Investing in the Stock Market is the best way to earn lucrative returns. However, these gains come with a risk. Hence, it is essential to study and understand Stocks carefully before diving into the ocean of the Stock Market. Now, there are different schemes worth investing in. But the most desirable one is Initial Public Offering. It allows to invest in a short period and benefit from the fresh stocks of a company.
These shares are newly issued in the market by an unlisted company. When you subscribe to them, you become a shareholder of the company. IPO is an avenue for companies to grow capital and for you to own profitable shares. But this depends on the objectives of the company. Hence, study it thoroughly before considering investing. Also, understanding how Initial Public Offering works is essential. Let us understand them:
Prerequisites
Before investing in any stock, you need the means to start your investing journey. This involves a suitable stockbroker. You need to choose between a discounted and a full-service broker. The former levies nominal charges while the latter equips you with trading knowledge. Choose the one suiting your investment needs. After this, you open a Demat and Trading Account to carry out investments.
Application procedure
After account activation, use a mobile application or trading platform for convenience. Use them to select the IPO scheme and choose the invested type to apply. Select the number of shares and bid price. Apply after entering the required details. Next, the mandate request gets sent for approval. Once you accept this request, subscribe to the selected Initial Public Offering.
Blocking and unblocking
Now, buying such stocks may or may not result in the allotment. When it does, it gets termed as blocking. Here, you subscribe to the company shares and become the shareholder. But when the shares are not allotted, the entire blocked amount gets unblocked. Under allotment, the requisite amount gets debited from your bank while the rest gets unblocked. The whole amount gets deducted if you allot all the shares.
Important considerations
As you invest in the company directly, understand its dynamics. For this, read the issued prospectus and go through the financial details. This provides clarity on its future goals and the amount it intends to raise. You can assess the risk and reward ratio to understand the potential it holds. Depending on the company’s performance, the share price rises or falls. Hence, analyse it thoroughly before proceeding.
Benefits
If you choose the right IPO based on calculated analysis, there is immense growth potential. You benefit from the budding strength of new businesses. If invested wisely, it also provides higher returns than other Mutual Fund schemes. You can also use the earned dividends to reinvest in the company for higher returns. However, this depends on its performance and prospects.
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund and IPO related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.
