than the allotment price. You can get these valuable listing gains by investing in IPOs.
However, you should note that investing in IPOs doesn’t necessarily mean getting profit. Instead, you should check the market forces and move wisely while investing in the stock market.
How to apply for an IPO?
You can apply for the IPO allotment by the ASBA facility that is available with your bank. Check out the steps through which you can apply for an IPO online through your bank.
Step 1: Log in to your net banking screen through your user ID and password.
Step 2: On the request tab, scroll down and go to IPO/ Rights Issue option.
Step 3: On the upcoming screen, you can check the list of IPOs that are life. Select and click on ‘Apply’ for your preferred IPO.
Step 4: The next screen will be a form that will ask for details regarding the IPO. It includes the number of shares for bidding, your bid price, date of birth and more. Some form sections would be pre-filled by the bank, such as name, PAN, bank account name and number and more.
Step 5: Once you proceed, there will be a confirmation message asking for your final confirmation for the amount to be blocked. Check the details again and agree to the T&Cs and submit the IPO application.
Accounts required to apply for IPO Online:
You would need some basic accounts to apply for the IPO online. These are given below.
- Demat Account: This is a mandatory account where your electronic shares would be stored.
- Bank Account: It will be your bank account from where you can transfer the money through the ASBA facility provided by the banks.
- Trading Account: To invest in an IPO online, you need a trading account. You can open a trading account with trusted brokerage firms like HTPL.
- India Pesticides Limited IPO- Opening Date: 23rd June on BSE, NSE
While it is possible that you are not allotted any shares in the IPO during the bidding process, do not consider it as a success metric. IPOs are the initial public shares offering that may or may not get you profit at the beginning. You can always trade-in that company after the initial dust of IPOs are over and enjoy the profits. All stock market investments should be made carefully with complete research of the subjects.