You no longer have to bother to understand the IPO related points

You no longer have to bother to understand the IPO related points

When any company around the world starts the process of expanding its work, it takes the first step in the form of 'IPO' and thus IPO becomes an important part of the journey of any company till it goes public.

Or rather - IPO is the first step for the company to grow, which strengthens the foundation of the company.

Many of us want to get involved in this process of the stock market through IPO. If you are thinking to invest in an IPO of a company or are going to invest, then it becomes very important to know some points related to the IPO.

Some important points related to IPO are as follows.

IPO Prospectus -

The IPO prospectus contains all the necessary information about the company. The company and investment bankers prepare it together. It contains all the information related to the company's prospects, risk, and finance. By reading this, you can guess the company and its IPO.

In fact, the company and Investment Bank together create an RHP-red herring prospectus and make it available to market regulator SEBI (SEBI). This red herring prospectus is called IPO Prospectus. This prospectus is publicly available and you can view it from the website www.sebi.gov.in.

Bid lot / Market lot-

These are a fixed share price from the company for the IPO and you can bid in the IPO in the same number of fixed shares or in its equal shares.

Example- The IPO of Wilson & Solar Company had just arrived, which had a market lot-19 That is, you can bid 19 shares of this company or you can bid in 19 multiples shares.

Fixed Price & Book Building (Price band) Issue -

The price of an IPO is determined in two ways- fixed price and book building price.

When the issue price of the IPO is fixed, it is a fixed price issue. For example, the fixed price of IPO of a company - 200 rupees. Per-share. At the same time, when the IPO price issues in a band, then it is the book building price.

For example, book building price of a company- (220-250) Rs. Per-share, it will become the price band. In this, instead of a fixed price, a band of the price is made, the price of IPO between the same band remains. The maximum and minimum prices are also determined in this. By the way, the issue price of the IPO of most companies is - book building only.

4.Issue Size-

The amount of funds that the company expects to raise from its IPO is called issue size. If a company is saying that the issue size of its IPO is 500 cr, then it means that that company is expecting to raise 500 crores through IPO.

5. Cut Off Price & Floor Price-

Looking at these two points while buying an IPO, we start wondering what do they mean?

So let's say the easiest way - Cut off-price is the IPO price during the last process of the IPO i.e. Allotment, while the floor price is the lowest rate at the time of bidding.

Over Subscription-

The number of shares the company is issuing for the IPO and its bid is higher than the shares in that IPO, it is called oversubscription.

For example, a company issues 3000 shares and the bids of those company's shares are equal to -9000 shares, it means that the IPO of that company has been oversubscribed 3 times.

Shares Allotment-

When we get shares according to the bid made in the IPO, it is called shares allotment. The more oversubscribed the IPO shares are, the lower the chances of allotment of our shares. Actually, allotment works on this formula - shares applied/oversubscribed

Example- If you have bid 1000 shares and that company has become oversubscribe 2 times, then you will get 500 shares only.

However, after the allotment of shares, the company gets listed in the stock market within 7 days.

It becomes extremely important for us to know these few points. For more information related to the IPO, you can Check This