Hello friends,
Many people ask this question
IPO stock or existing stocks which are good?
One question
always comes into the mind of investors or traders that whether they apply for
IPO of the company? Let’s discuss the facts in very simple words or in easy
way.
Basics:
Before we go
to the discus, we should know that what is IPO & why companies bring IPO
into the Stock market. The full form of the IPO is Initial public offering. It
is the stage, when the management of the company has decided for selling
the shares to the public. How much percentage of the shares holding company promoters
want to sell that all depends upon the company management. It is fund raising
process adopted by the companies when it required.
Management
Motive:
Most of the
small companies want to generate capital from the market by selling their
shares. The funds generated by the company may use for Growth purpose or for
many other purposes related to company like pay off existing debt or bank loan,
for expansion of the company, for Research & development. Some companies
bring IPO's into the market to gain market shares. The most important step is
to take permission from the Security & exchange board of India.
Different
type of investor can apply IPO
Retail:
SEBI supports the dynamic interest of retail financial backers by
an extraordinarily planned allocation strategy, which empowered greatest
designation to singular financial backers.
This is done to guarantee high liquidity and a benefit making road
for people by exchanging shares in the optional business sectors.
HNI:
The portion of offers in an IPO issue is relative.
Institutional:
The allocation technique according to SEBI is optional.
Type of IPO’s:
Fresh Offer
In the
event that an organization is raising capital interestingly from the essential
market and getting the organization stock recorded on the stock trade, such an
IPO is known as another offer. This grows the investor base of the organization
and infusion of capital into the organization.
FPO
In
such a case, the organization is now recorded in the stock trade with
organization shares being exchanged the market. Be that as it may, the
organization is quick to raise extra assets through the IPO course. Such an
issue is called follow-on offer.
Purchase on Available offer
If
there should be an occurrence of a proposal available to be purchased, the
current advertisers and anchor financial backers sell a piece of their
shareholdings by means of an IPO. If there should arise an occurrence of
Government substances, the greater part of the disinvestment are through
proposal available to be purchased. In this manner, while the offer capital
doesn't develop, the offer brief delay goes through a change. The proposal
available to be purchased course may likewise be utilized by a firmly held
organization to list in the stock trade.
Why we should Consider IPO
In an
IPO issue, financial backers can purchase portions of the responsible
organization by putting away cash and become investors of the organization. Contingent
upon their shareholding, investors are qualified for profits, extra offers and
so forth dependent on the income of the organization and announcement by the
administration of profits or reward issue. Generally, value has created better
yields than other resource classes. In
this manner, it is reasonable for financial backers to hold a specific part of
value in their portfolio. Nonetheless, value is additionally viewed as
hazardous as the offer costs are inclined to visit change dependent on monetary
and non-financial occasions and frequently, with no specific explanation.
Over
the long haul, be that as it may, putting resources into the offer market can
help in abundance creation by putting resources into significant supplies of rumoured organisations with a hearty plan of action and monetary execution. An IPO is a
chance to pick winning stocks and put at a serious cost in the portions of
future industry pioneers that give important income via stock appreciation.
Because
of the sensible value, one can purchase numerous portions of the guarantor
organization at a sensible cost. After the organisation has effectively settled
itself, it would be over the top expensive to purchase various portions of the organisation as the current market cost would be high.
Another Option, Should we Apply for IPO or Not:
Whether to
Apply for IPO, this decision may differ from person to person. There are many
people in the market those had good experience with the Past IPO' of the
companies like Reliance Industries, Infosys, Mahindra & Mahindra, TCS if
they got allotment of the shares. But in many cases if the IPO gets over
subscribe or multiple times subscribe then retail investor get nothing. In such
cases it looks like at lottery. If the Company IPO is showing more premium in
the stock market then it will attract many retail investors but at the end most
of the investor get nothing in the form of IPO allotment of the shares. I am
not against the IPO market but it requires luck for getting allotment &
also required deep research before apply the IPO application.
There are
many listed stock into the Indian stock market & we all know the past
performances of those companies as well as price movement of company share
prices. So it is better to buy listed stocks with one click from your operating
system rather than try your luck just to get allotment of shares or not.
Example:
If a person
apply for an IPO of the having share price is 100 rs per share & the lot
size is 200 shares. It means if you apply IPO by using internet banking the
your bank will lien the amount of 20,000 rs. IF you will get allotment then you
are lucky otherwise you lost the opportunity in the secondary market for buying
other listed shares.
In nutshell, the
secondary market is better than to try your luck in the primary market.
You never know that how IPO share price will be listed into the secondary
market or whether you will get the opportunity to take a exit on the opening
day of IPO listing.
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