Since the beginning of 2022, the equity markets have been incredibly turbulent. Investors are struggling due to divergent domestic and international economic outlooks. Primary markets have also been affected by this sentiment.
Only 16 corporations have raised almost Rs. 40,300 crores through IPOs in the past eight months. In contrast, in 2021, 63 companies raised a total of Rs. 1.18 trillion through the IPO method.
However, IPOs remain a hot topic in the investing community, which is understandable. They are one of the few ways to get in on the ground floor of a company that may be a success.
Trading apps have revolutionized the way people participate in financial markets. With just a few taps on their smartphones, users can access a wide range of investment opportunities, monitor real-time market data, and execute trades instantly. Whether you’re a seasoned trader or a novice investor, a trading app provides a convenient and user-friendly platform to stay informed about market trends, manage your portfolio, and take advantage of trading opportunities anytime, anywhere.
Investing in a company through IPO trading before it goes public is a great way to gain exposure to a new, high-growth company.
What is an IPO?
IPO is the abbreviation of Initial Public Offering. When a business initially offers its shares to the general public, it is known as an IPO. It is a method for companies to acquire capital and offers investors the option to purchase shares in a business they think will succeed.
Once the IPO comes out, the stocks trade in secondary markets. Before going for an IPO, companies must take approval from the SEBI (Securities Exchange Board of India).
In the case of an IPO, the company hires investment bankers to help it decide what type of securities to issue. These bankers determine the size of the IPO and how many shares will be offered and negotiate the pricing of those shares.
The company releases a prospectus containing information about the company and its business plan, including financial statements and shares of the company’s stock. The company then sells stock directly to individuals or institutions.
What motivates businesses to go public?
Due to the following factors, businesses list on public markets:
- Cost of capital: Reducing business costs is often the driving force behind companies going public. Companies want to reduce their debt load; so they have fewer interest payments to make. Businesses with higher debts must pay a larger share of their profit to lenders. Going public provides a way for these companies to lower their borrowing costs.
- Other benefits include: Obtaining funds from the selling of the shares, benefiting from a higher value, and giving the company’s founders and early investors liquidity.
How to apply for an IPO through a mobile app?
First, individuals will require a Demat account app, a Trading account, UPI ID, and a bank account to apply for an IPO.
Now, adhere to the steps below to apply for an IPO via a mobile app:
- Login to your trading app and enter the client code.
- Find the IPO tab and navigate to the active IPO section. From the current list of IPOs, choose the desired name.
- You must enter the number of stocks or the lot size you wish to bid on. Additionally, pick the bid price.
- Enter your UPI ID and press the submit button in the following step. Your UPI app will ask you to approve the transaction before the exchange accepts your bid.
- Watch for the UPI app’s mandate alert. Up to the IPO allotment date, the application money will be blocked.
If there is an oversubscription, your chance of receiving shares will depend entirely on great luck; if not, the quantity blocked will be instantly unblocked.
Several factors need to be known if you are considering investing in an IPO. First, you need to be aware of the risks involved. The stock price can suddenly increase or decrease during IPOs.
Before investing, you need to research the company. Ensure that you are familiar with their financials and company plan. Finally, avoid falling for the hype. A company may receive much media attention, but that does not always indicate it is a wise investment.
Although they carry risks, IPOs may be a fantastic opportunity to gain money. If you are willing to accept the consequences, you can invest in an IPO.
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