How many of you remember the full-page advertisement on the first page of a newspaper stating an IPO of SBI Cards. Before the SBI cards, IRCTC was one of the famous IPOs in our country. Now let me ask one thing, how many of you have understood the true meaning of IPO.
Initial Public Offering (IPO) is the process when a private limited company lists its shares for the first time in the stock markets. Through the process of IPO a private company becomes public. It becomes Public as the company is getting funds from the public.
WHY COMPANIES GO FOR IPO?
IPO is a very significant process for any company.
- companies could raise huge capital from the public
- these funds help them to expand their business, increase product lines, or clear off old debts.
- more feasible than bank loans or issuing debentures which may charge them huge interests
- increases their exposure and credibility to the general public.
While discussing the positive sides, there some negatives too. The listing process of IPO is very lengthy and complex. Therefore, it includes a big initial cost. also when the company is listed, it may lead to dilution of ownership or control.
So in the above paragraphs, I was explaining from the point of view of a company. for individuals like us, IPO is a very good opportunity to buy fundamentally good companies at a discounted rate. Those who got IPO like IRCTC, Avenue supermarts ltd, Yash Chemex ltd, Dr.Lal Prathlabs ltd HDFC AMC got good returns from the very first day of listing itself. while as we all know some IPO didn’t perform as per the expectations.
while getting shares allocated in IPO becomes very hard to incase of popular companies.SBI Card IPO was one of the recent popular IPO in India which went to 26 times oversubscription. but it gave negative returns as it was listed just before the beginning of the COVID crisis.
UPCOMING IPOs IN INDIA
- Life insurance corporation (LIC)
- Burger King India
- Bajaj energy
- UTI Asset management company
- Equitas small finance bank
- National Stock exchange (NSE)
- Park hotels
Due to the sudden crash of stock markets in India and all over the world, companies coming with IPO now would be a wrong decision. They could think about it once the market starts recovers or bounce back.