IPO means Initial Public Offering. It is generally when a company wants to sell its shares to public to raise the capital. These shares are listed in the NSE (National stock exchange) or BSE (Bombay stock exchange) for the investors to trade.
There are two types of IPO:
1) Fixed Price Issue
2) Book Building issue.
1) Fixed price issue:
This is when the company study its debts, assets, and financial position. Based on this conclusion upwriters come up with how much money they want to raise and fix the stock price according to it and they provide this offer document to explain the how the price is decided. Investors can apply for the company shares during the IPO period.
2)Book Building issue:
In this IPO process can will give the price band (₹ X – ₹ Y) here X is floor price and Y is the cap price. Usually, investors can bid their amount in the mentioned price for the allotment of the lot. After this bids company will release the actual price of the share between the floor abd cap price.
How to apply for the IPO:
To apply IPO, you need to have the DEMAT account with any of the SEBI (Securities and Exchange Board of India) approved brokers like Zerodha, Angel One, Groww, Dhaan etc.,
In this we can easily find the options to apply for the IPO.
Key terms for IPO:
Issue size: Total value of shares offered by the company (E.g: 2000cr)
Lot Price: Value of one lot (Eg: 14,000 for 20 shares)
Price Band: ₹ X – ₹ Y price of the share on the allotment date will be between this price range.
Face Value: Original value of one share (e.g., ₹10).
Listing Price: The price at which the stock starts trading on the exchange.
Oversubscription: When total bids > shares offered (e.g., 20x subscription).