What is an IPO?
An IPO (Initial Public Offering) is a process of transitioning a private company to a public-listed company for the sake of capital growth. They list their shares in the Stock Market for sale to institutional or retail investors. Investors have to buy shares as units of ownership in a particular company.
The thousands of companies listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) range from small-cap to large-cap. The market capital of these publicly-listed companies are from hundreds to thousands of crores.
How does an IPO work?
A private held company’s value depends upon different factors such as assets, growth, profits etc.. Take an example of a well-established ABC company, anyone who owns a share of the ABC company knows how much it is worth at current and about the performance of the company over a while.
For listing in upcoming IPOs, a company has to register with SEBI (Securities and Registering Board of India) and fulfill all the requirements set by SEBI. Once the documentation process is complete, the company will be listed on the Stock Exchange of India and raise capital to fund its growth.
They can avoid hefty bank loans, future loss, etc. Listing in an upcoming IPOs provides companies with huge publicity helpful to survive and gain capital for longer terms.
Key-terms to know for an IPO.
Before investing in an upcoming IPO, you must know the following key terms:
Issue price:The price at which shares become available to a set of people for sale for the first time is known as the issue price. This type of price is also known as the issue price.
Common Stock: In this type of share, you can get the right to share in the profits of the company. You will be able to vote on matters regarding the corporate policy and the composition of the members of the Board of Directors. Another name for a common stock is Equity share or Ordinary share in the UK and other Commonwealth realms.
Lot size: Lot size allows an investor to apply for the minimum number of shares in an IPO. You will bid within the decided price range.
Price band: There is the lower and upper limit of the share price within which buyers will bid is known as the Price band.
Underwriter: Underwriters in IPO are financial specialists who help the issuing company to prepare for the IPO like what will be the offering price of the securities initially and other processes related to buying & selling of the securities through the underwriter’s distribution network.
Upcoming IPOs in 2021
The IPO activity has been getting higher since 2019. India witnessed many IPOs in 2020 and significant growth in 2021 as compared to 2020. To invest in an IPO and become a part of the growing economy, you can opt for IIFL Securities where you will get a list of upcomings IPOs. They provide information about IPOs and keep you updated regularly.