IPO – OVERVIEW
IPO is Initial Public Offering. Most of the companies, probably all companies start off their business with some amount of private funding. Like if I want to start my own business, how will I do that? I can invest my own money there or I can borrow from my parents or I can go to some investors.
So, like this, each and every company start their own business with their own private fund, as they grow bigger or grow up, they want to expand.
They want to hire more employees, maybe expand overseas, build another factory, they can do whatever they want to do.
But for doing so they need more capital cause its necessary and a very basic thing for any organisation. So that’s when they go to the Public Market.
That’s when they list to be publicly traded, to sell equity on the public market. So in that case instead of getting money from a bank or a private investor or their own family member, they decide to go to the public market.
This is when the term IPO comes.
So, let us take xyz Ptv Ltd is a company and they have decided to go to the public market because they need more fund for expanding or they want to start their new chain of business.
Now let’s think you as an investor in NSE or BSE, you can buy a small piece of this company.
Because you believe in this company and you think the value of the company will go up over time.
They take your capital, collects funds for different operations, ideally, they increase their profits, grow the company, and you get rewarded over time.
It is the same model, they are just going to the stock market, instead of pursuing private funding or from a bank. This is all about the IPO, all have a brief about this.
How Can We Buy an IPO?
Now we have already known about, what is an IPO. And is one of the easiest ways to be a part of big companies and not only being a part, you can easily make money out of it.
Almost 80% time it has been seen that you can earn much more profit by investing in it.
If the company is popular enough and people know about it, knows about their services and products use them and have faith in it, then investing on it will be a big result for you in future.
For that, you have to follow few steps which I’ll explain one by one there certainly few guidelines and process of doing so if you can learn about it investing or buying an IPO wouldn’t be that much tough for you.
Before starting I would like to give you two most important tips that I believe you all should follow before buying an IPO. Those are as follows:
1. Company’s Full Track Record
The first and foremost thing before investing in an IPO to keep an eye or to keep the full track record of the company, in one word you have to know every Past record detail of the company, like if they have done anything irregular in past, whether it is fraud or not.
Those who are quality companies will always be controversy-free, free from debt and will be on profit.
Sometimes sales can be down cause it depends on many things but at least you will get lots of assurance from a reputed company.
2. Know when to Buy, Be a Smart Investor
If someone is a newbie in this trading world it is very important for them to have patience, try to observe and act as a smart investor.
Always believe in the chart, even if you see the day 1 spike never buy on 1st day. It can slam harder later in the day. May be Gap down the next day or can gap up the next day.
It’s not predictable. What you have to do, you need to let that chart tell you where this stock is headed. First few days the stocks can go up and down, up and down.
Then stock starts consolidating. Starts trending higher. Don’t know how much time it will take one or two weeks later, that’s when you should attack.
If any company is open for 3 days in IPO ( which generally happens) always wait for the last day’s result.
How to Buy an IPO
1. Offline Method
Those who are not comfortable with the online system can follow the offline method.
Offline/physical forms are available in many brokerage firms as well as many banks.
You just need to fill-up the form also mentioning the price on which you want to bid on.
Plus, you need to attach a cheque with it. That’s it. It is that simple.
2. Online Method
Nowadays the most popular and the easiest way is the online method. It is the most preferred one.
Creating DEMAT Account is the most basic thing that you have to do no matter you are filling up the application for offline or online.
If you have your DEMAT Account with your bank like Axis Bank, ICICI Bank, then you can get the IPO option directly in the DEMAT ACCOUNT dashboard.
Select the quantity and bid from there and apply for IPO.
This is a must process. Providing your basic identity proof Like Aadhaar or Pan you can apply for this account.
This account is nothing but an online store for keeping your stock.
2. Contact your Broker
My suggestion would be if you are choosing the online method, that is you need to contact your broker and find out if they have an allocation of these shares.
They might have access to these shares so you need to call your broker and find out if they have an allocation of these shares that you can get your hands on.
Each brokerage will have a different allotment amount. If you have a good relationship with your broker.
He will let you know all the information about the hot IPO that you should buy/ how to do / when to do.
You can easily log-in through the trading portal given by your broker and fill the application form.
3. Zerodha & Upstox
And the payment will be done through UPI. It is better if you have the Bhim or G Pay app on your phone.
And for Upstox there is no use of upstox dashboard. You just must have your DP ID. And rest of the work will be done through your net banking.
It is one of the easy ways, it takes hardly 10mins to do. You just have to be very careful
As I have said earlier it is an easy process you just need to follow certain steps carefully. Like ASBA which means Application Supported by Blocked Amount.
It is one of the vital and compulsory nowadays. With the help of ASBA the banks get authorization to block certain money in your bank account.
It is a new process with this you make your bank aware of your purchase, but money will not be deducted till you are not receiving or you are not allotted with your shares.
Always keep in mind to fill the ASBA section while filling the IPO application.
Stockquantum was founded by Dharmendra Mukati in 2018. I am a Trader and Investor in the last 10 years.
I am writing here about stock broker review, broker comparison, IPO investment, Crypto currencies, technical analysis, fundamental analysis, sub brokership, mutual fund, personal finance, and our experiences.