With a continued upward trend in the financial markets, companies feel the desire to earn benefits of market reflections. To expand and explore opportunities, businesses raise funds from different sources. Prior to becoming a public entity, well-established small private businesses reach private sources to get funds.
Investors in India use various stocks and other securities to invest their funds. Among traded securities, they heavily deal with the Initial Public Offerings(IPOs). IPO meaning in the financial market can be understood in terms of issuance of securities in the market. Every year, several financial and non-financial companies apply for IPOs in order to list on any registered stock exchange.
Dealing with IPOs is quite simple as you can invest your funds in these IPOs conveniently. Let’s have a detailed understanding of the IPOs.
In the financial market, Initial Public Offering refers to issuance of fresh securities to the general public by a company in order to become a public enterprise. Securities are issued over the counter through the primary market. With this issuance of securities through IPO, companies list their issued securities on the stock exchanges namely BSE, NSE, and others.
As an investor, you can get numerous benefits with an investment in initial public offerings. If you are thinking about investing in recent IPOs, you would be required to follow a certain procedure. Let’s have a look at it now.
Investment in IPOs through Demat account:
Unlike the traditional investment and trading system of the Indian financial system, IPOs investment is now facilitated with a simple demat account. A demat account is an electronic and digital space to hold financial securities such as stocks, bonds, mutual funds, and other securities. It also provides an opportunity to trade in the securities that are listed over the stock exchanges.
Various brokerage firms allow you to open your demat account with them in order to participate in the market. The account facility is available at low initial expenses and transaction costs. If you are going to invest your funds in IPOs, then you need to have a demat account.
How to open a Demat account to invest in IPOs?
As you need to have a demat account, following procedure should be used to open and invest funds for IPOs of the companies:
- Search for a broking house and analyse their initial expenses, transaction costs, annual fees, maintenance charges, and the facilities they offer to the intestors.
- Select a broker who provides the best services at reasonable charges among all competitors.
- To open an account, fill an application form with the required details regarding personal information, income status, residential address, banking information, and other relevant information.
- Several documents are required to apply for an account. These are, bank statements, PAN card, Aadhar card, ITRs , bank account information, driving license, passport, voter ID card, and income receipts.
- Brokers verify your profile and documents through the KYC process. Generally, 24-48 hours are required for KYC. Successful verification allows for a unique client investment ID and number.
- With this investor ID, you can place an order to buy or sell securities along with long-term investment in initial public offerings.
Important aspects to know before investing in IPOs:
Don’t put your funds blindly in any company. Always analyse various aspects and parameters that directly or indirectly impact your investment. Before making a bid for IPOs’ stocks and other securities, you should consider things values:
- Business model and structure of management.
- Vision, mission, and goals of the company.
- Preceding years’ financial values such as net profit, assets, turnover, net worth, price-earning ratio, and others.
- Trend of company’s growth in terms of profit and value.
- Market share of the company.
Big Upcoming IPOs
- Life insurance corporation of India
- Bajaj Energy Ltd.
- Aditya Birla Sun Life AMC
- Go Airlines (India) Ltd.
- PayTM and One97 Communications
- One MobiKwik Systems Ltd.
- Policybazaar Fintech Ltd.
- ESAF Small Finance Bank Ltd.
These are a few renowned IPOs that have initiated a process with the stock exchanges to issue initial public offerings to the general public.
With proper analysis of a company’s profits and other concerned data, investment in an IPO can be made without any hurdle.