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What is an IPO & how does it work?

19 Jan 2016 | 15:15PM

What is an IPO & how does it work?

Meet Ajay. He owns a medium size company in Mumbai.

To expand his business outside Mumbai, Ajay would need Rs. 1 crore.

To raise this amount, Ajay decided to sell a part of his business to the public by issuing shares through an IPO. When a company issues shares to the public for the first time, it is done through an IPO or Initial Public Offering.

Initial Public Offering (IPO)

Ajay decided to sell 10% of his 10 crore company by issuing 1 lac shares priced at Rs. 100 each. The shares were then listed on a stock exchange for the public to buy.

In time, Ajay’s business flourished & the share prices of the company increased. The investors who bought his shares through the IPO, sold their shares at a higher price & made great profit.

You can buy shares of an IPO by Partnering/Opening an Account with Angel Broking.

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