What is IPO and How to Apply, Advantage and Disadvantage of IPO, Upcoming IPO 2020?

Initial Public Offering or IPO is the type of public offering where the company offers its shares to the Individual Investors (Retail) or Institutional Investors. Here the company raises funds from the public and Institutions for the existing business or to convert from private limited to Public limited.

Initial public offerings (IPO) can be used to raise new equity capital for companies, to legalize the investments of private shareholders of the company, and this enables the company investors to trade easily and liquidate the company shares in the share market.

Post-IPO Listing in Market, shares are traded freely in the open stock markets like NSE (National Stock Exchange) BSE (Bombay Stock Exchange) and it is known as free-float.

Hand turns a dice and changes the expression “SHORT TERM” to “LONG TERM” (or vice versa).

How to Invest in IPO (Initial Public Offering) or Important Stages in IPO:

OPEN DEMAT AND TRADING ACCOUNT

The first step for Investing in IPO is to Open a Demat and Trading Account with a stockbroker by submitting Identity Proof, Aadhaar proof, PAN Card, Photo, and Bank Details. Here your shares will be stored electronically.

APPLICATION PROCESS

Apply from your Account for the available IPO by doing some research on the company and Allocate the required fund from your bank account to buy the shares.

BIDDING

In this stage, the Investor has to select the required Lot size which should be equal to or more than the minimum lot size quoted by the company and Bid within the price range and the investor should block the required fund in the bank account for the same.

ALLOTMENT

In this stage, the Investor gets a full allotment of shares which he has applied in their Demat account, here in some case Investor might get fewer lots than applied lot size due to demand for the shares now the remaining fund will be returned to Investors bank account.

LISTING DATE

On this day shares will be listed in the stock market and now it can be traded in the stock market. Usually, some Investors sell the allotted shares and take advantage of Listing Gains.

Businessman hand holding red arrow up with the letters IPO on money coin stack arranged as a graph, concept of Increased investment

Advantages Of IPO (Initial Public Offering):

IPO gives the opportunity to buy the shares at the best price.
The Investor gets the benefit of both short-term gain and long-term gain.
IPO allows companies to raise capital from public
Listing in stock exchange gets more media coverage and publicity for the company.
Shares of company get easy liquidity by listing in stock exchange.

Disadvantages Of IPO (Initial Public Offering):

Company has to be more transparent in the business, and should disclose all the critical Information about the company.
Initiating IPO is very expensive and Time-consuming process for the company.
The IPO transaction process cost underwriter fees which is about 5% to 7% of the gross proceeds. Added to that legal fees, auditors’ fees etc. will add additional expenses for the company for initiating IPO.
Applying to IPO requires disclosing of your personal details along with the bank details so some might feel privacy is the concern has company handle all this data.
Listing price risk if the market condition is bearish the chances of negative listing is possible for the IPO shares Investors whose investment to grab the listing Gain would suffer the Loss.

UPCOMING IPO (Initial Public Offering) 2020 :

Company Name : Kalyan Jewellers Limited

Company Incorporation : 1993

Founders : T S Kalyanaraman

Revenue : Rs.10,100.9 crores

Business Type : Gold Jewellery Business