In the present scenario, it is very unlikely that you have not heard about IPO. IPO stands for an Initial public offering and a company can go for it only once, though a company can raise money through other sources as well.
Need for IPO?
An IPO allows a company to raise funds from a large number of people and it also allows a company to get listed on stock exchanges (NSE/BSE). As everyone knows for doing business money or capital is needed and it is one source through which they can raise money.
How will IPO help a company?
Apart from providing funds for the growth of the company, it also helps in providing an exit for existing investors.
How IPO proceeds?
Whenever a company decides to go for an IPO, it generally hires an investment bank. Investment bank prepares a Red herring prospectus and also decide the base price for the shares which will be going to be issued to the public. Finally, a company needs permission from SEBI in order to get listed on the exchanges. Once the approval is given, usually within a few weeks the company get listed on exchanges.
How to apply for an IPO?
Applications for IPO are allowed through a bidding system. Here one has to bid for the price between the prescribed limit and number of shares one wants to get allotted. There is minimum and maximum limit for the number of shares one can purchase. Nowadays, IPO Applications are processed only through ASBA (Application Supported Block Amount).In the application process, the amount remains blocked in your bank account for the IPO application. The amount is debited only when the shares are allotted to you.
When IPO company get listed?
Usually, the company get listed within 10 days of bidding application closure.
When can one sell IPO shares?
You can sell your allotted shares as soon as the company get listed on the exchanges.
I hope this will be useful. Thanks for reading.