An Initial Public Offering (IPO) is when a security is sold to the general public for the first time in order to raise capital. The companies opt for IPO’s in a bid to fund the capital requirements for the growth of the company.
Consider you wish to start a company of about Rs. 10 crores. For raising capital, you can take a loan from the bank if you wish to but you’ll be required to pay back the same along with interest in a stipulated time frame. So is there any legal way in which you can raise money and not have to return it back? Yes, there is a way in which both parties will benefit. This happens in Initial Public Offer (IPO).
Suppose, if 7 or more people wish to start a company of say around Rs. 100 crores. Out of that Rs. 100 crores say they have their own capital of Rs. 40 crores. So they can raise the remaining Rs. 60 crores from the general public. This process of raising capital from the public is known as Initial Public Offer or Public Issue. As the company is operating based on funding collected from the public, such a company is known as a Public limited company. The people who have invested their money in the company receive the shares of that company in exchange.
The general public can invest in an IPO in two ways. Firstly, if you are a client of the company that is being listed, then you may be offered the opportunity to directly participate or invest in the IPO. In this case, you will be able to purchase the shares at the price they are offering to sell them. The other way is to purchase the shares when they are resold in the public market once the IPO comes out. This scenario is the most common one amongst individual retail investors. An investor can place an order to buy the shares with his or her broker.
So if you wish to invest in an IPO then you can do so with the help of ASBA (Applications Supported by Blocked Amount). Here, the total amount that you wish to invest in the IPO will be blocked in your bank account after you apply for the IPO using ASBA and this amount will be deducted from your bank account only if you get an allotment in the IPO. If you don’t get the allotment of shares in the IPO, then the amount that was blocked earlier will get un-blocked and it will be once again reflected in your bank account.
There are several companies along with multiple tech start-ups and unicorn companies that will be going public this year. Below is the list of the Upcoming IPO’s for the year 2022 (including NSE & BSE):
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