How to invest in IPO?

An IPO is the first sales of the shares of a company provided to the general public. Companies can raise funds by issuing either debt or equity. If a company has never issued equity shares to public earlier and they are issuing it for the first time, it is known as an IPO. When a company goes public it is known as the process of bringing an IPO. These shares which are being issued by a company is subscribed by the general public and later these shares will get listed at the stock exchange for trading. If the company that is already listed on the NSE or BSE, or other recognized exchange comes with a public issue later, it is called an FPO follow on public offer. They can serve as great investment options for investors, but before getting into the process of investing in them it is better to learn how to invest in IPO and the different intricacies of investing in IPOs.

Before jumping into the market, an investor should do the groundwork and understand how to apply for IPO and how the process of IPO works. The prospectus which is issued by a company is the invitation to a public, which states the financial details. They also include the money which a company has intended to raise and the type of shares. It might be advantageous for a trader to also learn about what is sensex before investing in IPOs.

The process of buying shares through an IPO:

1.    Getting a physical application form from a broker, distributor, or bank branch. These online applications are also available.
2.    Filling up the form with the details like a personal bank and demat account details.
3.    It also asks for an investor’s total investment amount.
4.    The allotment of shares is conducted within the first 10 days from closing date of the offer.

After a trader has understood how to invest in IPO, they can go ahead with the process of investing in IPOs. When they subscribe to these shares, they become one of the first shareholders of a company. So, a trader often gets shares at a low price. If a company is succeeding, their share prices rise as well. With this, an investor will be able to get a good deal.
Steps a trader should take before investing in an IPO are:

1.    Select:
The first step is to decide the IPO which an investor whishes to apply for. A trick to decide is by going through a company’s prospectus. A trader can find them on securities and exchange board of India’s website.

2.    Funding:
Investors can use their savings to invest in IPO. But if a trader does not have sufficient funds, some financial institutions also allow a trader to lend the money.

3.    Trading account:
A demat account is the main requirement to apply for an IPO. A demat account is a way to store a trader’s stocks and financial securities in an electronic format.

4.    Application process:
Traders can easily learn how to apply for IPO through different websites.

5.    Bidding:
A trader will need to bid while they apply for the shares, as per their lot size that is mentioned in the prospectus.

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