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.