Here's everything you need to know about IPOs
The IPO market is described as a primary market where firms look to access long-term capital
Despite the Covid19 pandemic, the financial year 2020-21 turned out to be a magnificent one for the primary market, with 30 companies raising over Rs 31,250 crore through initial public offerings (IPOs).
Bullish sentiments in the secondary market and robust liquidity helped this boom in the IPO market.
This financial year, Macrotech Developers also known as Lodha Developers and Power Grid InvIT IPO hit the market, and many big names are in the queue. Finance Minister Nirmala Sitharaman in Union Budget 2021 had announced that the Life Insurance Corporation of India (LIC) IPO would be completed in 2021. Issue size of LIC would be around Rs 70,000-80,000 cores. This will be the biggest IPO in the history of an Initial Public Offering in India. Earlier, the Coal India IPO was the biggest with Rs 15,200 crores.
What is an Initial Public Offering?
An initial public offering (IPO) refers to the process of offering shares of a private company to the Retail, High Networth Individuals (HNIs) and Institutional Investors in a new stock issuance and getting its name listed on the stock exchange. The IPO market is described as a primary market where firms look to access long-term capital.
How an Initial Public Offering (IPO) works?
Before an IPO, a company is considered private. As a private company, the business has grown with a comparatively small number of shareholders including early investors like the founders, friends and family along with professional investors such as angel investors or venture capitalists.
When a company reaches a stage in its growth process where it believes it is mature enough for the rigours of Sebi regulations along with the benefits and responsibilities to public shareholders, it begins to advertise its interest in going public.
Private companies at various valuations with strong fundamentals and proven profitability potential can qualify for an IPO, depending on the market competition and their ability to meet listing requirements.
Upcoming IPOs in 2021
In 2020 around 15 companies went public and more than Rs 25,000 crores were raised from the IPOs. IPOs like Happiest Minds, Burger King, Mazagon Dock Shipbuilders, Chemcon Specialty and Mrs Bectors subscribed more than 149 times.
Some reports suggested that in 2021, 30 companies are planning to raise more than Rs 30,000 crores from the markets.
Companies expected to go public in 2021 are LIC, Zomato, Nyka, Fincare small finance Bank, Nuvuco vistas, Indian Pesticides, Bajaj Energy, Studds Accessories, Apeejay Surrendra Park Hotels, Shyam Steel and Annai Infra Developers.
How can one apply in IPO’s online?
People can bid for IPOs through the offline and online method. In the offline method, an investor should have a Demat account then the form is filled up physically and submitted to the IPO banker or the broker. To apply for an IPO online, an investor has to open a Demat account and a trading account with a financial institution that provides this facility. Most national banks like SBI, PNB, ICICI, HDFC and popular stockbrokers such as Sharekhan, Angel broker offer the facility to apply IPO’s online.