IPO (Initial Public Offering) 101
The Lion King movie showed Musafa holding Simba up for the entire nation to watch and admire. IPOs are a private company’s way of doing the same
To be a bit technical, we assume that your angel investors, VCs and PE firms are already invested in the company by now
Consider: Swiggy.
Swiggy is a private company delivering you food that you could’ve cooked, only if those meetings ended at their scheduled time. You admire Swiggy for their business but could not be a part of it. You are sad
Now, Swiggy needs some capital (money) for their expansion and other future plans. Realising the stronghold they have over their current business, they want to go public and list a part of their company in the securities market. With this, they would allow anyone and everyone with a DEMAT account to invest in the future of Swiggy. That’s what your IPOs are for in the most simplistic way
Now the pre-IPO process involves road shows and filing red herring prospectus (RHP) with ROC among other things, but this thread will only focus on the investment side of an IPO
Let’s start.
1. Get a frickin’ DEMAT account – costs less than your coffee
2. Look for the open IPOs in your trading app
3. Each IPO has an offer start and offer end date – we will cover Nureca’s IPO as an example in the next post, its offer starts on 15th Feb and ends on 17th Feb
4. Timings for investment – 10 AM to 5 PM IST
5. Lot size: Minimum number of shares you have to bid for in an IPO
6. Maximum purchase: ₹2 lakhs for retail investors per PAN card
7. Price band: Minimum and maximum price for you to bid on an IPO (396 – 400 for Nureca)
8. Allotment finalization date: when you know if you’ve won the lottery, 24th Feb for Nureca
9. Listing date: date on which the nation sees Simba for the first time
10. Amount to purchase: you can only purchase in multiple of lots, as in, 1 lot, 2 lots, … This amount is blocked in your account till the refund date. Refund date, on most occasions, coincide with the allotment date
11. GMP (grey market premium): shady amount referring to the additional price at which the IPO might open
Let’s end.
However, investing in an IPO requires you to analyze its kundli (RHP) and if you feel it meets your investment objectives, then go ahead. I’ll cover more on how to pick an IPO with the Nureca example in our next thread with some basic pointers on how you can increase your probability of winning this lottery.
Bye for now!