We will try to give detailed information about the IPO today in this segment of the share market to give you different information about the stock market. The evidence of investing in the stock market in India is much less than in developed countries, there are many reasons for this, but the most important reason is the lack of information about the stock market.
For investors who are ready to invest in the stock market, their basic source of stock market information is the television and social media information. In which it is very difficult to understand the right and wrong information and more investors get a bad experience from the stock market. We can get reliable information from reading books, but most of the investors cannot afford to devote so much time or they are not in the habit of reading.
In this article, we will try to give information about what are common shares and what are IPOs. Reasons why people are so eager to invest in IPO and will try to give the analytical reality of IPO.
What is IPO ? –
The Full form of IPO in English “Initial Public Offer” is the primary public offering in the stock market that a company raises money from investors and shows the investor in the stock market whatever plans are there to increase the business.
The number of shares the investor takes, he gets the same stake in that shares, as in ordinary shares, the only difference is that it is the primary stage or the beginning, of a company to raise money from the stock market. These are SEBI regulations for investing in IPOs, under which and according to the rules of the stock market, the IPO is displayed in the stock market.
Many people are interested to invest in an IPO, but in reality IPO we have to buy at a higher price than ordinary shares. There are many restrictions to buy IPO, due to which we cannot invest as much as we want in it like other shares. An IPO is based on demand and supply, on which shares are divided through quota system, based on how much subscription will be given to them. it happens .
IPO Process in Share Market –
When a company decides to raise money in the market or legally a company or entity has to become a public company, that company decides to bring the first IPO in the market. For this, first the company appoints an expert organization for this work because the process of listing IPO in the stock market is very complicated.
Which is called Investment Bank or Merchant Bank, through which an agreement is made in both for how this IPO will be listed, in which the terms and conditions are fixed, in which mainly ….
- Details of what will be the deal between the two
- How much money will be raised from the IPO
- How many shares will be listed in the market
The details of what the company is going to do with this investment in the stock market in the future, according to the company law and the rules of SEBI, which is called Red Hearing Prospectus, which is verified by SEBI. As soon as IPO is approved by SEBI.
The company declares the date of IPO listing, which has to be completed in three days. In countries like America, this process is completed in just one day. In which the distribution of shares and those who have not received the shares and whose remaining amount is left is returned.
Purpose of IPO –
Just like small companies deposit their own capital to run their business, if more money is needed then it raises money from banks and market at interest. Public listed companies raise money in the stock market in the form of shares from investors and big financial institutions, in return, they make the investor a partner in the company. Therefore, first of all, if the company wants to raise money from the stock market, then it has to list IPO.
This IPO is of government companies, it is of financial banks and it is of private companies that work in the production, service and technology sectors. Generally, private companies launch their IPO in the market at a higher price, the same government companies land their IPO at a normal price, so it is mainly seen that the prices of IPO are very high.
That’s why private companies keep the price of each of their shares high so that they get the price of their shares at the maximum price. The prices of 80% of the shares fall later, only 20% of the companies maintain their prices on good performance even after being listed in the market. That’s why companies build capital on a very large scale of their business from the stock market.
IPO Investments & Shares Investment –
The one who normally invests in the stock market is the seller and the buyer who decides the price of the shares, according to the law of demand and supply and buying and selling takes place. The money that the company gets from the IPO is used by the company to grow its business.
Indirect buying and selling takes place in the common stock market, in which the company does not get any direct financial benefit from these transactions, only its market capital value increases, which increases the goodwill of the company. People are more attracted to IPO investment because it gives more profit in less time.
In direct IPO, some companies perform well even after being listed, most of the companies fail to keep their prices stable or above. Only 5 percent of the people make a lot of money from the IPO and that is quite limited as there are limits for investing in the IPO which are not there for buying common shares.
Facts of IPO Investments –
There are SEBI and many other regulations for IPO investment and there are limits for investment, financial institutions, general investors and internal investors of the company, all these in quotas are fixed. Most of the times, there is a demand for more shares than the number of shares listed, due to which not everyone gets the desired number of shares.
We buy IPOs of most companies at a price much higher than the actual price, due to which most of the times IPOs fall a lot after listing. Many times, many IPOs perform well even after getting listed in the stock market.
There is a limit on the amount to be invested in an IPO and large entities cannot sell those shares for a few days after the IPO is listed. The general investor does not have this rule, but the people who get profit after listing such IPO are very less according to the capital of the stock market.
Features of IPO –
- The way for private and government companies to make capital publicly available through the stock market is called the IPO.
- A stock market is the primary way of providing money, which the company uses to grow the business.
- For listing IPO, under SEBI rules and regulation of the stock market, all documents have to be given to the company, after which SEBI gives permission to list IPO.
- Most of the IPOs are overpriced in the stock market.
- Investors have limits to invest in the IPO and quota is fixed for each investor and if there is more demand then the shares are allotted in proportion to the number and the rest of the money is returned to the investor.
- This process of IPO used to take a lot of time, but through digital technology this process is completed in just three days.
- In the IPO, only 20% of the shares are listed at good prices, the rest of the shares mostly fail because of the high price and not based on the performance.
- There is a lot of competition in the stock market to invest in IPO, so sometimes there are several thousand applications for 100 shares, due to which the allocation of shares becomes difficult at times.
Successful IPO’s in India’s stock market –
- Coal India (2010) – Rs 15,199 thousand crore
- General Insurance Corporation of India (2017) – Rs 11,257 thousand crore
- SBI Cards and Payment Services (2020) – Rs 10,341 thousand crore
- Reliance Power (2008) – Rs 10,123 thousand crore
- New India Assurance (2017) – Rs 9,586 thousand crore
- Zomato (2021) – 9,375 thousand crores
- DLF (2007) – Rs 9,188 thousand crore
- HDFC Standard Life Insurance (2017) – Rs 8,695 thousand crore
- SBI Life Insurance (2017) – Rs 8,389 thousand crore
- Gland Pharma (2020) – Rs 6,480 thousand crore
Is it right to invest in IPO? –
It is true that by investing in IPO in India, it can get a lot of profit till it is listed in the stock market, but for this the company needs to practice a lot. Large financial investors cannot sell shares immediately after IPO listing, but small investors can.
Therefore, for a very short time, the financial institution cannot take advantage of getting much profit and for small investors if the IPO is oversubscribed, then very few shares are available in which it is very difficult to get more profit. So investing in an IPO is just an illusion, the chances of getting more profits are less.
Big financial investors can make high returns on small time investments on the strength of their big capital and on expertise and technology. Investing on the fundamentals would be the best investment for the general investor. Talking about investing in IPO, it is only an illusion spread by television channels and social media, which benefits only and only the company.
How to Invest in IPO –
The sale of shares of the IPO is generally done by making lots or a group of shares called lots and forms are filled for this through quota and the shares are allotted according to the type of subscription for IPO. If you have not received the number of shares you have demanded, then the remaining amount is credited to your account.
Generally, in the secondary market, we buy and sell shares immediately and the process of IPO is very different from this, the money available to the company is used to grow its business. The rules of how the investment will be for financial institutions are decided by SEBI, which are very strict.
For small investors, the amount and the number of lots of shares are very less and if the response to the IPO is high, then it is very difficult to get lots of shares according to your demand. Earlier this process was done by filling the IPO form which took 10-15 days to complete, but now this process has to be completed in just three days due to digitalization.
After the IPO listing, small investors can sell their shares at any time, but big financial investors cannot do this, for them a time limit has been fixed by SEBI.
New Guide Lines of SEBI for IPO
- SEBI has declared a new guide-line for IPO in December, under which
- It has been decided to increase the price band of the IPO, which used to be very low earlier by 105%, which will lead to good and fair bidding for the IPO.
- 33% of the IPO will be earmarked for a private investor between Rs 2 lakh and Rs 10 lakh.
- Two-thirds of the IPO will be earmarked for investors with an amount above Rs 10 lakh.
- The lock-in period has been extended for the anchor investor, which was earlier 30 days, in which 50% of the shares can be sold by the anchor investor and the rest of the shares will not be sold before 90 days.
- All these rules will be started from the financial year April 2022.
- SEBI has also made a lot of changes for primary shares.
In this way we have seen how IPOs are listed in the stock market and why so much importance is given to people to invest in IPOs. We have tried to give as much information as possible about IPO, so that whatever is the confusion about investing in IPO and whatever is the truth, we have tried to tell it here.
To understand what is called primary investment in the stock market and what is called secondary investment, we have told about the behavior of the general stock market and behavior of IPO. Here we have tried to understand how we should practice to invest in IPO.
In the stock market segment, we are bound to provide you with the most detailed information and we will tell you the smallest details through political, economic and technical analysis.