WHAT IS AN IPO

IPO termed an Initial public offering is a significant financial event in the stock market. Where a company offers shares to the public for the first time. This process is done by the company for the purpose of raising funds. In this process company owners typically the private ones sell off their ownership in the form of shares.

HOW AN IPO WORKS

When a company plans to expand and requires capital and resources. The company can make a process to convert into a public company. Section 18 of the Companies Act, 2013 allows a company to transform an existing Company to convert itself into a Company of another class by altering its memorandum and articles of association in the manner prescribed in Chapter II of the Companies Act 2013. Once the company has been transformed into a public company. It gets the power to issue shares and debentures of the company of whatever percentage is decided for the public and get the required amount of capital to raise funds.

PROCEDURE TO APPLY

Well to apply for an IPO or to own shares of a particular company there are are few steps that must follow.

– COMPANY’S FINANCIAL KNOWLEDGE

The very first and most important step needs to be followed. If you want to hold shares in a profitable company. If you are planning to apply for an IPO. You must study and make a financial analysis of the company by checking its financial growth over the period. If a company is growing in continuity on an average or more than average then the company is considerable.

– OWNING A BROKER ACCOUNT

To apply for an IPO you must have an account in a broker firm there are so many brokers available in the market you can choose yours wisely. Here is a list of some of the top brokers available in INDIAN market

• ZERODHA
• PAYTM MONEY
• ANGEL BROKING
• SHERKHAN
• GROW
• UPSTOCKS

– FILE AN IPO APPLICATION

The next step is to file an IPO application. The amount whatever it would be asked by the company per lot will be locked in your own account for 7-10 days. Once the company gets listed and it allots you shares then the amount will be deducted or if in case of a huge number of subscriptions you do not get allotted then your locked amount will be released.

– ALLOCATING PROCESS

The complete process of issuing shares takes up to 14 days. Once the shares have been issued you can have a watchover in your broker account. Most of the time if a company’s financial growth is good and gets listed with a high subscription rate then there are high chance the company will give a return of 50-100% at a minimum even more but there is a dark side as well if a company do not get a good amount of subscriptions or the financial growth is not that appropriate than there are chances company will list in negative and you may face loss but for a limited time.

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