IPO is the very first sale of stock that is issued by a company to the public. IPO is the abbreviation for Initial Public Offering. Before an IPO, a company is considered to be a private company. Until a company offers its stock for sale, the public is unable to invest in it. A private company has no obligations for selling you anything; you will have to approach them by yourself. On the other hand, a public company has obligations regarding selling and disclosing information to and for you. This is why IPO is called as “going public.”
IPO offers a great deal of money for the company in order for it to expand and grow. There are many options for a private company to raise capital like borrowing and getting additional investors, but IPO is the option which raises the largest sum of money for the company, and it is one of the most reliable options available for raising capital.
Public companies can enjoy better due to the increased scrutiny from investors and analysts. As long as they are in demand by the market, they can issue more stock in the name of a secondary offering.
Basically, it is a way of going public for a private company and offering their business to the public for the very first time.
The very first step for you would be to decide and select the IPO you wish to apply for. This can be easily done by going through company’s prospectus, and you can get them on the Securities and Exchange Board of India’s website. You will get a fair idea of what is a company planning to do and how does it work. You will then have to arrange the funding for your investment in IPO, a few banks and companies could be of help if you are falling short of funding.
Get a trading cum demat account activated, after that you can apply for initial public offerings. Now you will have to bid while you are applying for shares, as per the lot size. Lot size is actually the number of shares you have to apply for during an IPO.
You can revise your bid, but you must note that you will need to block the money required while bidding. That blocked amount will stay in the bank account and earn interest till allotment. There is a possibility that you will get fewer shares than you have asked for, there can be a situation where you could even fail to get any shares at all. And if you do not get any shares, then the bank will unlock your money either part by part or all at once.
Once the shares are allotted, they will be credited to your demat account. Now, your next step would be to wait for the listing of shares on stock exchanges. Listing of shares on the stock exchange is done in seven days from the final date of issue.