Initial Public Offering (IPO)

During 2021 Indian equity market has been flooded with IPOs. More than 63 companies have come up with IPOs to raise funds. India jumps 3rd spot for unicorn startups in the world. Many newbies investor sees an IPO to earn easy money. They apply IPO based on grey market price, IPO Price, shares in lot, company name etc. They often ignored some important points while applying IPO i.e., company fundamentals, company’s future prospectus, company management. So, in this post we will discuss about detailed procedure about IPO.

Definition: An Initial Public Offer or IPO is the first sell of company’s common shares to institutional and retail investors.

Purpose of IPO:
1. Companies can raise capital by selling shares to public. This process can be used to expand company operations, Research & Development and to pay off debt.
2. Other ways for raising funds like Angel Investors, Venture Capitals or bank loans may be too expensive.
3. Being a public company, it helps them to secure better terms from lenders and gain more exposure and recognition.
4. It provides liquidity to company founders and early investor for exit at higher valuation.
5. To get the benefit of listing on exchanges.

Advantages & Disadvantages to bring IPO:

Advantages	Disadvantages
Fundraising for Company	Regulatory Requirement & Disclosures
Exit Opportunity for Promoters & Early Investors	Market Pressure
Publicity & Credibility	Potential Loss of Control over Ownership
Reduced Cost of Capital	Recurring Transaction Cost
Transparency in Company Operations	Increases Regulatory Oversight

Procedure to Bring IPO:
Step 1 – Hiring an Investment bank / Underwriter
Step 2 – Preparation of RHP and submission to SEBI
Step 3 – Verification of documents by SEBI
Step 4 – Making an application to stock exchange
Step 5 – Pricing of IPO
Step 6 – Creating a buzz or advertising
Step 7 – Allotment of shares

Different types of IPO investors:
1) Qualified Institutional Buyer (QIB) – It includes commercial banks, public financial institutions, mutual fund houses, foreign portfolio investors (FPI) that are registered with SEBI.
2) Retail Investors – It includes resident and non-resident Indians as well as HUFs. The maximum amount can be invested in this category is Rs.2,00,000. It gets the 35% quota of the total IPO.
3) Non-Institutional Investors – This category is open to all retail investor who wish to apply for more than 2,00,000. They are eligible for 15% quota of total offer. Added advantage is that they can withdraw their bids before the day of allotment.
4) Anchor Investors – It means a Qualified Institutional Buyers who makes an application for a value of 10 crore rupees or more in IPO. They are allotted up to 60% of the total offer. Bidding for them open one day before the IPO open for public subscription.

Performance of some of IPOs in year 2021:

Company Name	Listed On	Issue Price	Listing Day Close	Listing Day Gain	Current Price	Profit/Loss
CMS Info Systems Limited	31 Dec, 2021	216	237.4	9.91%	295.90	36.99%
Supriya Lifescience Limited	28 Dec, 2021	274	390.35	42.46%	570.95	108.38%
HP Adhesives Limited	27 Dec, 2021	274	334.95	22.24%	424.45	54.91%
Data Patterns (India) Limited	24 Dec, 2021	585	754.85	29.03%	779.75	33.29%
Medplus Health Services Ltd	23 Dec, 2021	796	1120.85	40.81%	1184.55	48.81%
Metro Brands Limited	22 Dec, 2021	500	493.55	-1.29%	605.15	21.03%
Anand Rathi Wealth Limited	14 Dec, 2021	550	583.5	6.09%	615.50	11.91%
Tega Industries Limited	13 Dec, 2021	453	725.5	60.15%	590.65	30.39%
Star Health	10 Dec, 2021	900	906.85	0.76%	860	-4.44%
Go Fashion (India) Limited	30 Nov, 2021	690	1252.6	81.54%	1103.20	62.55%
Latent View Analytics Ltd	23 Nov, 2021	197	488.6	148.02%	573.40	191.07%
PayTM	18 Nov, 2021	2150	1564.15	-27.25%	1042.50	-51.51%
Sigachi Industries Limited	15 Nov, 2021	163	603.75	270.40%	383.05	135.00%
PB Fintech Limited	15 Nov, 2021	980	1202.90	22.74%	997.05	1.74%
Paras Defence	01 Oct, 2021	175	498.75	185%	712.95	307.40%
Ami Organics Limited	14 Sept, 2021	610	934.55	53.20%	1070	75.41%
CarTrade Tech Limited	20 Aug, 2021	1618	1500.10	-7.29%	834.35	-48.43%
Glenmark Life Sciences Ltd	06 Aug, 2021	720	748.2	3.92%	602.50	-16.32%
Tatva Chintan	29 July, 2021	1083	2310.25	113.32%	2611.35	141.12%
Zomato Limited	23 July, 2021	76	125.85	65.59%	133.05	75.07%
India Pesticides Limited	05 July, 2021	296	343.15	15.93%	316.30	6.86%
Sona BLW Precision	24 June, 2021	291	362.85	24.69%	770.55	164.79%
Macrotech Developers	19 Apr, 2021	486	463.15	-4.70%	1231	153.29%
Barbeque Nation	07 Apr, 2021	500	590.40	18.08%	1488	197.60%
Kalyan Jewellers	26 Mar, 2021	87	75.3	-13.45%	68.95	-20.75%
Laxmi Organic	25 Mar, 2021	130	164.6	26.62%	458.20	252.46%
Easy Trip Planners	19 Mar, 2021	187	208.3	11.39%	575.00	207.49%
Indigo Paints	02 Feb, 2021	1490	3118.65	109.31%	2055	37.92%
IRFC	29 Jan, 2021	26	24.85	-4.42%	23.70	-8.85%

Process to apply IPO:
To participate in IPO a person needs a demat account. It can be opened through any broker. A single person can have multiple demat accounts, but IPO can be applied only through 1 demat a/c. IPO can be applied through ASBA or UPI method. After applying the funds are blocked in bank account till allotment date. On allotment day if shares are allotted, respected amount is deducted from bank account & if not amount is unblocked. This process hardly takes 7 days. Next day shares are listed on exchange. Usually, it opens with listing gain or loss depends on the subscription. Zerodha and Upstox are two top discount brokers in India.

Disclaimer: We are partner/authorized person in Upstox. You can open Free Demat A/c with this link.