An IPO, or Initial Public Offering, is the process through which a private company offers its shares to the public for the first time. This marks the transition of a company from being privately owned to a publicly traded entity. Companies often go public to raise capital for expansion, pay off debts, or fund other significant initiatives.
When a company decides to go public, it works with investment banks to determine the price of its shares and the number of shares to be offered. Here’s a step-by-step process:
Market Volatility IPO shares can be highly volatile in the initial trading period, leading to potential losses.
Lack of Historical Data New public companies have limited trading histories, making it challenging to predict future performance accurately.
High Expectations If the company does not meet investor expectations, the share price can drop significantly post-IPO.
Open a Demat Account A Demat account is required to hold shares in electronic format. You can open one with any SEBI-registered broker.
Research the IPO Study the company’s financials, business model, and market potential. Read the red herring prospectus (RHP) filed with SEBI.
Apply for Shares You can apply for shares through your broker’s online platform or via ASBA (Application Supported by Blocked Amount) service provided by banks.
Allocation of Shares If the IPO is oversubscribed, shares are allocated based on a lottery system. If undersubscribed, you may get all the shares you applied for.
Wait for Listing Once the shares are allocated, wait for the listing date to start trading your shares on the stock exchange.
Shares are allocated to retail investors in an IPO through a lottery in case of oversubscription of IPO. Online IPO allotments status offers detail about the number of shares applied and allocated to the investor in an IPO.
The allotment status is available online on the registrar’s website. An investor can check allotment status by entering PAN Number or the IPO allocation number.
Registrar of the IPO also publishes a basis of allotment document. This document provides detail about the number of applications received and how the allotments are done.
IPO investors can check the IPO allotment status on the website of IPO registrar.
Each IPO has a designed registrar i.e. Linkintime, Karvy. Register of an IPO is a financial institution registered with stock exchanges and SEBI. Registrars keep the records of the issue and ownership of the company shares. The registrar is responsible for allotment of shares to investors in an IPO, process refund, and transfer allocated shares to investors demat account.
Investing in IPOs can be a lucrative opportunity if approached with thorough research and a clear understanding of the risks involved. By following the steps outlined above, you can make informed decisions and potentially benefit from the growth of newly public companies.
Disclaimer – Prosperia is just an advice and is not a blanket Fatwa authority! Hence the individual can decide to invest based on the recommendation provided by Prosperia Team. The people behind Prosperia will not be liable in any way on the judgment day of Qayamat in the hereafter or this world. If you ever doubt your investments and income activities, do always reach out to a trusted & reputed Aalim/Mufti of your particular Maslak for 100% assured advice.
Investments in securities markets are subject to market risks. Please read all related documents carefully.
