It is common to spot announcements or news pertaining to companies all set to launch IPOs in the media. But what exactly is an IPO and why do companies launch them? What are the benefits of IPO? Where does one look for the India upcoming IPOs list? Read on to find answers.
An IPO stands for initial public offering. A company issues or launches an IPO when it decides to go public — it is the process wherein a private company, not listed on the stock exchange, opts to raise funds by selling its shares to the public for the first time. The primary market is where shares are first sold to the public by thus far unlisted companies. The secondary market is where a listed company trades securities after it has sold its initial public offering on the primary market.
Why do companies take the IPO route?
- There are many benefits of IPO but one of the key benefits is that it helps raise much-needed funds for a company. A company may need an infusion of capital to grow and expand its presence or line of products/services. It may need capital for research and development or to clear debts. A good way to do it is to take the IPO route.
- One of the other benefits of IPO is to ensure that the future position of the company is good. By launching a successful IPO and raising funds, the company establishes a precedent for greater confidence among shareholders in its future. It also helps a company to be better placed for future financing from lenders. It helps in maintaining a solid balance sheet for the company.
- The other advantage of an IPO pertains to mergers and acquisitions. If a company becomes publicly listed, it ensures a smoother merger and acquisition process.
- Sometimes, an IPO serves as a good exit opportunity for stakeholders/private investors of a company, wherein they can get to sell off their stakes in the company.
- One of the many benefits of IPO is that it lends a certain amount of credibility and popularity to a company. It ensures that a firm and its products/services get talked about among the public; an IPO helps in creating a certain brand perception among future shareholders, lenders and analysts, among others.
Now that you know about the advantages of a company taking an IPO route, it’s time to understand what’s in it for an investor. An initial public offering lets an investor partake in the growth of a company at an early stage. One of the many India upcoming IPOs may help you cater to your financial goals as they provide returns over a sustained period. An IPO helps a long-term goal-based investor.
How would investors research, track and pick an IPO?
- It is important for someone looking to invest in an IPO to research a company and its finances carefully. By research, one should not just look at the balance sheets or profitability but also the quality of management and leadership, apart from the promoters.
- Also, investors would need to compare other India upcoming IPOs and pick the ideal option on the basis of their financial goals and the size of the IPO.
- One of the better ways to spot the right IPO is to look at the Draft Red Herring prospectus or DRHP. This document is the one-stop resource for all the information you need to know about a company. The DRHP is submitted to the Securities and Exchange Board of India (SEBI) for approval of the IPO, which means that it is authentic and has all the important information an investor needs. SEBI review of the document for sufficient disclosure follows and only after changes are made will the document of final offer be filed. The DRHP also provides insights into why the company is taking the IPO route and how the funds will be used.
- Investors would also need to understand the business or sector in which the company operates as that would help them make an informed choice.
Where to track India upcoming IPOs?
- Although news related to IPOs may be reported in the media from time to time, such news items may be sporadic or scattered. As someone who is keen on investing in an IPO or tracking upcoming offers, it is ideal to look at a place where comprehensive information is available in one space.
- You can check out websites of exchanges like the National Stock Exchange(NSE) and Bombay Stock Exchange (BSE) for upcoming initial public offerings. All an investor would need to click the list of IPOs coming up for reliable information. The calendars typically include security type, symbol, issue start and end dates, price range and date of listing.
- While you can also track news of upcoming IPOs via Google alerts, you can also keep track of any new offering in the country by looking up the website of your broking house, where the entire list of IPOs is made available, with the dates and the IPO size. Such a calendar helps you look up details of every upcoming IPO effortlessly. Once you click on the link, you can access further information about the face value, market lot and where the IPO has been listed. There are also websites dedicated to watching IPOs so you can look for them as well.
Now that you know all about an initial public offering, it’s time to keep track of the upcoming launches. The year gone by has seen many IPOs hitting the markets, in spite of the Covid-19 pandemic because the markets have recovered ever since the fall of March 2020 and have been on a sustained bull run, albeit with some corrections. Many more IPOs are expected to be launched in the coming months and the better way to ensure you track them is to look at the IPO calendar on the website of your brokerage house or the NSE/BSE websites.