Initial Public Offer popularly called IPO, is a process in which a Company offers shares to the public for the first time. IPO can be a smart way of investing in stocks. You and many other investors, invest in IPOs, hoping to make some quick money. If you invest in IPOs, you have an opportunity to buy shares at cheap prices. If you are a long-term investor, this is a great opportunity to buy shares of a reputed Company at low prices. IPOs give you an opportunity of making listing gains.
So what are listing gains? If you are allotted shares in an IPO, you can buy/sell these shares on stock exchanges like BSE and NSE. If on the day of listing the opening stock price is higher than the allotment price, the difference in price is the listing gain. Listing gain depends on demand for the shares and the pricing of the shares. Shares of the Company may also list at a discount and you could suffer a loss. You need to be extremely careful while selecting Companies to invest in an IPO.
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The Year 2017 was great for IPOs. The capital issued through IPOs stood at Rs 66,169 Crores. This easily beats the previous record of Rs 37,535 Crores in 2010. No wonder you and other investors are queuing up to invest in IPOs.
If a Company is issuing shares for the very first time, you must make a thorough study of the Company. When a Company goes for an IPO, it will publish a prospectus giving all details on the business, the industry in which it operates, the financials of the Company and the pricing of the issue.
You can find the prospectus of the Company online or on various broking websites. Read the prospectus and understand the Company thoroughly, before investing in an IPO.
SEE ALSO: 3 Ways To Make Money From IPO's
To invest in an IPO you need to open a demat account with CDSL (Central Depository Services India Ltd) or NSDL (National Securities Depository Ltd). You can open a demat account either directly or through a depository participant like a broker or a bank. You need to have a PAN Card to invest in an IPO.
You can apply for an IPO through ASBA (applications supported by blocked amount). In ASBA, the amount needed for the IPO is blocked in your bank account, but not debited.
You can invest in an IPO either online, or through a physical application form. The physical form is available with your broker or you can get it at the bank branch. You then fill details (name and other personal details), the IPO Price range and also bank and demat account details.
The form which is taken from the broker has the broker code stamped on it. This form must be submitted through the same broker. Banks also accept forms from different codes, but you must have a bank account with that bank, where you are submitting the form.
You can submit online applications in an IPO through broking, distributor or bank websites. If your personal details are already uploaded, all you need to do is fill the price range, the total amount and then simply click on apply. Your personal details and demat number must be updated in a proper manner.
IPOs had a great year in 2017. Just take a look at Apex Frozen Foods which was the best IPO of 2017. Apex Frozen Foods gave over 380% since its listing in September 2017 and looks good for more. Apex Frozen Foods did not give much in listing gains, but for those investors who showed faith in it by continuing to stay invested, they enjoyed massive returns. Apex Frozen Foods is a leading producer and exporter of shrimps in India. It has maintained presence across the value chain, starting from hatchery to port. It also has its own brands which it sells to retailers, restaurants and distributors. Be Wise, Get Rich.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.