What is an IPO and how can we invest in one?

An Initial Public Offering or IPO is when equity shares of a company are offered to the public in the open market i.e. the stock market for the first time. The company going public raises capital and funds by trading IPO shares. During the IPO trading, a fraction of shares is reserved for different types of investors including Individual investors, Qualified Institutional Buyers and High Net-worth Individuals. The IPO is either a Fixed Price Issue or Book Built Issue.
In Fixed Price Issue IPO, price of the shares is decided by the company in advance. In Book Building Issue, the bidder bids for shares within a given price range.
Before investing in IPO, do proper research about the company. Always read the prospectus, pick a company with strong underwriters and study the valuation of the company. You can apply for IPO through ASBA (Application Supported by Blocked Amount). Under ASBA, the IPO application amount remains blocked in your bank account and the amount will be debited only to the extent of the shares allotted.
If you want to invest in IPO in a hassle-free manner, use HDFC securities app. You can apply in an IPO in just 3 clicks. You can download the app using this link- https://play.google.com/store/apps/details?id=com.snapwork.hdfcsec&hl=en

What to look before investing in IPOs?

Investing in an IPO is an important decision, which should require a lot of analysis and prior research.
Here are some key things to keep in mind before investing in IPOs:

  1. Understand Your Financial Goals
  2. Understand the Business
  3. Research Well About the Company
  4. Understand the Risk
  5. Evaluating the Company’s Management

You have to open a demat account in order to invest in IPO. You can check out the HDFC Demat Account, the review, the charges etc.

Hi Anish,

It’s a great explanation about IPO and investment of IPO. Thanks for your clear explanation for the beginners.

The process in which a private company starts selling their shares to the public via the stock market is known as the Initial Public Offering or IPO. The company’s transition from private to public is a very important phase in the company’s life. Through the IPO, the company will raise money from the public to fund its expansion plans. IPO is also utilised to unlock the potential of the shares to pay back the investors.

Now coming to the second part of your question, you will not have a few things. If you want to bid for the IPO lots, you will need a demat account and a PAN card. The companies will first offer a prospectus, which contains all the details about the company’s business. After a few days of releasing the prospectus, the company will start the application process. The application process is based on the Application Supported by Blocked Accounts; the process enables the bank accounts to essentially freeze the funds that you have bid for the IPO lot.

During the application process, you will have to bid for a lot of shares of the company. You can only bid within the price range provided by the company. The final stage of the IPO is the allotment of shares. If you are lucky, then you will get an allotment. Your bank will use the arrested fund to purchase and return the unutilised amount.

Why are these specialty chemicals IPO performing so well nowadays?

In the past Chemcon, Rossari Biotech, Laxmi Organic, etc. got a huge subscription from the market. Now Clean Science and Technology is also having great IPO GMP . Any specific reason for their high performance?

How should we approach such (specialty chemical) IPOs? For the long term or just for listing gains?

Amid a bull run on stock markets, the initial public offering (IPO) market is witnessing a fierce storm. The list of companies seeking to make stock market debut is only growing longer to capitalise market exuberance. Nowadays, IPOs have become a good investment avenue for investors. The IPO market is a great way to make money in a short time as it offers high returns. By investing in IPO, people may sell shares at the point of profit on a listing day or thereafter.

What should you look before investing in IPOs?
While investing in IPOs can be a great way to grow your money, there are certain factors that one needs to consider before buying a company’s shares. Here are some key points to remember while investing in IPOs.

Credibility and the track record of a company:
Market potential:
Financial performance
Management quality:
Offer price

Thanks for this valuable text. Nevertheless, it is still not clear to me whether it is the most risky to invest in IPO. Risks seem to be easier to track, right?

The most important thing is to assess the stability of the company.

This is a fairly general parameter that includes many of the items listed earlier on topics.

In general, yes, but I have never met the word stability in the entire thread. This is at least important to say for contextual awareness.

In the bull run every and all IPO starts demanding premium as if it’s their right. But when the dreams of profit or targets are not realised then it becomes quite difficult to make money and in most of these cases losses are made. Thus, while subscribing for an IPO one needs to keep in mind the quality of the company and of course the listing price. In my simple opinion you should apply for IPO of those companies which actually make profit and are a bog name in their sector.

The most important thing, of course, is to focus on the development of the company, what are its plans, what can go wrong, what are the risks.

Well, you understand that sometimes companies just make a rustle behind which absolutely nothing is hidden.

Investing in an initial public offering (IPO) is a major choice that should be made after extensive study and analysis.
Before investing in an initial public offering, bear the following points in mind:

Recognize Your Financial Objectives
Understand the Business and Conduct Thorough Research on the Company
Recognize the Threat When Evaluating a Company’s Management
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I focus on companies that work in areas of interest to me, in which I already know. Investing in what you don’t know is too risky.

Thanks for the recommendation