All you Need To Know About IPOs

An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time, allowing it to raise capital from external investors and become a publicly traded entity on the stock market. IPOs are often undertaken by companies seeking to raise funds for expansion, debt repayment, or other corporate purposes. When a company goes public through an IPO, it issues new shares to investors, and existing shareholders may also sell their shares to the public.

Who Can Invest in an IPO?

Investing in an IPO is generally open to a wide range of investors, including:

1. Individual Investors: Any individual investor who meets the eligibility criteria set by the regulatory authorities can participate in an IPO. Typically, individuals need to have a demat account and a trading account with a registered brokerage firm to apply for shares in an IPO.
2. Institutional Investors: Institutional investors such as mutual funds, pension funds, insurance companies, and foreign institutional investors (FIIs) are also eligible to invest in IPOs. These investors often purchase large blocks of shares during the IPO process.
3. Non-Institutional Investors: Non-institutional investors, also known as retail investors, can participate in IPOs by applying for shares through the retail portion of the offering. Retail investors typically invest smaller amounts compared to institutional investors.
4. High Net Worth Individuals (HNIs): High net worth individuals who meet certain wealth criteria may also participate in IPOs. They often invest significant amounts in IPOs and may receive preferential treatment in the allocation of shares.

Process of Investing in an IPO Online

Investing in an IPO online involves several steps, including:

1. Opening a Demat and Trading Account: Before investing in an IPO, you need to open a demat account and a trading account with a registered brokerage firm. These accounts are necessary for holding and trading securities in electronic form.
2. Research and Analysis: Conduct thorough research and analysis on the company going public, its business model, financial performance, industry prospects, and IPO valuation. This information can help you make informed investment decisions.
3. Applying for IPO Shares: Once you have identified an IPO you want to invest in, you can apply for shares through your brokerage’s online trading platform. Fill out the IPO application form with the required details, including the number of shares you wish to apply for and the price at which you are willing to bid.
4. Payment and Allotment: After submitting your IPO application, you need to transfer the funds for the shares you have applied for to the designated bank account. If your application is successful, you will be allotted the shares, and the corresponding amount will be debited from your bank account. If oversubscribed, the allotment process is done based on a lottery system or pro-rata basis.
5. Listing and Trading: Once the IPO shares are allotted, they are listed on the stock exchange, and trading begins. You can sell your allotted shares on the stock exchange through your trading account once the shares are listed and trading commences.

It’s important to note that investing in IPOs carries risks, and investors should carefully evaluate the prospects of the company and consult with financial advisors before making investment decisions. Additionally, the IPO process and requirements may vary depending on the regulatory jurisdiction and stock exchange where the IPO is being conducted.

How to Increase Your Chances of IPO Allottment?

Increasing your chances of IPO allotment involves understanding the IPO process and adopting strategies to enhance your likelihood of being allotted shares. While there are no guarantees of allotment, here are some tips to improve your chances:

1. Apply for Multiple IPOs: Diversify your IPO applications across multiple IPOs to increase your chances of getting allotted shares. Applying for a variety of IPOs can help spread your risk and improve the probability of receiving allotment in at least one IPO.
2. Apply with Different Demat Accounts: If you have access to multiple demat accounts, consider applying for IPO shares through different accounts. Each demat account is treated as a separate application, increasing your chances of allotment.
3. Opt for the Retail Category: Retail investors often have a higher chance of IPO allotment compared to institutional investors and high net worth individuals (HNIs). If you qualify as a retail investor, consider applying in the retail category to leverage this advantage.
4. Use the Cut-Off Price: When applying for IPO shares, consider selecting the cut-off price option. By choosing the cut-off price, you allow the system to bid on your behalf at any price within the price band set by the company. This increases your chances of getting allotted shares, as the bid price will be set based on demand and oversubscription.
5. Apply for Small Lots: If the IPO allows for multiple lot sizes, consider applying for smaller lot sizes. While this may reduce the number of shares you receive if allotted, it also increases the chances of getting allotted at least one lot.
6. Participate in IPO Bidding Syndicate: Some brokerage firms offer IPO bidding syndicate services, where they pool together applications from multiple clients to increase the overall bid size. Participating in such syndicates can improve your chances of getting allotted shares.
7. Apply for IPOs with Strong Fundamentals: Conduct thorough research on the company going public, its business model, financial performance, and industry prospects. Prioritize IPOs of companies with strong fundamentals and growth potential, as they are likely to attract higher investor demand and oversubscription.
8. Avoid Last-Minute Bidding: Submit your IPO application well in advance of the closing date and avoid last-minute bidding. Early submission ensures that your application is processed smoothly and increases the chances of being considered during the allotment process.
9. Keep Sufficient Funds in Bank Account: Ensure that you have sufficient funds available in your bank account to cover the application amount. Insufficient funds may lead to rejection of your IPO application.
10. Monitor Market Conditions: Stay informed about market conditions, investor sentiment, and demand for IPOs. Consider subscribing to IPO alerts and news updates to identify promising IPO opportunities and make informed investment decisions.

While implementing these strategies can enhance your chances of IPO allotment, it’s important to remember that IPOs are oversubscribed in many cases, and allotment is subject to various factors, including market demand and company decisions. Diversify your investment portfolio and consult with financial advisors to mitigate risks and maximize investment opportunities.

Top 10 Upcoming IPOs in 2024

1. BoAt: Imagine Marketing Limited, the parent company of boAt, filed a DRHP with SEBI on 26 January 2022 for an IPO of Rs. 2,000 crores. This offer includes a 900 crores fresh issue of equity shares and an offer for sale amounting to Rs. 1,100 crores as described in the DRHP. Further, the company is looking to raise Rs. 180 crores through a pre-IPO placement. So far, the company is waiting for SEBI’s approval before it can float the IPO in the market.
2. Go Airlines: India’s popular budget airline Go Airlines aims to rake up Rs. 3,600 crores through its IPO. The face value of each share will stand at Rs. 10.
   Go Airlines has filed papers with SEBI for its initial public offering.
3. Ola: Ola is another major Indian tech start-up that will be launching its public offering in 2024. Although not finalised, various reports suggest that the Ola IPO would come with an issue size of Rs. 15,000 crores.
   It has recently wrapped up its pre-IPO funding round.
4. BYJU’s: Edtech giant BYJU’s, which was founded in 2012, has entered the unicorn club in 2018. BYJU’s is in the process of launching its public offering. Reports suggest that the public offering would help the company to fetch $40- $45 billion.
5. Bajaj Energy: Bajaj Energy is one of the major private players involved with thermal power generation. It has a gross capacity of 24,330 MW. The company intends to raise Rs. 5,450 crores through this IPO. Bajaj Energy IPO will consist of a fresh issue share of Rs. 5,150 crores with an offer for sale of shares worth Rs. 300 shares.
6. OYO Rooms: Founded in 2013, OYO Rooms is a leading digital platform offering hospitality services. The company has filed DRHP for Rs. 8,430 crores IPO, which would be a combination of Rs. 7,000 crores freshly issued shares and an offer for sale of Rs. 1,430 crores by its existing investors and shareholders.
7. Droom: Online automobile marketplace Droom is also planning to take the IPO route in 2024. It has filed papers with SEBI for Rs. 3,000 crores offering. This will include a fresh share issue of Rs. 2,000 crores with an OFS of around Rs. 1,000 crores.
   The proceeds will be used for a variety of expenses, including organic and inorganic growth initiatives, general corporate expenses and more.
8. Navi Technologies: Founded by Sachin Bansal and Ankit Agarwal, Navi deals with lending, microfinance, health insurance, and mutual funds. Navi has already initiated the process of its public offering. It will possibly file its DRHP in the first quarter of the next year.
9. MobiKwik: Leading digital payment platform, MobiKwik, has filed for its IPO in July 2021. MobiKwik IPO would be a combination of a fresh equity share issue of Rs. 1,500 crores along with an offer for sale by selected promoters and shareholders worth Rs. 400 crores.
   The platform currently offers its services to 3 million retailers and more than 120 million customers across the country.
10. ixigo: Travel booking platform ixigo is looking to take the IPO route and raise Rs. 750 crores through initial fundraising. It also seeks to collect Rs. 850 crores with an offer for sale. Two of its existing investors, Elevation Capital and Micromax, would be exiting partially through ixigo’s Rs. 1,600 crores IPO.
11. Penna Cement: Leading cement manufacturer Penna Cement is planning to raise Rs. 1,550 crores through its initial public offering. This IPO would be a combination of a fresh share issue of Rs. 1,300 crores with an OFS worth Rs. 250 crores. It has already received SEBI’s approval for its IPO launch. Penna Cement has a strong presence in Eastern and Southern India and comes with an annual manufacturing capacity of about 10 million tonnes.
12. Keventer Agro: Keventer Agro is one of the popular food and beverage companies in Eastern India. It is a part of the Keventer Group. It is looking to float an IPO to raise Rs. 800 crores. The company’s valuation is set to touch Rs. 2,500 crores after the public offering.
13. Fincare Small Finance Bank: Fincare Small Finance Bank has filed for its IPO back in May 2021. This IPO is going to be a combination of fresh share issuance of Rs. 330 crores and an offer for sale of shares amounting to Rs. 1,000 crores. Fincare Small Finance Bank had the highest growth rate in the country among all small financing entities between FY18 and FY20.
14. PharmEasy: API Holdings, the parent company of India’s leading digital healthcare platform PharmEasy, has filed for its IPO with market regulator SEBI in November 2021. PharmEasy IPO will have an issue size of Rs. 6,250 crores. This will be an entirely fresh share issue. No shareholder or investor will be selling off their stake in the company through this IPO.