The full form of IPO is “Initial Public Offerings”
In the world, when you are doing business of any kind or forming a company it needs an initial capital as an investment to start. People take loans from a bank or borrow money from friends or relatives to fulfill that need. Sometimes you raise investment from a private investor giving away your company’s certain stake or equity. The more you expand your company the more investment it demands from us. After a point when you need a bigger investment, launching an “IPO” which means “Initial Public Offerings” turns out to be the best way one can think about. This article will cover all the points related to “IPO IN INDIA” and explain it in detail.
Meaning of “IPO”
In the business world when a private limited company decides to offer the company’s shares to the public for the very first time. Since they are doing this on an initial level hence it is called “IPO” or “Initial Public Offerings” In short company sells a certain percentage to the public.
After going public the company doesn’t remain private. A certain percentage of the company belongs to the public. The public becomes the investor of that certain company.
The Process of “IPO”
The process of “IPO” starts when a particular company decides to raise investments and sell stocks to the public. The first step the company does is to examine the financials of the company, by performing a thorough audit it can be done. After the audit, Once everything turns out well, the company needs to get ready to submit a registration statement to the responsible exchange commission which is the SEBI (THE SECURITY AND EXCHANGE BOARD OF INDIA)
SEBI will review the application. If the application is approved the stock exchange also reviews it. In India, we have NSE ( NATIONAL STOCK EXCHANGE)
and BSE ( BOMBAY STOCK EXCHANGE) are two stock exchanges where one can list their company. They can suggest some changes if required or reject the application if it does not fit their criteria. If they green light the application, the business will consult an underwriter (generally they are banks ) to figure out things like how mum should be the initial price of the IPO and the number of shares the company can offer. Once these things are locked, the company launches the IPO (INITIAL PUBLIC OFFERINGS).
Difference Between IPO (Initial Public Offerings) and shares
| Distinguishing Criteria | IPO (Initial public offerings) | SHARE (also known as FPO) |
|---|---|---|
| Definition | A private limited company’s sale of its shares to common people on an initial level is called “IPO( Initial Public Offering)” | Buying shares of companies that are already listed on a stock exchange(NSE, BSE) is called general stocks or shares also known as FPO (Follow-On Public Offer) |
| Risk factor | IPOs are generally risky as compared to regular shares because these companies are new and not that renowned in the stock market compared to existing companies. No one can predict how well they will perform once they get listed. Because of this, the risk factor is higher. | As compared to IPOs shares are not that risky. Because these companies are already listed in the market over a certain period because of their permanence you are well aware and through fundamental, technical, chart analysis you can predict their positional graph and accordingly choose to invest in them. |
| Investment Cost | To invest in IPOs one has to invest more amount than investing in shares because you can not buy one stock of an IPO, their buying happens on a lot basis. Therefore you have to invest a certain money to buy an IPO | Investing in a share is cost-friendly. You can buy a single stock of a company too. It does not have investment criteria as you see in IPOs. so investing in stock in pocket-friendly |
| Availability and luck factor | IPOs are offered category-wise they have a certain hierarchy generally There is a luck factor strongly involved here They are first offered to institutional investors, such as banks, hedge funds, or high-net-worth individuals. And then comes the opportunity for retail investors to arrive. Also, it’s like a lottery system they have while selecting sometimes you can get it sometimes you don’t. | As we talk about shares there is no such case of hierarchy or luck factor involved here. No one can buy stock anytime during the trading period |
| Time Limitation | IPOs are available for sale for short periods approximately for a week or so, hence one does not get enough time to do research or analysis of the company and has to lose out on an opportunity to buy good IPOs. | On the other hand, since shares are already there in the market for investment and trading one can buy and sell them anytime during market hours. By doing a good analysis one can generate good wealth by investing in shares |
The Eligibility criteria to apply to an IPO
- For common people to invest in an IPO, first they must have an idea about the IPO. One should do proper homework on the IPO if they are looking for investment. Without knowing swimming jumping into the ocean is just stupidity. So be thorough with the knowledge.
- One should have enough capital to invest on an average between 15K to 20K per IPO.
- One should have a Demat account only then one can think about applying for the IPO.
You can check out the link below to create a free Demat account.
NOTE – FOR THE COMPANIES WHO WANT TO GO PUBLIC WITH AN IPO, YOU CAN CHECK OUT Chittorgarh.com FOR ELIGIBILITY CRITERIA
Conclusion
With the help of research and the ability to learn efficiently, one can easily understand the concept of IPO (Initial Public Offerings). As you can see the answer to the question what is an IPO in India? And in detail, we tried to analyze it in the best way possible. Once you understand the company, and its year-on-year financials you can consider good IPOs to invest in, your ability to gain profit will increase henceforth.
FAQs
Is IPO a good investment for beginners? Does ipo give profit?
Yes, it can be a good investment for beginners if they do a proper analysis of the company who are launching that IPO. By analysis I mean the background of the company, which sector it belongs to, and whether the company is debt-free or not. their last 3-5 years’ financials etc.
What is the grey market?
The grey market is also known as a parallel market. it is an unofficial marketplace where stock and any other commodity trading happens. Before IPOs are available for trading on the official market, you can check their buzz in the market and their tentative current listing price which gives you an idea of whether to invest in certain IPOs or not.
Grey market premium (GPM) is the price at which a particular share of initial public offerings (IPOs) are traded in the grey market before listing on the stock exchange. From the grey market, you can get a potential response about The IPO, the buzz around it, and the expected listing gain from the IPO.
What is Ipo Price? What is the offering price of the IPO?
It is the price on which a company is launching a company’s IPO. it is the offer price of a particular company’s IPO. which is decided with the help of an underwriter who can be the bank.
