What is IPO Investment?

 What is IPO Investment?

The stock market is a market full of uncertainties. The market moves in one moment and then in another moment it becomes a little difficult to predict the stock market. You too must often think about investing in the stock market, but then you must be wondering how to invest in the stock market?

In fact, there is no more difficult process of investing in the stock market. All you have to do is read a little and get in the habit of keeping an eye on the stock market. Investing in the stock market can be done in two ways ...

1. PRIMARY MARKET

2. SECONDRY MARKET

In the primary market you invest through IPO and in the secondary market you invest directly in the stock market listed shares.

Understand IPO in simple language ...

What is an IPO?

An IPO is called an INITIAL PUBLIC OFFERING. In fact, when a company first offers its shares to the public, it is called an IPO. In this process the companies offer their shares to the common people and it falls under the primary market. If you want to know in a more simple way, say that the company raises funds through IPO and spends that fund in the promotion of the company. In return, the people who buy the IPO get a stake in the company. This means that when you buy shares of a company, you own the purchased part of that company. A company can bring in an IPO more than once. Companies usually bring in IPOs for a number of reasons. Also know these reasons in detail ...

Reasons to bring an IPO

• FOR EXPANSION

When a company feels that it is constantly moving forward and needs more expansion i.e. now the company has to expand to other cities and for this it also needs people then in this situation the company issues IPO. For the expansion of the company, it can also resort to a bank loan, but the bank loan has to be repaid to the company at a certain time with a fixed interest (INTEREST). However, if the company raises funds through IPO, it does not have to return the money to anyone and does not have to pay any interest.

This is the advantage of the company. Now let’s talk about the benefits of people buying IPOs. Investors who invest in an IPO get a certain percentage stake in the company in exchange for the IPO purchased. That is, if a company has issued some shares for an IPO and you have bought two per cent of those shares, then you own two per cent of that company. In this way IPO benefits both the company and the investor.

• TO REDUCE DEBT

Even in this case when the company is in high debt, the company issues IPO. In such a case, the company thinks it is better to sell some shares of the company and repay the loan than to repay the loan by taking a loan from a bank. In this case the debt of the company is also paid and the company also gets new investors and the investor also gets a chance to own some part in the company.

• For the launch of a new product or service

There is another reason for issuing IPO. The company launches its new products and services. Whenever a company launches a new product or service, the company wants that service or product to be promoted and reach as many people as possible. Therefore, the company issues an IPO or Initial Public Offering (IPO).

Types of IPOs (TYPES OF IPO)

An IPO can be divided into two parts and the reason for dividing it into two parts is its pricing.

• FIX PRICE ISSUE OR FIX PRICE IPO
• BOOK BUILDING IPO

1. FIX PRICE IPO

The IPO issuing company discusses the price of the IPO with the INVESTMENT BANK before issuing the IPO. In a meeting with the investment bank, the company decides the price of the IPO. Only at that fixed price can any investor subscribe to IPO. You can only buy an IPO at the price that has been set.

        2.BOOK BUILDING IPO

In this the company together with INVESTMENT BANK decides a price band of IPO. It is issued only after the price band of the IPO is decided. Investors then SUBSCRIBE their bids from the decided price band. There are two types of book building IPO price bands ...

If the price of IPO is low in the price band then it is called FLOOR PRICE.

If the price of IPO is high then it is called CAP PRICE.

It is to be noted that in book building IPO, a difference of 20% can be made between CAP PRICE and FLOOR PRICE.

How to invest in IPO?

What is an IPO and why an IPO is issued? Now you know how to invest in an IPO?

The IPO issuing company opens its IPO to investors for 3-10 days. This means that when an IPO comes, any investor can buy it within 3 to 10 days. Some companies have a period of just 3 days to issue their IPOs, while others have more than three days.

You can invest in an IPO by visiting the company’s site within these specified days or through a registered brokerage. Now if IPO is a fixed price issue then you have to apply for IPO at the same fixed price, and if IPO is a book building issue then you have to bid on that book building issue only.

ALLOTMENT PROCESS

When the IPO opening closes, the company allots the IPO. In this process, the company allots IPO to all the investors and after the IPO is allotted to the investors, the shares are listed on the Stock Exchange (STOCK MARKET). Once listed on the stock market, the shares are bought and sold in the secondary market. You cannot sell stocks unless they are listed on the stock market. Once the shares are listed in the stock market, money and shares are exchanged between the two investors.

Once listed, you can buy and sell stocks according to STOCK MARKET TIMING.

The whole process is monitored by SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA)

When any company plans to bring its IPO, it has to follow all the rules of SEBI. He has to make SEBI aware of every big and small thing from the reasons for bringing IPO. The company gives a RED HERRING PROSPECTUS to SEBI.

In this red herring prospectus the company's -

• BUSINESS DETAILS
• CAPITAL STRUCTURE
• RISK FACTOR
• RISK STRATEGY
• PROMOTORS AND MANAGEMENT
• PAST FINANCIAL DATA

It contains all the information. The Red Herring Prospectus is available on SEBI's (SECURITIES AND EXCHANGE BOARD OF INDIA) website. Every company is required to abide by all the terms and conditions of SEBI.

Here are some things to keep in mind before investing:

There are some important things to keep in mind before investing ...

The company should also be compared with other companies before investing.

Must read the red herring prospectus of the company bringing IPO ...

Investing with all these things in mind is the right idea ....