Module : IPO: A Complete Guide
You probably heard of an IPO, where a company goes public to issue shares and several investors go to subscribe to those shares.
Why do people like you and I go to subscribe to those shares?
Because, when we buy shares of any company, we will become a part of the company which is generally termed as a shareholder.
The best feature of an IPO is you can buy the shares at a low price and if you invest in a company that has a good potential to grow big, along with the company’s performance the share price is also going to skyrocket. You can make huge profits out of it.
You don’t believe it? Let’s take Reliance Industries as an example. If you have invested in Reliance Industry IPO worth Rs. 10,000 in 1977, it is worth more than Rs. 1.6 crores in 2019
These stories of riches don’t end with Reliance Industries.
Let’s look at some of the jaw-dropping numbers of an IPO.
There are a lot of lingos thrown around the primary market, that may not be understandable for everyone. This module takes you through the entire process of the IPO from the beginning to the end to make it all clear for you.
Before jumping into the process of an IPO, the allotment procedure, modes of an IPO etc, first let me tell you why the IPO segment is so vital for the companies, investors and the entire economy.
Now, let us talk about the current scenario of IPO activity.
The primary market in India is seeing tremendous growth. Within a span of just 2 months, the issue market has raised funds worth over Rs. 10,000 crores. Despite the IPO markets remaining inactive due to the coronavirus pandemic, demand for most of the recent IPOs has been robust.
The stock market has its best phase and one of the reasons for it is the rising number of companies going for IPO. It is going with the utmost enthusiasm as the number of retail investors entering the market is on the rise.
You may be surprised that the funds are pouring into the market like anything.
If you look at the growth of proceeds from the IPO activity, it’s been increasing since 2014 and experienced a sudden plunge from 2017.
But again, 2019 is a good start for IPOs.
But, let me tell you one thing, the number of IPOs and the proceeds are never proportional, i.e, the amount of funds raised through an IPO never depends on the number of IPOs.
So, the funds raised are increasing even with fewer IPOs. And it is a good sign for the Indian stock market.
In comparison to the global IPO activity, the Indian IPO market does not always go hand in hand. Let us quickly look at the graph of IPO collections year-wise. Since 2011, there have been times where the Indian primary market was having a tough phase while the global IPO market was in full swing.
You have seen the activity of Indian and global markets and you might have noticed that the number of IPOs is increasing. Along with that, the market capitalization has been increasing as well.
Now, the question is why is the market cap increasing?
From where are the funds pouring into the primary market?
This answer relies on many factors, such as reduced interest rates, awareness about the stock market, and investments.
How would it be if we took a deep dive into the world of IPOs?
You might be aware that IPO management is fast catching on, with the marketing, pricing of an issue as it is a crucial part of its success.
But, there is so much more that goes behind the launch of an IPO.
So, come on.
Let me take you through the entire process of an IPO that a company goes through, along with the other modes of fundraising, the purpose of fundraising, types of IPOs, and much more on IPOs.
From the next chapter, we are going to discuss the initiation of an IPO, such as why a company goes for fundraising, the stages of fundraising, etc.
So stay tuned!
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