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:
|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.