Understanding Initial Public Offerings (IPOs)

Investments are a cornerstone of wealth creation. They help you stay ahead of inflation and capitalise on growth opportunities. With a variety of investment options available, you can tailor your portfolio to your financial goals and risk tolerance. Don't miss out on the potential to be part of the next big investment opportunity. Initial Public Offerings (IPOs) offer a chance to invest in exciting new companies.

 

IPOs involve a private company selling its shares to the public for the first time. This allows the company to raise capital for growth while offering the public a potential for high returns. By including IPOs in your investment strategy, you can potentially achieve your financial goals while spreading risk across different asset classes.

Here are some of the different types of IPOs that issuing companies offer:

• Fixed Price Offering

In a Fixed Price Offering, the issuing company, with the help of underwriters, determines the offering price based on both qualitative and quantitative factors, including the company's financials. The fixed price is typically set at or slightly below the expected market value on the first day of trading. 

• Book Building Offering

Under Book Building Offering, there is no fixed price. Instead, the price range can fluctuate within a band set by the issuing company. The lowest price of the offering is known as the Floor Price, and the highest value is known as the Cap Price. Investors can choose to bid within this range with their preferred prices. The final stock price is determined by the issuing company after evaluating all the applications and bids.

 

If you are looking to apply for an IPO then here are the steps to participate in an IPO. However, the process may differ depending on whether you own a Demat account or not. 

1. Login to your Demat account

2. If you are not a registered user then you will need to complete the signup process first

3. Navigate to the section displaying all the available IPOs

4. Select the issuing company that you intend to bid on

5. Type in the desired quantity of the shares that you want to purchase along with the bidding price

6. Enter your financial details to complete the trade 

 

Alternatively, you can also visit your nearest brokerage firm or bank branch to apply for an IPO.

 

Now that you understand Initial Public Offerings (IPO), leverage this knowledge to optimise your investment choices. Selecting the right IPO is crucial, as these are highly volatile instruments.

 

Remember to consider the current market trends and choose an appropriate investment timing. If IPOs don't suit your preferences, explore the variety of other investment options available.