In recent times, the popularity of IPOs has reached a new high among stock investors and traders who love to be a part of a growing organization that is ready to go public. As IPOs are considered the most sought-after way for organizations to raise capital from the public by listing their shares in the stock exchange, a large number of people love to invest in an upcoming IPO. Take the example of Zomato, Railtel Corporation of India, and others that have been considered among the most popular IPOs in 2021.
If you are also looking to invest in an upcoming IPO, it is necessary for you to have proper knowledge about the IPOs, the application process, and the process to find the best upcoming IPOs by top stock brokers in India. In this post, we will discuss all these points in detail.
What is an IPO?
IPO stands for Initial Public Offering. It refers to a case when an organization lists its share to the public for the first time. In other terms, this is when a business decides to go public.
Before the release of an IPO, the company tends to have very few shareholders like business founders, venture capitalists, and others. But when the company launches its IPO, its shareholders increase as the public can own a stake in their shareholders.
How to apply for an IPO?
Though it is possible for the investors to apply for IPOs online, one important thing to remember is that an IPO order cannot be initiated directly through your broker. You need to make the order via your bank that has an ASBA facility.
What is ASBA?
Application Supported by Blocked Amount (ASBA) is thought to be a simple and effective way to apply for IPOs. When it comes to investing in IPOs through ASBA, the funds in the account are locked in your account for the IPO. The money is debited from the bank account only if the shares are allotted under the IPO. During this time, one would also accrue interest on these funds.
How share allocation is done in an IPO?
There are various investor categories in regard to IPOs including:
· Qualified Institutional Buyers (QIBs)
· Non-Institutional Investors (NIIs)
· Retail Individual Investors (RIIs)
The share allocation differs for all the given categories in an IPO. Most individual stock investors fall under the third category – Retail Individual Investors.
They are permitted to invest in small chunks of Rs. 10,000-15,000 and can apply for an upper limit of Rs. 2 lakh in an IPO. The overall demand for shares in the retail category is judged by the number of applications received. If the demand is less than or equal to the number of shares in the retail sector, they are allotted full shares.
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When the demand goes higher than the share allocation, it is called over subscription. In most cases, an IPO can be over-subscribed more than 5 times. This refers that the demand for shares surpasses the supply by 5 times!
In such scenarios, the shares in the retail category are given to investors on a lottery basis. This is a computer-based process that safeguards the impartial allocation of shares to IPO investors. At the same time, it is also important to note that the Securities and Exchange Board of India (SEBI) has made ASBA mandatory for the bidding of IPO.
How to find the best upcoming IPOs in India?
For those looking to invest in an IPO, it is necessary to keep a close check on all the upcoming IPOs. In today’s internet age, there are hundreds of websites that provide up-to-date and reliable information on all upcoming IPO in India. All you need to do is to keep visiting them periodically to stay updated on all the upcoming IPOs in India.
Always remember that the more you keep yourself updated about an upcoming IPO, the more will be the chances of getting it allocated.
FAQs
What does an IPO mean?
IPO is when an unlisted company chooses to raise capital through sale of securities or shares for the first time to the public. In other terms, IPO refers to the selling of shares to the public in the primary stock market. A primary market mainly deals in fresh securities being allotted for the first time. Once the company in listed on the stock exchange, the company is turned into a publicly-traded company and the shares of the organization can be traded openly in the stock exchange.
What role does a registrar play in an IPO?
Registrar of a public issue is a major entity in the processing of IPOs. They are self-governing financial institution listed with SEBI and stock exchanges. They are selected by the organizing going public by launching its IPO.
What does DP refer to in an IPO application document?
DP stands for Depository Participant.
There are two types of Depositories in India – National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Each depository is made up of a number of depository participants that act as an intermediary between depositories and companies that release securities.