Benefits
Benefits of Investing In IPO
Enhanced Liquidity
Gains from Listing
Fair Opportunities for Retail Investors
Our Help in IPO
Legal and finance taxation advice:
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Market research:
Investment research involves examination and analysis of various financial instruments, markets, and trends to aid investors in making investment decisions
Documentation & observance:
we guide delves into the framework of legal documentation for investors.
Launch Your IPO
To launch an Initial Public Offering (IPO), a company needs to navigate a multi-step process involving legal, financial, and regulatory considerations. This includes hiring investment bankers, preparing documentation (like the DRHP and RHP), securing SEBI approval, marketing the IPO, determining the price, and ultimately, listing on a stock exchange.
What is IPO?
Initial Public Offering (IPO) refers to the process where private companies sell their shares to the public to raise equity capital from the public investors. The process of IPO transforms a privately-held company into a public company. This process also creates an opportunity for smart investors to earn a handsome return on their investments.
Investing in IPOs can be a smart move if you are an informed investor. But not every new IPO is a great opportunity. Benefits and risks go hand-in-hand. Before you join the bandwagon, it is important to understand the basics.
There are 2 Type of IPOs
1.Fixed price offering
A fixed-price IPO is a type of initial public offering where the company offering its shares to the public sets a predetermined price for the shares. This price is decided before the IPO opens and remains constant throughout the offering period. Investors know exactly how much they will pay for each share upfront.
Key characteristics of a fixed-price IPO:
Pre-determined price
The company, in consultation with its underwriters (investment banks), establishes a fixed price for the shares before the IPO begins.
Transparency
Investors know the exact price they will pay for the shares, which can be appealing for those seeking clarity and predictability.
Simplicity
The fixed-price method is straightforward and easy for investors to understand.
Potential for under or overvaluation
The fixed price may not always accurately reflect the market’s true valuation of the company’s shares, potentially leading to under or overvaluation.
Investor demand is not a primary factor
The fixed price is set based on the company’s assessment, rather than being influenced by investor demand during the IPO process.
Fixed-price vs. Book Building:
A fixed-price IPO differs from a book-building IPO, where a price range is established, and investors bid within that range. In a book-building IPO, the final price is determined by market demand.
Example:
Imagine a company decides to launch an IPO at a fixed price of ₹100 per share. Investors applying for shares in this IPO will know they are paying ₹100 for each share they are allotted, regardless of how much demand there is for the shares.
Advantages:
Transparency
The fixed price provides clarity to investors.
Simplicity
The process is straightforward and easy to understand.
2.Book building Offering
In a book built issue for an Initial Public Offering (IPO), the issuing company doesn’t fix the share price beforehand. Instead, it sets a price range (price band) and invites investors to bid for shares within that range. The final price is then determined based on investor demand during the bidding process. This method allows for better price discovery and market participation compared to fixed-price offerings.
Here’s a breakdown of the process:
Price Band Determination
The company, with the help of underwriters (investment banks), establishes a price range .
Bidding Process
Investors, both institutional and retail, place bids indicating the number of shares they want to buy and the price they are willing to pay within the specified range.
Price Discovery
Based on the bids received, the company determines the final price (cut-off price) that clears the market, meaning the price at which the demand for shares is met.
Allocation
Shares are allocated to investors who bid at or above the final price.
Listing
The shares are then listed on the stock exchange.
Benefits of investing in IPO
- Liquidity
- Diversification
- Potential for high returns
- Access to capital
- Listing gains
- Advantage for retail investors
- Access to growing businesses
- Brand equity
- Raise money
- Shareholder authority
- Capital markets access
- Currency for acquisition
- Discipline management
- Early access
- Early investment opportunity
- Employee benefits
- Enhanced reputation and credibility
- Exclusive opportunities
- Gives visibility and credibility
- Good valuations
- IPOs
- Long-term growth
- More costs
- Perspective