Everything you need to know about IPO
When a company goes public, it taps on a large userbase to raise funds and meet its growth objectives
IPO has been the buzzword recently. Initial Public Offering (IPO) is a process through which a private company goes public by offering a part of its stake to public in form of stocks. From Barbeque Nation to Rakesh Jhunjhunwala-backed Nazara Tech, there has been an eminent IPO rush on the D-Street.
Why does a company decides to go public?
The main objective of an IPO is to raise capital for business. When a company goes public, it taps on a large userbase to raise funds and meet its growth objectives. A company starts offering an IPO only when it has gained some success and going public adds to its goodwill. It also helps companies to retain skilled employees via ESOPs i.e. employee stock ownership plan.
New investor? Here’s how you can apply for an IPO
The first step is opening a Demat account. Without a Demat account, you cannot trade in equities.
Once you have the Demat account, you can apply online by downloading the Application Supported by Blocked Account (ASBA) or through the broker’s website. ASBA is an application that authorizes the bank to block the application money. It is mandatory for every investor. After this, you can start with the bidding process.
Sometimes, an investor doesn’t get the share allotment or gets fewer shares due to excess demand. In this case, the bank unlocks the amount frozen.
When an investor gets a full allotment, he receives a confirmatory allotment note (CAN) within six working days.