In recent years, Indian capital markets have seen a series of companies raising equity through Initial Public Offerings (IPOs). For investors, the latest IPOs offer a chance to buy into a company’s growth story from the outset. Understanding IPO full form and the process of allotment are some basic things everyone should have in mind before investing.
Definition of IPO and its full form
IPO stands for Initial Public Offering. This is how a private company raises its funds by selling shares to the public for the very first time. By going through this step, the company is able to become publicly traded and thus be able to procure public capital. The investors acquire partial ownership within the company by subscribing to shares.
What’s New in IPOs: Following the Movie for Investors
The buzz generated by the forthcoming IPOs in India is because they generate maximum possible interest among the investors in diversifying their portfolios into newer sectors or companies. Each IPO is a company’s intention to raise funds, aside from simply business expansion and payment of debts, as well as with working capital improvement.
Public offers also mean that retail investors can buy shares prior to their trading on the stock exchanges at an issue price. Thus, many investors track the IPO calendar to match their strategies to their investment goals.
How to Invest in IPOs
Investing into the IPO in India has become phenomenally simplified because of digitalization. Here are some common ways that are used:
ASBA Facility (Application Supported by Blocked Amount):
They can apply using ASBA through their bank account. The inclusions remain in the account, thus ensuring safety for those funds until allotment.
UPI-Based Applications:
With increasing digitization, UPI ID applications for IPO investment can also be made via broker platforms and banking apps.
Investors would need to set up a demat account, maintain a trading account alongside a bank account linked to that trading account, to participate in any of the IPOs.
IPO Allotment Process
Understanding the allotment process is one of the more important things concerning IPO investing. Not every applicant gets guaranteed shares as allotment depends on demand and available shares to allot.
Retail Investor Quota:
There is a percentage of shares reserved for retail investors. Where the number of applications exceeds their allocated shares, allotment is done by way of a lottery system.
HNIs and Institutes:
These are two further categories that provide High Net Worth Indiv. or institutional investors with allotted shares under varying subscription levels.
Refunding the Unallotted Amounts:
When no allotment is done for investors, the blocked amount gets unblocked and sent back to the bank accounts of those who have invested.
Checking the allotment status can be done via the registrar’s website, portals of the stock exchanges, or broker platforms.
Key Considerations Before Investing in Upcoming IPOs
Although all eyes are on upcoming IPOs in India, investors still need to check off some boxes by way of research before they jump on the subscription bandwagon:
Company Fundamentals:
Reviewing the company’s financial performance, reading revenue trends as well as debt position.
Use of Proceeds:
Proceeds raised are meant to be used as defined in a company’s statement of intent. Such objectives will thus enable grasping how the business intends to operate.
Valuation:
Valuations generate an understanding of whether an IPO is well priced when comparing the price issue with those of industry peers.
Risk Factors:
Every prospectus mentions business-relevant risks. It aids in creating better-informed choices by familiarizing with these factors.
Upcoming IPOs for Retail Rationing
Retail rationing has shot up in terms of IPOs with the relative availability of applying online and choosing to invest in new-age businesses. Upcoming IPOs are often touted as having the strongest retail subscription numbers, often indicating interest from investors.
IPO Allotment Guide: Step-by-step process
Here is a guide for retail investors that simply explains allotment processes:
Check the IPO Calendar: Watch for new IPOs coming up in India.
Submit Application: Apply ASBA or UPI before closing on the deadline.
Wait for Basis of Allotment: The allotment process will begin immediately upon conclusion of subscription.
Verify Allotment Status: You can check whether shares have been allotted or not via registrar or exchange websites.
Listing Day: Allotted shares will be reflected in the demat account before trading has begun.
Unblocking of Funds: In case no shares get allotted, funds would be released back into the account against the name(s) of the investor(s).
Following this orderly process, it now avoids confusion for new investors, while ensuring clarity in tracking of allotments.
Conclusion
The new IPOs in India remain a hot topic for the investing class of bringing new ideas into equity markets. The knowledge of IPO full form, the procedure of application, and the mechanism of allotment are some of the prerequisites for participation. IPOs indeed pave the way for some of the brightest ventures, but they need a careful appraisal of their fundamentals as well as their valuations and risks.
