|
|
|
| |
Initial Public Offer (IPO)
|
|
|
What is an IPO or public issue?
When a company wants to raise capital by issuing shares to general investors, the process is generally called a public issue of shares or a primary market issue. If the company is a new entrant to the capital markets, the issue is called an Initial Public Offering or IPO.
What is FPO?
If it is from a company whose shares are already listed on a stock exchange, it is called a Further Public Offering or FPO. They are also called follow-on public issues, though sometimes the term IPO is being used in a generic form to describe such issues as well.
Prospectus
The prospectus is a documents issued by the company before IPO it has all the details about the company, the risk factors and the company's financials.
Apply for an IPO?
To apply to an IPO you have to fill an IPO application form. These forms are available with your share broker or investment consultant. After getting the form, you have to fill it, enclosed a cheques /DD for the amount required also you need to enclose a copy of PAN Card with this and deposit the form in the collecting centre for that IPO.
Allotment
At the time of allotment the shares will be directly credited to your demat account.
Thing To Remember when Investing in an IPO.
Track record of the promoters:Background and experience of the promoters, the management team and their expertise is one of the main factors that needs to be considered as they will be the ones responsible for the profitability of the company. Studying these things will help you avoid fly by night promoters and companies.
Financials:
The company's balance sheet is a very important document and investors should look at it carefully. Investors should look at not just the current balance sheet but also that of the last three to four years to get an idea of the company's growth and focus.
Prospectus:
Read the prospectus for the company carefully. The prospectus called as red-herring prospectus is a document that every company that goes for a public offering has to file with the SEBI.
Issue price:
Investors need to decide if the issue is worth investing in at that price. One way of checking the valuation is to look at the Price-Earnings (P/E) multiple.
The P/E multiple is the ratio of the share price to earnings per share (EPS which is listed in the balance sheet). P/E of the issue should be compared with the industry average and the other companies in that sector. |
 |
|
| |
|
