Before crossing the threshold of the IPO market, we need to understand the meaning of an IPO, its importance, and how it works in the Indian stock market. When a private limited company first sells shares of stock to the public, this process is called an Initial Public Offering (IPO). For that reason, the IPO process is referred to as "going public."
When startup companies or businesses grow in size and production, extra funds are required for further investments. They have two choices: either raise debt funding (from banks, NBFCs, etc.) or raise share capital by selling the company’s shares. A share is a unit of ownership in a company or a financial asset that investors purchase by investing capital. For example, if a company’s valuation is ₹1 crore and the owner holds 51% of its shares, they can raise up to ₹49 lakhs by selling shares. The share price depends on market demand, the company's goodwill, and future projects and investments.
However, investing in IPOs is risky because the company is new and investors have limited data about its financial health. Overvaluation can sometimes act as window dressing for retail investors. But for those with a high-risk appetite, IPOs can be a great way to make money.
Historical Returns of IPOs:
Safest Ways to Bid for an IPO:
1. Research and understand the company: Before investing in any IPO, it’s important to read the prospectus published by the company.
2. Diversify your investments: Don’t put all your eggs in one basket, as IPOs are inherently risky.
3. Ensure your UPI ID is linked to your bank account: Make sure it has enough funds.
4. Avoid multiple applications via the same Demat account: Don’t apply for an IPO through different broking apps using the same Demat account.
5. Bid early: Ensure you bid for the IPO early to avoid last-minute hassles.
6. Bid at the cut-off price: Always bid at the cut-off price to increase the chances of allotment. In the case of oversubscription, users with higher bidding prices will have a higher chance of getting allotted shares.
7. Apply in multiple categories (if available): If categories like SHA, POL, IND, and EMP are opened by the company, apply once in each category.
8. Consider purchasing parent company shares: If you hold at least one share of the parent company in your portfolio, you can apply in the SHA category, increasing the chance of allotment.
Upcoming IPOs in the Indian Stock Market:
1. Manba Finance
- Issue Date: 23rd September to 25th September
- Price Range: ₹114 to ₹120
- IPO Size: ₹150.84 crore
- Minimum Investment: ₹14,250
2. KRN Heat Exchanger and Refrigeration
- Issue Date: 25th September to 27th September
- Price Range: ₹209 to ₹220
- IPO Size: ₹341.95 crore
- Minimum Investment: ₹13,585
I hope this article helped you understand the basics of how to invest in IPOs. Remember, while companies try to create a buzz in the markets just before launching an IPO, you must thoroughly research the company before investing. Also, understand the entire process well and complete the application form correctly to avoid rejection.
Happy Investing!
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