Initial Public Offering or IPO is a process through which a privately held company transforms to a public company. IPO is also referred as a “company going public” as it is the first time when a private organization raises capital by issuing shares to the public. A company may require capital for multiple reasons. For example, they may need funds to expand their capacity, to expand their business domestically and internationally, they could be looking at diversifying into new businesses or they may even be wanting to repay loans. All such funding needs can only be met through an IPO.
To list its shares on a stock exchange for the first time, a company needs to meet the requirements of the Securities & Exchange Board of India (SEBI). With the increasing popularity of IPOs over the last few years, investing in IPOs elicits significant interest among the investors. As investment in IPOs could be a good opportunity to grow wealth through listing gains or capital appreciation, let’s read on to learn how to invest in IPO online.
The price of shares to be sold are predetermined, before the launch of the IPO which can be done via two methods:
a) Fixed cost method
b) Book building method
The price of the shares plays a vital role in the market. It cannot be overpriced or underpriced as either can be unfavourable to the company issuing IPO.
The applicant must-haves:
It’s advisable you do thorough research before bidding on a certain IPO. ‘Bidding’ is the term used for applying in IPO.
You can bid in an IPO online on the platform of your stockbroker. It is necessary to have a Demat account to bid in the IPO.
Let’s check how the bidding takes place online.
Now that you’re aware of how to invest in IPOs, you must be wondering where to find out about the upcoming IPOs.
You can login into the BFSL website and gain further knowledge on the same.
To sum up, even though companies create ample buzz in the markets before the launch of an IPO, you should do adequate research on the company you want to invest in.
Companies tend to put in a lot of details in their Draft Red herring Prospectus (DRHP), so go through these documents before you arrive at a decision. Go for companies that have a sustainable business model and reflects profit potential in the future. It’s always wise to invest in such companies. Scrutinize the entire process properly before investing to avoid any kind of rejection. Happy investing!
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