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Nilesh Jaiswal
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Asked: 2021-09-13T04:42:05+05:30 In:

What is an IPO?

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What is Initial Public Offering?

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    1. Best Answer
      Professional

      What is an Initial Public Offering (IPO) in India?

      Companies/Firms Make Public Offers for Capitalization

      1. A company/firm can go for the Initial Public Offering, IPO to raise equity capital.
      2. The basic purpose of raising an IPO is to make a capital investment for better organizational growth.
      3. In fact, a company going public is a strategic decision that enables long-term solutions to capital raising, and better business development.
      4. Despite the financial help from the banks, a significant portion of the capital can be consolidated from the public in the form of debt and equity funds.
      5. The company/firm raises capital through public issues and invests the acquired public funds in the business houses. If the IPO-listed venture utilizes the money efficiently then it can show high performance and greater profitability.
      6. The process involved in making public as stakeholders in the company/firms is known as Initial Public Offer.
      7. The term Initial Public Offering, IPO, refers to the fact that a company goes public by offering new shares to the individuals or reselling the shares of the shareholders for the first time to buyers.
      8. A New/Old/big/small company or firm that goes public is called the issuer.

      Companies go Public to Reap Umpteen Benefits:

      1. A company does go public as it attributes many benefits such as IPO can be invested for business growth, acquisitions, diversification of portfolio, and even working capital requirements.
      2. The new shares provide liquidity to the equity shareholders.
      3. The liquidity factor of new shares enables shareholders to pay off existing debts if any.
      4. IPO leads to national/international level credibility and its keen visibility on the share market.
      5. Shareholders can have quick access to the equity capital.
      6. The existing shareholders can adjust their portfolios to strengthen or diversify their equity base.
      7. A company can include stock options to improve employee motivational levels and increase the chances of retention.
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    2. IPO Stands for Inital Public Offering. IPO is nothing but the process of selling shares of a company to public in stock market. The purpose of an IPO is to generate funds from public for the development of the company.

      Who can apply for an IPO?

      Any one who has a demat account can apply for the IPO.

      How many shares can I buy through an IPO?

      Interested candidates have to buy the share in multiples of lot size. Lot size will be declared by the ‘company at the time of notification. You have to buy minimum of 1 lot to participate in the IPO.

      The allotment process is carried out in lottery system.

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    3. Professional
      This answer was edited.

      Initial Public Offering: IPO is known as an initial public offering, where in the companies sell shares of a company to raise the capital.

      The shares are sold to individuals and institutional investors. The company can raise capital to seek new equity or even expand the trading operations of the existing holdings.

      Whenever an IPO is released in the open market in a colloquial sense it is known as free float. Through the process of allowing investors and retailers into the company’s fold the floating or opening to the markets the privately held companies transform to a public company.

      The shares in the IPOs are offered to three categories…

      1. Qualified institutional buyers
      2. Non-institutional investors, and
      3. Retail individual investors.
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    4. How an IPO works in India

      An IPO, or Initial Public Offering, is like a selling shares of a company in the stock market. Whenever the company decides to share its ownership/ shares with the public for the first time it offers IPO.

      The company’s partnership divides into small pieces called shares, and the management decides how many pieces to sell, how much percentage to sell, and at what price.

      The company also decides price of the share offered.

      People who are interested in investing in that particular company can buy these shares at the set price in the given period of time.

      The money raised from selling of these shares goes to the company, and utilized to grow the company or to clear the debts.

      After the IPO allotment, these shares can be bought and sold by anyone in the stock market.

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