When some small company decides to raise funds for its business operations and expand its business for growth, it moves towards the IPO. IPO is one of the gateways of finance for a company. IPO stands for Initial Public Offering which separates the public listed companies from private ones. It is a way for the private company to going public and sell the shares for the general public, the first time. Through this, the company enters in the stock market. When someone buys these shares of the company, he/she gets the ownership of the company equals the value of the shares. Now that a large no. of small companies are establishing every day, it is required to learn the ways of IPO. This is why we’ve brought this small guide to IPO to help you understand the working of IPO in India.
How does an IPO work in India?
The company which is intended to issue shares through IPO to enter the stock market first has to register itself with SEBI. SEBI is a securities & exchange board of India which controls and manages the entire process of IPO. SEBI is the market regulator of the Indian domestic market.
When the company submits its documents then the SEBI thoroughly analyze the submitted documents and approves only after being convinced. By the time it gets the approval from SEBI, it announces that SEBI approval is pending.
When the approval is done the company set the price of the share and no. of shares it plans to issue. Afterward, the company has to work on the types of IPO issues. Either it is fixed price or building book. Later, the company offers a range of prices which you need to bid within the range. When the bidding procedure is complete then the people submit their applications showcasing their interest in buying shares of that company. After receiving the applications from the people the company starts the allotment procedure of shares.
The final step in the IPO working is the process of listing the shares on the stock market. Once the shares are issued in the primary market, they get listed in the secondary market for investing and trading.
People then start buying and selling shares.
IPO Infographics
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