IPO also known as Initial Public Offering is a procedure carried on by private limited companies to change their status to Public Limited companies. In other words such companies raise public funds for specific purposes so that they can carry on expansion plans and other work. The companies have to go through lengthy and tiring procedures for the same. They hire and undergo a lot of documentation work to get the approval of the stock market regulator. In India the regulator is SEBI and hence companies need to get the approval from SEBI for the same.
Before that they have to submit various information and give a lot of disclosures so that the public can know properly about the company’s business. This gives people a clear idea of what the company actually does and hence the investment plans can be done as well.
These procedures are undertaken to make sure that the company does legit business and also the public money is not invested into a shell, dummy or fraudulent company. Thus the SEBI takes care of all such things through step by step process. It begins with Hiring experts like underwriters and ends with IPO Listing.
Steps For IPO
Underwriter or Investment are the base or roots for the IPO Procedure. These organizations analyze and give out a valuation of the company and its crucial financial aspects. They present the positives and negatives behind the IPO and make sure that the companies get a clearance during the SEBI Verification procedure.
The investment banks also give out information about the deal from the behalf of the company, The details and the reasons for the IPO listing. Their Procedure suggests an amount to be raised with this process. They also present the information about Fresh Issue or Offer for Sale. Hence presenting the form of securities to be given through IPO.
Registering the IPO for SEBI Clearance
In step one a DRHP is prepared to be submitted to SEBI. After the submission SEBI verifies the information and approves or rejects the IPO based on the information presented and company profile. The DRHP contains all information regarding the company’s objectives, The risks associated with the company and its work, the objective behind the IPO launch, the financial details of the company and other legal disclosures.
Any extraordinary situation is also recorded in the document so that the shareholders are aware about all the company’s information.
Applying for the IPO in the Stock markets
After getting a nod from SEBI the company applied for getting listed in the stock exchanges in India (BSE and NSE). Thus the listing procedure begins from here.
Initiating marketing plans for the IPO
Post the IPO listing application to the stock exchanges the company creates a buzz about its launch in the open market. It tries to attract the investors to invest in its IPO. The company also goes through various modes of marketing to make sure that an adequate amount of issue is filled and it is not under subscribed. This step is important as the company is required to get a good subscription rate. The reason is it can get a better return while listing procedures.
Rolling out IPO Price Range
The company then presents its price range to raise money through IPO. This means the price quote per share.
After all such information the company initiates its IPO procedure. The Issue is rolled out and the investors and traders get 3 days to apply for the same. Post the three days the IPO closes for subscription and then the listing procedure begins.
Allotment and Refunds
The allotment information is given to all those who have applied for the IPO. The oversubscribed IPOs notify the people who have got the chance to invest in the company. After this the refunds for those who did not get a chance to apply for IPO is carried on.
Finally after all such procedures the IPO is launched into the open market. If the shares are oversubscribed and the market is stable then the company enjoys a great premium for listing and vice versa. However the listing gains are a major reason for the investors and major part of the shareholder community to invest into any IPO.
How To Fill an IPO ?
Currently the major two ways to apply for any IPO includes an application to bank or online subscription through the DEMAT account number. People are slowly moving towards the digital way. The reasons are :- quick and a better way to apply for an IPO instantly.
Zerodha offers a special service to directly apply for an IPO through its KITE portal. The steps for the same are :-
- Logging into Zerodha console through its website or KITE platform.
- Clicking the IPO link present in the Portfolio section.
- Click the Go Fashion (India) Limited IPO button and press the BID button.
- Entering the details asked for like UPI ID, Quantity and price.
- Submit the application form for the IPO.
- Visiting the application of UPI for approving the transaction.