Everything You Should Know About IPO

When you hear the word IPO, you might automatically assume that it means it’s an initial public offering. This term has multiple meanings and different implications.

An IPO is a fundraising event where new shares of the company are offered to investors who pay for them. This allows existing shareholders to sell their shares at a profit, increasing their wealth. In return, they receive shares of the new company in proportion to their original investment.

When a company goes public, its share price begins trading on a stock exchange. Companies often choose to go public after having raised enough capital through private placements, seed funding round, debt financing, etc. 

In this article, we will discuss everything about the initial public offering (IPO).  

What Is IPO In Stock Market?

An initial public offering (IPO) is the first sale of stock by a company to the public. Prior to an IPO, a company is considered private, and may not offer or sell its stock to the public. An IPO is a type of public offering in which shares of a company are sold to investors. 

IPOs are often issued by companies looking to raise capital, and they are typically underwritten by investment banks. Companies that go public through an IPO process are typically larger and more established than those that remain private. 

After an IPO, a company’s stock is traded on stock exchanges, such as the BSE and NSE. Investors can buy and sell shares of the company on these exchanges.

Some Initial Public Offering (IPO) Example In India

These are the Initial Public Offering (IPO) examples in recent years.

1. IRFC: The Indian Railway Finance Corporation raised Rs 4,633 crore in January 2021 through its public offer.

2. Mazagon Dock Shipbuilders: The company raised Rs 1,435 crore in September 2020 through its IPO.

3. SBI Cards: The credit card issuer raised Rs 10,340 crore in March 2020 through its public offer.

4. UTI AMC: The asset management company raised Rs 5,609 crore in October 2019 through its initial public offer.

5. Indigo Paints: The company raised Rs 1,490 crore in January 2020 through its public offer.

When IPO Started In India?

Reliance is the first-ever Indian company that issued IPO In 1977. The company was founded by Dhirubhai Ambani in 1966 as a textile company. 

Reliance made its debut in the stock market in 1977 with an initial public offering (IPO) that was oversubscribed by seven times. The IPO raised ₹100 million (US$1.4 million), with the company selling 10% of its equity to the public. This was the first time that an Indian company had raised capital through an IPO. 

Reliance quickly became a leading player in the Indian textile industry, with a 38% market share in the 1980s. The company diversified into other areas such as petrochemicals, telecommunications, and information technology in the 1990s. 

Today, Reliance is a conglomerate with interests in a wide range of sectors, including energy, telecommunications, media, entertainment, financial services, and retail.

Why IPO Is Important For A Company?

There are many reasons why a company might choose to go public through an IPO. The most common reason is to raise capital to fund expansion, research, and development, or to pay down debt. An IPO also provides liquidity for shareholders and can help to build the company’s brand. Going public can also help a company attract and retain top talent. 

There are some risks associated with an IPO, including the potential for share price volatility and dilution of existing shareholders. The company will also be subject to greater scrutiny from the public and investors. 

Overall, an IPO can be a great way for a company to raise capital and visibility, but it is important to weigh the risks and benefits before making a decision. 

Some benefits of an IPO for a company include:

-The ability to raise large amounts of capital quickly

-Increased visibility for the company

-A liquid market for shares

-Attracting and retaining top talent

Some risks of an IPO for a company include:

-Share price volatility

-Dilution of existing shareholders

-Greater scrutiny from the public and investors

What Is IPO Cycle?

An IPO cycle is the process by which a company goes public. This includes filing for an initial public offering (IPO), going through the Securities and Exchange Commission’s (SEC) review process, and then finally listing on a stock exchange. The IPO cycle can take anywhere from a few months to a year or more. 

The first step in the IPO cycle is for the company to file a registration statement with the SEC. This is a lengthy document that provides information about the company’s business, financial condition, and risk factors. The SEC will review the registration statement and may ask for additional information. 

Once the SEC is satisfied with the registration statement, the company can begin marketing the IPO to potential investors. This is done through roadshows, where company executives travel to meet with institutional investors. 

The final step in the IPO cycle is pricing the IPO. This is done by investment banks that underwrite the offering. After pricing, the IPO is launched and shares begin trading on the stock exchange. 

IPO cycles can be long and complex, but they are an important part of the capital markets.

Things You Should Keep In Mind Before Investing In An IPO

These are the important factors that you should always consider before going into an IPO.

1. Check the financials of the company: Before investing in an IPO, always check the financials of the company. This will give you an idea of the company’s profitability, revenue, and debt levels.

2. Check the company’s business model: Always check the company’s business model to see if it is sustainable. Does the company have a competitive advantage? Is the company’s business model scalable?

3. Check the company’s management team: A company’s management team is important in determining the company’s success. Make sure that the management team has a good track record.

4. Check the company’s valuation: Make sure that the company is not overvalued. A company’s valuation should be in line with its fundamentals.

5. Check the risks involved: Always check the risks involved in investing in an IPO. Make sure that you are comfortable with the risks.  

6. Do your own research: Always do your own research before investing in an IPO. 

7. Seek professional advice: Seek professional advice before investing in an IPO. Read Our MNS Pro magazine

Bottom Line

The most important thing to remember when considering an IPO is that there are a lot of risks involved. There is no guarantee that the stock will be successful, and it is important to do your research before investing. While an IPO can be a great opportunity to make money, it is also important to remember that there is a chance you could lose money as well, so be careful while investing.  MoneyNotSleep – Financial Media House