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Everything You Need To Know About Initial Public Offering

For those who have come across the term IPO or Initial Public Offering for the first time, you must be wondering what IPO means. IPO refers to a floatation that is offered by a company or an issuer in form of shares or some ordinary stocks.


IPO is said to be the first stock sale that is done to the public by some private company. Now you may get curious as to know why companies offer IPO? These kinds of offerings are usually made by the firms which are either new or are medium sized which are in dire need of funds in order to increase the dimension of their business.  In other words, IPO is also called public offering. Read on to find out more.

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Some Of The Most Common Terms That Are Associated With IPO

It's time you know closely about IPO so that it enhances your interest. Given below are some of the basic terms associated with IPO.

  1. Primary Market: The place where investors get the opportunity of buying a security that is newly issued like an IPO.
  2. Prospectus: This has the thorough details regarding a company and is designed and issued to make the investors well aware of risks that might come over along with investment.
  3. Book Building: This process is an attempt for determining the cost of the securities to be offered depending upon the investor’s demand.
  4. Over-Subscription: This is the case in which the number of the shares that have been issued is less than the demand for the shares that are offered in IPO.

Factors That Need To Be Taken Into Consideration

Would you take any step without knowing the pros and cons or ensuring the authenticity? There is a number of factors that one must take into consideration before applying for an IPO whilst in India.

  1. Any past record or the history of the firm about providing the IPO.
  2. The kind of services or products that are offered or sold by the organization and how likely they to prosper in the near future are.
  3. Any information regarding the firm having entered or being engaged in some collaboration with any technological firm.
  4. Different techniques and the project value of the plan being sponsored.
  5. How much risk aspect is involved in executing the plan?

Working Of IPO In India

How does the functioning of IPO take place? The process of IPO begins only after a company, in accordance with the SEBI, lodges a declaration of registration. The SEBI then goes through the whole listing declaration. The same is then done by the brochure that the sponsor has proposed and then some catalog before the offering of the share. It is then that the time and the value of the IPO are determined.

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How To Apply For IPO In India

While proposing for IPO, the shareholders have to fill a form which is to be carefully filled. The amount is then to be submitted using cash or cheque or even demand draft before the closing date. However, all this has to be done according to the guidelines that are mentioned. One should always keep in mind that IPOs happen only once for each company and therefore should be done very wisely.

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