A significant event that takes place in the corporate every now and then, an IPO is understood as an initial Public Offering. It is understood as a process where a private company goes public by offering its shares to the public. In other words. It is a time when the company begins to sell its stocks to the public in order to raise capital. To know more about IPO meaning and process, keep reading this post.
What does the process of an IPO look like?
IPOs have become very popular these days since several companies that are seeking to raise some funds for expansion as well as debt reduction launch an IPO. IPO allows companies to gain a significant amount of capital, which can be used to fuel growth, expand operations, or pay off existing debt.
Step-By-Step Understanding
- The process of IPO is very simple. It begins with a private company registering with the Exchange and securities board of India. After this, with the diligence process, there is a scrutinization process where the company operates its management, operations, and financial structure.
- After SEBI has approved your application, the company will hire an investment bank or underwriter to help it with the IPO process. This person will help determine the offering price for its shares depending on factors like industry trends, financials, investor demands, etc.
- Once the price has been set, the company will file its prospectus with SEBI which will contain all the necessary details about the organization, including management structure, financials, etc.
- After the prospectus has been approved by SEBI, the company will begin the marketing process in order to attract some investors. This also involves advertising, media coverage, and roadshows that create buzz for the company and the IPO.
What happens on the day of the IPO?
On the day of the IPO, investors can purchase the company’s shares through the stock exchange where the company is listed. The demand for such shares and its final price are at the end determined by supply, demand, market forces, investor sentiment, etc.
Why is IPO lucrative?
IPOs can be a lucrative option to invest in, but do note that it comes with some level of risk. Investors must always research the company as well as the financials before they invest in anything. They should know the risks that are associated with the IPO like market volatility, potential of company shares, etc.
In other words, IPO can be an a good investment option for retail investors in India. In recent years, many successful IPOs in India like Paytm and Zomato have given you a lot of interest and provided investors as well to give you good returns.
Conclusion
IPOs are a very significant event where companies are given the opportunity to raise capital. This is done by offering shares to the public. Investing in such IPOs can be very lucrative. However, it is important for the investors along with their due diligence to understand all the risks that are involved. By doing some careful analysis and research, IPO can also be a good investment choice for retail investors in India.
