How an IPO Unfolds & Benefits of Investing in an IPO

An Initial Public Offering (IPO) is a process through which a private company offers shares to the public for the first time, transitioning into a publicly traded entity. This is a significant event for any company, as it opens the doors for new capital, broader market exposure, and the opportunity for growth. In this detailed blog, we will cover every aspect of an IPO, from preparation to listing and the regulatory compliances involved.

An IPO allows a company to raise funds from public investors by offering its shares on a stock exchange. It’s the process of going from privately owned to publicly listed.

• Before even thinking about listing, the company must evaluate its internal structure, finances, and business model. This involves financial health check; strong management team and a scalable business model.
• Investment banks (Underwriters) help the company evaluate the market conditions and suggest the right timing for the IPO, determine the amount of capital to be raised, Price the shares based on company valuation & market the IPO through roadshows. Some well-known underwriters are Goldman Sachs, JP Morgan, and Morgan Stanley.
• Valuation process involves assessing company’s revenue, profit margins, and market potential. This valuation sets the issue price of the shares, which is crucial in attracting investors.

• The company must file the DRHP with the Securities and Exchange Board of India (SEBI) or relevant regulatory bodies.
• Once the DRHP is submitted, SEBI reviews it, and the company must also comply with regulatory bodies like the Registrar of Companies (RoC) and the Stock Exchanges (NSE, BSE). After approval, the company issues the Red Herring Prospectus (RHP), which includes the final details of the issue.

The roadshow is a critical phase where the company’s management and underwriters meet with institutional investors, fund managers, and analysts to pitch the IPO. The goal is to generate interest and get potential investors on board.

a) Price Discovery Process:

• Fixed Price IPO: The company and underwriters set the price in advance.
• Book Building Process: The price is determined based on investor demand within a given price range (e.g., ₹100-₹110 per share).

b) Lot Size and Bidding: Investors (retail, institutional, and HNIs) bid for shares in the IPO, with a minimum number of shares set as the lot size.

c) Allotment Process: After bidding closes, shares are allocated based on demand and the price band. In case of over-subscription, investors may receive fewer shares than they bid for.

After share allotment, the company is listed on stock exchanges like NSE or BSE. On the listing day:

• The stock opens for trading.

• The listing price may differ from the issue price based on secondary market demand.

• High demand may lead to a premium listing, while low demand may result in a discount.

• Early Investment Opportunity: You can invest in a company at its initial offering price, potentially allowing for long-term growth as the company expands.

• Potential for High Returns: If the company performs well post-listing, early investors may benefit from significant capital appreciation.

• Diversification: Investing in an IPO allows you to diversify your portfolio by adding a new stock with growth potential.

• Ownership in a Growing Company: By applying for an IPO, you gain ownership in a company, benefiting from its future success and value creation.

• Access to New, High-Quality Companies: IPOs often represent emerging companies with strong growth prospects, offering investors access to innovative businesses.

1. Visit https://ipo.adroitfinancial.com/ and enter the required details. If you're an existing Adroit client, simply log in using your mobile number. If you're a new user, you'll need to provide both your PAN number and mobile number.
2. Once logged in, select the IPO you wish to apply for.
3. Review the IPO details and enter your UPI address. After confirming the information, a UPI mandate will be sent to you.
4. Open your UPI app, approve the mandate, and complete the application process.

1. Open the TradeWhiz app and log in if you're a registered user.
2. From the main menu, select Apply IPO.
3. Choose the IPO you wish to apply for.
4. Review the IPO details and provide your UPI address. After confirming the information, a UPI mandate will be sent to you.
5. Open your UPI app, approve the mandate, and complete the application process.
   
   It’s that simple and hassle-free

An IPO is a complex process that requires months or years of planning, including internal preparation, regulatory compliance, roadshows, and the final listing.

In 2024, India's IPO market raised ₹1.19 lakh crore ($14 billion), making it one of the best years for IPOs in the country's history. This is attributed to the growing number of companies tapping the public markets for capital, ranging from start-ups to well-established giants.

The surge in IPOs is driven by an enthusiastic investor base, especially due to strong retail participation

Seize the opportunity to apply for an IPO now—don’t wait! Make sure you don’t miss out on this chance.

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