In this article, you will know what is IPO, what are the benefits of investing in IPO, How to buy IPO in Zerodha?
What is IPO and full form of IPO
The full form of IPO is Initial Public Offering. IPO means when a private company is listed in the stock market for the first time and goes to sell its shares for the first time, then it is IPO.
After releasing the IPO, the private company does not remain private but becomes public because it also costs the public money.
Why does the company take out IPO and why does it sell its shares?
Let us understand with an example why the company takes out IPO and sells its shares: Suppose a company is 100 crores i.e. its total valuation is 100 crores.
Now the company wants that it should be international, for which the company assumes that 25 crores will be required.
Read Also: What is P/E Ratio? | Price to Earning Ratio
Now for 25 crores either the company will take a loan from the bank, then interest will also have to be paid on it.
But it is better that the company gets listed in the share market, after that the company releases its IPO, after which people will buy the shares of the company and that money will come directly to the company.
Due to which the company can increase the business further and it also has the advantage of the company because if the shareholders give money, they will come directly to the company.
What are the benefits of buying an IPO?
1. Buy cheap price and earn more
Whenever a company comes into the stock market and releases its IPO, then generally you get the share in the lowest price at the same time and after some time that price increases by 2 to 3 times.
Read Also: Stock Market Timings in India
For Example 1: Route Mobile limited’s IPO was released on 21 September 2020, then its issue price was approx Rs 350, and 7 days later i.e. on 28 September 2020 its price is approx 938 rupees.
For example 2: Happiest Minds technology’s IPO was released on 17 September 2020, then its issue price was approx 166 rupees. And on 28 September 2020 (10 days later), its price is approx 363 rupees.
2. Price Transparency
There is price transparency i.e. the price of that share will be written in your ordered document. So those who are small investors and those who are big investors will have the same information available to them related to those shares.
3. More Growth Chances
Whenever the company releases IPO, then either the company is thinking of expanding itself or it is thinking of paying its loan. So in a way the company is going to move forward.
So there are many chances of its price increases and that company growing. So these short risks are low and there are many chances that your money will increase a lot.
But without doing any research in any company, one should not invest in IPO because many times the price falls even after IPO.
Important information to apply in IPO
- You have to apply for IPO and if you apply then there is no guarantee that you will get an allotment.
For example: If 1 crore shares of a company are available and an application for 2 crore shares comes, then not everyone will get it. So after applying there is no guarantee that you will get it or not.
- In IPO, 2,4,6,8 such shares are not bought as much as you like, but it has a lot size as UTIAMC’s IPO has been released and its lot size is 27.
That is, if you want to buy his shares then you have to buy at least 27 shares and if you want to buy more than that then you have to buy in multiples of 27.
That is if you want to buy more than 27 shares, then (27 x 2 = 54) 54 shares will have to be bought.
- There is also a limit to the maximum number of shares you can buy. You can’t buy more than that even if you want.
- It is not necessary that you will get the same number of shares as you have applied for. It depends on the availability and how many applications have come.
How to Buy IPO in Zerodha
Step 1: To buy IPO from Zerodha, first, you have to go to the profile.
Step 2: After going to the profile, IPO is seen written in the console, then you have to click on IPO.
As soon as you click on IPO, then this interface will open in front of you.
It is written here that you can apply for IPO from 10:00 AM to 5:00 PM.
Below you are also seeing the IPO window, in which you will see from which IPO is currently available.
Right now 2 IPOs are visible, UTIAMC is seen at the top, so its minimum quantity is 27 shares. So you have to take at least 27 shares.
Price: will be between 552.00 to 554.00 and for this, you can apply till 1 October 2020.
LIKHITHA is also visible below it, its minimum quantity is 125 shares. The price will be between 117.00 to 120.00 and for this also you can apply till 1 October 2020.
Step 3: To buy IPO you have to click on Bid.
After clicking on Bid, you will first have to enter your UPI ID on the top through which you will make the payment.
Next to this, whatever bank is there, it has to be put.
Step 4: After this, select Individual Investor in Investor type. And here there is only the option of the individual, apart from this there is no option here.
But suppose if its parent company was Reliance and you already had Reliance shares, then you would have to select the other option that comes.
Step 5: Quantity comes after selecting the investor. As we told above in this article a minimum quantity of 27 shares has to be taken in this i.e. 1 lot.
If you want to take more than this, then you will have to take 2 lots i.e. you will have to take 54 shares. Either 27 shares will have to be taken or 54 shares will have to be taken or else will have to be taken in a multiple of 27.
Now its price was that you had seen that it can be between 552 to 554, so if you write an exact price and it is not found in that price then you will not get that share.
So that’s why people generally select Cutoff-Price, that is, you agree to buy at the price you will get.
In the rest, other price options have been given because, if you put the exact price, then you could have set 2-3 prices. So that’s why you can use these other options.
Otherwise, the cutoff price is the best because you will buy it at whatever price it is.
Step 6: After this, you have to tick under ticking.
Step 7: Now you see the amount payable below, if you have to pay Rs 14958 then click on submit.
As soon as you click on Submit, the request goes to your UPI and from there you have to make the payment. And as soon as you make the payment, your bid gets placed on the order.
If you have to meet then you will get it or else it will be cancelled and the money will come back to your account.
IPO means when a private company is listed in the stock market for the first time and goes to sell its shares for the first time, then it is IPO.
The full form of IPO is Initial Public Offering.
1. Buy cheap price and earn more.
2. Price Transparency.
3. More Growth Chances.