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IPO (Initial Public Offering)

 What is an IPO? (Initial Public Offering)

An IPO (Initial Public Offering) is when a private company offers its shares to the public for the first time in order to raise capital. Through an IPO, the company becomes publicly traded, allowing investors to buy and sell its shares in the stock market (NSE & BSE in India).

Example:

Reliance Industries, Infosys, TCS, Zomato, Paytm, and Nykaa were once private companies. They launched their IPOs to raise money from the public and got listed on stock exchanges.

Why and When Does a Company Issue an IPO?

A company issues an IPO mainly to raise funds for growth and expansion.

Reasons for IPO:

  1. Raising Capital – To fund new projects, pay off debts, or expand business.
  2. Increasing Public Awareness – Being a public company increases brand value and reputation.
  3. Liquidity for Early Investors – Founders and early investors can sell their shares.
  4. Stock Exchange Listing – Once listed, the company gets access to more investors.

When Does a Company Decide to Go for an IPO?

A company issues an IPO when:
✔ It has a strong financial background.
✔ It has consistent growth and profitability.
✔ It meets SEBI (Securities and Exchange Board of India) regulations.

How Do People Benefit from an IPO?

Investors can benefit from IPOs in two ways:

1. Listing Gains (Short-Term Profits)

  • If demand is high, the stock price may rise on the listing day, leading to quick profits.
  • Example:
    • Zomato IPO (Issued at ₹76, listed at ₹126) → Investors gained 66% on the first day!
    • Nykaa IPO (Issued at ₹1,125, listed at ₹2,018) → Investors gained 80% on the first day!

2. Long-Term Growth (Wealth Creation)

  • If a company performs well over time, its stock price increases, giving huge returns.
  • Example:
    • If you had invested ₹10,000 in Infosys IPO in 1993, today it would be worth ₹3-4 crores!

When to Apply for an IPO?

An IPO is open for subscription for 3-5 days. You should apply during this period.

Best Time to Apply for an IPO

📌 Apply on the 2nd or 3rd day → You get a better idea of demand and subscription rates.
📌 Apply under the Retail Investor Category → High chance of getting shares if demand is moderate.
📌 Look for Strong Fundamentals → Check the company’s financials before applying.

How to Apply for an IPO? (Step-by-Step Guide)

Applying for an IPO is easy and can be done online through your Demat account.

Step-by-Step Procedure to Apply for an IPO

✅ Step 1: Open a Demat & Trading Account

  • If you don’t have one, open it with Zerodha, Upstox, Angel One, or ICICI Direct.

✅ Step 2: Log in to Your Broker’s App or Website

  • Example: Zerodha Console → IPO Section
  • Example: Upstox → IPO Section

✅ Step 3: Select the IPO You Want to Apply For

  • Check the IPO details like issue price, lot size, and open-close dates.

✅ Step 4: Choose the Number of Lots & Price

  • Lot Size: Minimum number of shares you can apply for.
  • Retail Investors can apply at cut-off price for higher allocation chances.

✅ Step 5: Apply Using UPI Payment

  • Enter your UPI ID (Google Pay, PhonePe, Paytm, etc.) and approve the request.

✅ Step 6: Wait for Allotment

  • IPO allotment happens after 7-10 days. You can check your status on:
    • NSE/BSE website
    • Registrar’s website (like Link Intime, KFin Technologies)

✅ Step 7: If You Get Allotment, Shares Will Be Credited

  • If allotted, shares will be visible in your Demat account on listing day.

✅ Step 8: Sell on Listing Day (If Needed)

  • If the stock lists at a higher price, you can book profits.

What Are the Benefits of Investing in an IPO?

1️⃣ Opportunity to Buy at a Lower Price – IPOs often offer shares at a discount compared to their future market price.
2️⃣ Listing Gains – High demand IPOs give quick profits on the listing day.
3️⃣ Long-Term Growth – If the company grows, your wealth increases.
4️⃣ Easy Investment for Beginners – No need for deep stock market knowledge.
5️⃣ IPO Investment is Safe Under SEBI Regulations – IPO process is controlled by SEBI, reducing fraud risk.

Key Points to Remember Before Applying for an IPO

📌 Check Company’s Financials → Look for strong revenue and profits.
📌 Check Subscription Status → High demand means better listing gains.
📌 Don’t Invest in Every IPO → Some IPOs (like Paytm) listed at a loss.
📌 Use the Cut-Off Price Option → Increases the chance of allotment.
📌 Use Multiple Accounts in Family → To increase the chances of getting allotment.

Conclusion: Should You Invest in IPOs?

✅ If you are a beginner, IPOs can be a great way to enter the stock market.
✅ If you do proper research, IPOs can give excellent returns in the short & long term.
✅ IPO investment is risky but rewarding – Choose wisely!

💡 "Great companies are built by visionaries, but great investments are made by smart investors."

🔥 So, start your IPO journey today and build wealth for the future!

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