An IPO is the first sale of a company’s shares to the public. It converts a privately held company into a listed one, after which its shares trade on an exchange.
The stages
- 1The company files a draft offer document with the regulator through its merchant bankers.
- 2After review, the Red Herring Prospectus is issued with a price band and issue dates.
- 3The issue opens for a defined window during which investors apply.
- 4Applications are tallied; the basis of allotment is finalised under the prescribed process.
- 5Shares are credited to demat accounts and the stock lists on the exchange.
Applying
Retail applications are made through ASBA or a UPI mandate. The amount stays blocked in your bank account and is debited only if shares are allotted. Unblocked funds are released after the allotment.
What to read before applying
- The risk factors section - it is the most informative part of any prospectus.
- What the proceeds will be used for, and how much is an offer for sale by existing shareholders rather than fresh capital.
- The financials over several years, not just the most recent one.
- Any related-party transactions and pending litigation.
Educational content. This article explains general concepts. It is not investment advice, does not recommend any security or scheme, and takes no account of your personal circumstances. Investments in securities are subject to market risks.