IPO

Initial Public Offering (IPO)

Spread the love

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:

AdvantagesDisadvantages
Fundraising for CompanyRegulatory Requirement & Disclosures
Exit Opportunity for Promoters & Early InvestorsMarket Pressure
Publicity & CredibilityPotential Loss of Control over Ownership
Reduced Cost of CapitalRecurring Transaction Cost
Transparency in Company OperationsIncreases 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 OnIssue 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 Limited14 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 Precision24 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.

About the author

Shankar Awale

Hey! I am Shankar Awale an aspiring blogger with an obsession for all things of Finance. This blog is dedicated to help people to learn about Financial Knowledge in easy language.

View all posts

27 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *