Hello friends, if you are interested in Share Market then you must have heard about IPO and if you do not know what is IPO, then in this post you will get complete information about IPO, that too very simple. In this language as well as you will also know how to invest in IPO.
What is IPO?
Funds are needed to start or grow a company, initially Company Owners invest in the company by taking their own capital or money from friends or relatives and their own other sources, that is, only a limited number of people share in the company. That’s what happens.
But when the company needs more capital for its expansion, its new projects or to eliminate the company’s debt, then in such a situation the company first launches its shares in the stock market to the general public, it is called IPO i.e. Initial Public. It is called Offering or Public Issue.
In such a situation, the company decides some price of its unloaded shares, after which the general public buys the shares according to the price of the shares and in this way the company gets the fund by its sold shares and the investors i.e. the shareholders of that company. gets a share in.
What are the types of IPO?
When a company has to take out an IPO, then the company has to decide at what price to take out its IPO, that is, what is the price of its shares. In such a situation, the company has two methods for this, Fixed Price Issue and Book Building Issue.
Fixed Price Issue
In this, the company, together with the Investment Banks, fixes a fixed price of its shares, and offers its shares to the investors at the fixed price.
After which the investors buy the shares of the company in the IPO at the same fixed price, that is, if a company has kept the price of its shares at Rs.200 in the fixed price, then the investors have to buy the shares at the same price.
Book Building Issue
In this, the company does not fix any price of its shares, so a complete study of the company is done by the merchant banker and a price band is prepared on its basis.
That is, the minimum and maximum value of the company’s shares is fixed, like Rs 100 and 120, after which the price of the shares will be within 100 to 120 and there is only a difference of about 20 percent in the price band.
After this, Bidding is done by the Investors inside the Price Band and the price of the Shares is decided by the Cut Off Price.
The IPO remains open for Minimum 3 and Maximum 10 days only and during this time the investors have to apply to buy the shares.
Role of SEBI in this
In India, any company that wants to bring its IPO in the market, they have to get approval from SEBI (Securities and Exchange Board of India), in which the company deposits its RHP (Red Herring Prospectus) in SEBI.
In RHP, the company presents its complete details in front of SEBI, such as its Business Detail, Capital Structure, Risk Factor and its Past Financial data etc., in a way, RHP is the complete horoscope of a company, and its information from the investor SEBI website. Can get it.
How to Invest in IPO
First of all, you should take complete information about the company whose IPO you want to buy, which you will get from the website of SEBI, or you can also get this information from the new Press Release or Google search.
To invest in IPO, you must have Demat Account and your PAN No, for Demat Account you can contact your bank or it can also be opened by a broker.
In the bank it opens free of cost with your regular account and in many banks its One Time Charge is also taken.
There are two mediums to apply in IPO, the first medium is offline, in which you have to get the form from your bank or agent and submit it to your agent or bank after filling your Demat Account No and your complete information and bidding related information in the form. Is.
If you talk about the popular online medium, then you can easily apply for IPO, in this your Demat account and your complete information is already available.
:- First of all you have to go to your internet banking account.
:- Go to his E-Services option.
:- Demat and ASBA Services have to be selected.
:- Now by selecting the IPO Equity option, you have to accept the Term and Condition.
:- After this you will see the IPOs taken out by the companies.
:- Now you can do your bidding by choosing your IPO.
IPO Related Important Terms
Some important words related to IPO that are used in the IPO process, it is important for you to understand them.
RHP (Red Herring Prospectus): – In this prospectus, the company issuing the IPO presents its complete information in front of SEBI.
It is in a way like the birth chart of the company, in which there is complete information about the promoters of the company, Business Detail, Capital Structure, Risk Factor, Detail of Management and Past Financial Data of the company etc., which SEBI completely Examines, and on being satisfied with the complete information and only if the information is found to be appropriate, allows the company to carry out the IPO.
Price Band: – This is part of the Book Building Issue, according to which the minimum and maximum value of the share is kept by the Merchant Banker by not keeping the fixed price of any share like Rs 100 and 120 it is called Price Band.
Floor and Cap: – Floor to Earth is called the minimum value kept in the price band like Rs 100 and the cap is called its maximum value like 120.
Cut Of Price: – This is also a part of the book building process, in which the bidding is done by the investors within the price band decided by the merchant banker, and when more bidding application comes at any one price, that price is fixed. , and the value of the share fixed is called the Cut Of Price.
Lot Size: – This means the shares purchased by the investor in one transaction, that is, if the investor wants to buy the shares of the company, he cannot buy one or two shares according to himself, but according to the lot size fixed by the company. Shares can be bought,
Conclusion:
Friends, hope you have got information from this post, what is IPO, if the information of the post is of some use to you, then share it with others, thank you.