IPO investment is now every investor’s dream. With a growing number of Investment Opportunities in India, there are new investors who wish to invest in IPO. Initial Public Offering popularly known as IPO is where the private companies go public through trading of shares. Investing in IPO is beneficial as the returns on it are quicker and safer.
The procedure requires the following steps on How to Invest in IPO
#1 – Decision Making:
When you find a private company has begun corporate governance upgrades and its annual and quarterly financial statements are being scrutinized by investors and analysts or changes in management, it is a sign that it is going public.
One of the known examples of successful IPO is Google that decided to go public in 2004. What started as $85 a share was closed at $445.28. While Omeros, a Seattle –based biotechnology firm had the worst IPO flop where the hope towards cash infusion failed miserably. This shows that before you think of investing know the integrity of the company.
The best way to find it is to visit the SEBI’s (Securities and Exchange Board of India) website. Check out how Angel Broking files for Rs 600 crore IPO with SEBI.
#2 – Arrangement For Finances:
With a number of non-financial institutions in the market, arranging for finances can never be a problem. Simply check onto the interest rate before you decide to plunge in.
#3 – Begin Trading By Opening Your Demat-Cum-Trading Account:
Open a demat-cum-trading account with broking agencies that are reliable. They should have a track record of more than 30 years of unmatched support system online and offline like Sharekhan, ICICI.direct.com, HDFC Securities, Angel Broking, and Motilal Oswal etc. They will guide you with documentation and other details.
#4 – Submitting An Application For IPO:
Applying for IPO is easiest with the help of ASBA (Application Supported by Blocked Amount). ASBA form is different from that of existing application form for public issues. These physical forms are readily available at any of the broker’s branch-like Angel Broking. You will also find experts helping you out with a subscription to the IPO.
#5 – Start Bidding Now:
For example, a private company XYZ Ltd is out with an IPO of 4000 shares and the price band is fixed at Rs. 60 to Rs. 66 per share.
Now the bidders can bid at any price stipulated within the price band.
|
Bid Price |
Number Of Shares Bid For |
Cumulative Shares Bid |
|
Rs 66 |
1,000 | 1,000 |
|
Rs 65 |
1,500 | 2,500 |
|
Rs 64 |
500 |
3,000 |
| Rs 63 | 1,000 |
4,000 |
|
Rs 62 |
1,500 | 5,500 |
| Rs 61 | 2,000 |
7,500 |
| Rs 60 | 2,500 |
10,000 |
Let me explain.
The highest cut-off price here will be Rs. 63 as this will ensure that 4000 shares will compulsorily be sold. Thus, those who are bidding below Rs.63 will not be allocated any shares. But those who bid more than Rs.63, they will get the shares at Rs.63 each.
If you think the issue is going to be oversubscribed then increase the number of shares for investing. Don’t apply for IPO on the first day when the book building process starts. Observe the demand graph.
#6 – The Allotment Stage:
On getting CAN (Confirmatory Allotment Note) the procedure of allotment begins. It is called the book-built process. On crediting the shares to your demat account, you can trade it when the IPO Stock Market Investment is done.
Hope the article was useful for all the beginners who wish to invest in IPO. For more details about latest upcoming IPO initial public offering, current IPOs and forthcoming IPOs in India. Contact us!