Initial Public Offering (IPO) is conveyed as a process of offering shares of any particular private corporation to a public in the form of a new stock insurance. The shift from a private to a public company is considered an important time for private investors to understand the gains from their investment completely. These offerings traditionally include premiums of shares for current private investors. Alongside, the participation of public investors is also allowed in the offering.
A company planning an IPO would choose an exchange in which shares are issued and traded publicly where they typically select an underwriter or underwriters.
Invest in IPO
How to apply for an IPO
Choosing an IPO is the first step to while applying. You can use your savings but there is nothing to worry about if you cannot access that option.
There are a few banks and non-banking finance companies that are willing to lend money, at some certain interest rate.
Then comes the preparation of a Demat-cum-trading account which can be created by submitting your PAN card, Aadhaar card, address and identity proofs.
The application process involves IPO through trading account or bank account. One needs to be aware about Application Supported by Blocked Amount (ASBA) facility, which is a compulsory option for IPO applications. The ASBA is an application that authorises banks to block money in your bank account which is available in both physical and demat form.
The next step is to bid while applying as per the lot size mentioned in the prospectus.
To avoid a possibility of getting fewer shares that you had asked for, you can allot your shares which will be credited to your demat account.
Benefits of Applying in IPOs
The IPO price is the cheapest price at which you can invest in companies that have good potential of growth. So you have opportunity to buy cheap and earn big amounts.
IPO investment is very transparent. Every IPO has a Red Herring Prospectus that contains all relevant information about the company like financial information, pricing of shares etc.
A retail investor sometimes get retail discount of around 10% on some IPOs, hence they can pick the IPO at a lower price than the issue price.
Achieve Long term goals
All IPOs are equity investments and thus have potentials to give big returns in long term which can help you achieve long term goals.