If you show curious in the stock market also known as share market then you may be observed the term just like What is IPO ?
It’s ok if you face some questions in your field it shows your growth in the particular field.
In this blog I am going to explain you some details about IPO. At the end of the article we’ll also explain you how it can be beneficial for you.
Every major query will be solved. Feel free about IPO.
What is IPO (Definition)
IPO stands for Initial Public Offer.
IPO is only for raising money from the general public by making them shareholder of the particular company.
There can be many reason of Initial Public Offer that will be covered further.
Companies have to meet to the security and exchange commission of the country before hold IPO.
Security and Exchange Commission of India is SEBI.
SEBI refers to Security and Exchange Board of India was established on 12th April 1992.
Why IPO is important
Company usually file the IPO in order to raising money from general public.
An IPO can be filed by both company.
What do I mean by that?
It can be the,
- New Company
- Exiting Company
There can be many reason of this offer.
Some of them are mention below.
If the company want to expansion in their company, they can file for IPO in the stock market.
To open another office in the city or may be in another state or country.
In Infrastructure, Marketing etc.
So, Capital is needed in case of expansion of Company.
Cut off Debt
In case of large amount of Debt and Interest on Loan of the company, IPO can be filed in stock market to raising money from the general public.
To pay off the creditors etc.
Exit of Previous Holders
In case of long list of shareholder whose dividend are yet to be pay, Company will be filed the IPO to exit them.
However it can not be said that after getting dividend those shareholder will be left out from the company they can be reinvest those amount of money.
That are the different concept.
How to apply for share online in IPO?
This is the duty of SEBI (Security and Exchange Board of India) to operate every activity of company so that there will be less chance of fault with customer.
To Apply for share in particular company you need to have both account.
- Trading A/C : To trade for share
- Demat A/C : To block the amount in Electronic mode
In this technical era everything is going to be easy.
Why not for apply in share ?
You know there is lot of way that helps to purchase share directly to the company.
Such application and online from website and also from investment bank.
It is not necessary that every share will be accepted by the company and they’ll give you share certificate.
That’s not always work.
As I mentioned that you have to open two account. Trading account as well as Demat account.
Suppose you have apply for share in XYZ co. You have also paid amount of this. That is usually known as Investment.
Your amount will be blocked in your Demat account because of ASBA.
ASBA stands for Application Supported By Blocked Amount. By using this way your amount will be blocked and stay in your account.
After the company accept your blocked amount will be transferred into company’s account.(It may be transferred into Investment bank i.e. usually hired by Company.)
In short you can apply for share easily using Zerodha.
For whole the process you can read this article.
What should I know before Investing in IPO?
Mostly people afraid in case of investment in stock market.
Also whenever they hear the term investment the only sentence that come in the mind is,
Will I loss my money?
Warren buffet become the big beneficiary from the investment . The reason behind this is Study.
That’s why I always recommend to people surround me about Education.
Education not only teaches you about book knowledge but also helps to become intellectual person as well as Discipline.
You have to study as well research about the market and ground trend.
Just go and visit the market ask some of the people about your query and know that you are not aware of the topic.
Learn from everywhere and give your best as much as you can to learn the procedure of the investment as well as making a profit.
The major way that you know the company very closely is to read prospectus of a company.
A prospectus of a company is the legal document that show all the related information about an investment offering for sale to the Public.
You can read prospectus at SEBI official website on the filing section.
People see the news every next day, This man is become a millionaire and billionaire by investing in the stock market.
As Beginner you should know what is Sensex and Nifty in the Stock market. You know the fundamentals of the Stock market.
When company wants to raise money from the general public they goes for file IPO.
Company hire Investment bank to collect the money and for marketing.
It is necessary to know that you should have trading accounts as well as Demat accounts when it comes to investing in IPOs.
Just leave a comment of your doubt, I’ll definitely consider.
Thanks for reading.
Disclaimer :Be sure to consult the experts before investing. We will not be responsible for any mistake and fraud. The purpose of the content is only to share knowledge.