What’s an IPO? As the term suggests, in an IPO (Initial Public Offering), a privately owned company lists its shares on a stock exchange, making them available for purchase by the general public. This capital is then used by the company for growth. An IPO is granted by the regulatory authority, i.e. Securities and Exchange Board of India (SEBI).
Generally, companies pursue an IPO for several reasons that are:
- To raise additional capital by selling shares to the public and using those funds for expansion of business, Research and Development or to pay off company debt.
- It is an alternative source to raise funds through venture capital as bank loans or funds from other private institutions can be expensive.
- Going public in an IPO can be a means to earn huge publicity for companies.
- Companies want reputation and credibility in the market that often comes from being a public company.
The IPO Season is back starting today and you will be witnessing many IPOs. Here is the list of forthcoming IPOs, the first one starting from 30 Nov, i.e today for this IPO Season.
1. Star Health and Allied Insurance Company Ltd IPO
Star Health and Allied Insurance Company Ltd is one of the largest private health insurers in India with a market share of 15.8% in Fiscal 2021. The company primarily focuses on the retail health market segment and ranked top in the retail health insurance market in India based on GWP over the last 3 fiscal years. It is set to open its Issue on Nov 30, 2021.
2. Tega Industries Limited IPO
Tega Industries was established in 1976. It is a leading manufacturer and distributor of specialized, critical, and recurring consumable products for the global mineral beneficiation, mining, and bulk solids handling industry. Globally, Tega industries are the second largest producers of polymer-based mill liners, based on revenues for the calendar year 2020. Tega Industries opens the issue on 1st Dec 2021.
3. Anand Rathi Wealth Limited IPO
Anand Rathi Wealth is one of the leading non-bank wealth solutions firms in India and has been ranked amongst the top three non-bank mutual fund distributors in the country. The company offers a wide product portfolio of wealth solutions, financial product distribution, and technology solutions to its clients. Anand Rathi Wealth might hit the market soon with their IPO as the company gets SEBIs’ go-ahead.
4. Go Airlines (India) Limited IPO
Incorporated in the year 2004, GoAir is an ultra-low-cost carrier (ULCC) airline focused on providing affordable and accessible air travel to the people. The company’s target customers are young Indians, leisure customers, and MSME business travellers.
5. Adani Wilmar Limited IPO
Adani Wilmar Limited was incorporated in 1999 as a joint venture between Adani Group and the Wilmar Group. The company’s product portfolio is categorized into (i) edible oil, (ii) packaged food and FMCG, and (iii) industry essentials.
First Time Investor?
When the IPO goes live, investors can subscribe to it and specify the amount they’d like to invest. If they’re successful, the shares are credited to the bidder’s demat account. As an individual you can only subscribe to an IPO if it is open for retail investors.
If you are investing in IPO for the first time, it is an absolute necessity to have the following for placing your bid in an IPO order:
- Bank Account – For making the payment, for subscribing to an IPO etc.
- Demat Account – You need to have a demat account to buy shares.
- UPI App – If you are following the UPI Payment route, for approving the UPI Mandate received for your Bid.
Application and Bidding Process:
One has to apply online through the broker trading platform. The ASBA option has been made mandatory for IPO applications. This provision allows banks to block a sum of money equivalent to the value of shares applied for. Also, SEBI has made it mandatory for retail investors applying through registered brokers to invest in IPOs through the UPI route. This makes the entire process secure and straightforward. Each payment app, such as Google Pay, PhonePe, Paytm and BHIM have their own unique processes for finding and accepting the UPI mandates.
One also has to share bidding details like the number of shares applied for etc. ASBA can be availed in physical and Demat form.
One has to bid for shares based on the lot size specified in the prospectus. The lot size is the minimum number of shares that one needs to apply for during an IPO application process.
Going for a public offering, companies get a distinct advantage in the form of additional capital. In an IPO, investors can buy shares of the issuing company by investing their funds and becoming share holder of that company.
Here are some points why you should invest in IPO.
- One of the main advantages of investing in an IPO is the gain earn on the listing day. Companies value their stock and mention the price on the offer document. Once the investor receives the shares and after that company opens at a price higher than that of offer price, investor can earn gains, generally called – listing gains.
- IPO markets have become more professional and safer for retail investors as companies provide investors the prospectus in advance hence investor gets enough information to process before making a decision.
- After investing in an IPO, the investor becomes shareholder of the company hence giving investor the voting rights.
- In addition to these IPO offers more price transparency.
IPOs might seem tempting and are considered safest but however this might not always be the case as when a private corporation decides to go public, there is very little or sometimes no information about it in the public domain so investing in any company without conducting a thorough investigation might be dangerous. Investors may also suffer from losses if listed price is less than the offer price.
So, Investment in an IPO is associated with both benefits as well as risks. Hence it can be a sort of luck-based investment. Don’t go by hearsay, marketing advertisements, herd mentality or popular sentiment! Go through your own research before investing.
Disclaimer: Information provided is only for educational purpose and general point of view. We are not SEBI Registered, before taking any positions seek professional advice.