Initial public offering (IPO Part I)

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IPO Part I

IPO is a very popular concept now a day. we need to understand how this process goes. As we know companies always need money for expansion and to meet the needs of an evolving business. when it became nearly impossible for them to raise money from loans from banks for the long term then companies will always go for financial markets to raise money. in this case, the company can raise money from the primary market or from the Secondary market. when the company is new in the market then they have to go for primary market

In the primary market, we can directly buy a share from the company so we don’t need to pay brokerages for primary market transactions as only the buyer and company are involved in the transaction. To list this share in the market. The company first needs to find out investment banker. some times more than one bank will be involved in this process. but one bank act as a lead bank and the other as an assist banker. this banker act as an underwriter means if all of the shares will not get sold in the primary market then this bank will take the responsibility to buy all these shares. but before that bankers will always check the asset quality of that company and then they will decide to get appointed as an investment banker or not.

Investment bankers prepare one underwriting statement about detailed utilization of money and register that statement to the SEBI then This statement go under the scrutiny of SEBI then Draft Red hearing prospects will get filed by bankers and scrutinized from SEBI. If everything is good, then the company will get permission for IPO. after that price of the IPO will be get decided, whether to go for fix price issue or book building issue that will get decided and after completing all this procedure they can able to launch the IPO in the primary market and can declare the listing date

 For IPO we can apply directly online or offline nowadays through a broker as well. if price band is given like Zomato IPO between 72 – 76 RS/ share then we have to fill the form with the highest price that is 76 RS. but we will get IPO with a decided price at Issue. all these transactions will get handed by 2 depositories NSDL, CDSL. we can’t apply for an individual or a specific number of Share in IPO we must need to apply for a decided lot size  

That’s it for today we will get more information about IPO in the Next blog

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