As the new year unfolds, it’s once again a time for old and new market investors to tread very carefully. Several unlisted companies would be attempting to break into the stock market.
This Article Includes:
What is IPO
2021, ‘The year of IPOs’
Reasons to Invest in an Initial Public Offering
What are the Steps to Investing in an Initial Public Offering (IPO)?
What is IPO Initial Public Offer?
The action by which unlisted companies make their debut on the stock markets is known as an initial public offering, or IPO. This is the point at which the corporation decides to raise funds from the general public via stock exchanges. Many investors hope to purchase shares in companies with reasonable valuations during their initial public offerings (IPOs).
The DRHP, or Draft Red Herring Prospectus, is the major source of information in such a process. This is a document that the firm develops that details its financial status, day-to-day operations, risks and strengths, and many other things that an investor could be interested in knowing.
2021, ‘The Year of IPOs’
The red-hot primary market in India, where companies raised a record Rs 1.18 trillion in 2021, is anticipated to remain active in the coming year, although much will depend on secondary market performance.
In 2022, there is a robust pipeline of IPOs. In the fourth quarter of 2021, more than 15 firms filed drafts red herring prospectus (DRHPs) on the main market, with plans to float their IPOs in Q1 2022. With the anticipated IPO of Life Insurance Corp. of India in the first half of 2022, investors are bracing up for the largest IPO in Indian capital markets history (LIC). Inflation, rate hikes, and the advent of the Omicron coronavirus strain might all shake up the stock markets in 2022, with the effect spreading to public share sales as well. Low interest rates and returns on the first day of trading are luring more retail and high-net-worth investors into the stock market. The primary market is expected to be strong in the coming year.
Many companies are planning an initial public offering (IPO) for 2022. On the list, there are a few well-known names. In 2021, the start-up world saw Zomato, Policybazaar, Nykaa, and Paytm go public.
Reasons to Invest in an Initial Public Offering
Benefits in Listing
The gain on listing day is one of the key benefits of investing in an IPO. Companies evaluate their shares and provide a price in their offer documents. You can apply for a specific number of shares at that price as an investor. Let’s say you get your shares and the company starts trading at a greater price than the offer price. Then you’ll be able to make a lot of money. A listing gain occurs when the price of the shares on the day they are traded is higher than the price you paid for the shares when you applied for the IPOs to invest in 2022.
IPOs Provide a Level Playing Field for Small Retailers
The Securities Exchange Board of India (Sebi) has established a number of rules and guidelines to ensure that small merchants have a fair chance of receiving shares in an initial public offering (IPO). A small investor may not have the opportunity to purchase shares on the secondary market.
IPO Rules are Strict
IPO markets have become more professional and safer in order to protect retail investors. The company’s performance, financials, risks, growth, and future objectives are all documented in the prospectus that it distributes to investors. This provides the investor with adequate data to consider before making a decision.
A shareholder is someone who invests in a company’s initial public offering (IPO) and receives shares. The company’s founders must now take steps to keep you invested in the company. They now have targets to meet in order to meet the profit levels promised to their investors and analysts. They understand that the stock price will rise or fall in response to the performance of their company.
Since the Beginning, Being a Part of the Company
When you work for a firm from the beginning, you have the opportunity to make quick money right away and over a long period of time. In the long run, this will boost your wealth.
For IPOs, the Sebi has constructed a process called application. This ensures that funds are deducted from your account only once you have been assigned shares at the time of listing. Until the allotted day, this money remains in your account, generating interest. If you have to acquire them on the secondary market, this may not be the case.
Top Upcoming IPOs in 2022
1. Adani Wilmar IPO
Adani Wilmar is a well-known name in the edible oil sector, with cooking oil under the Fortune Oil brand being one of its most popular goods. It is one of the country’s top FMCG companies, offering a wide range of products. The IPO will be worth Rs 4500 crore.
The country’s largest insurer, Life Insurance Corporation of India (LIC), is planning an initial public offering (IPO) in the January-March quarter of 2022. The government intends to sell stakes in LIC to meet its disinvestment objective of Rs 1.75 lakh crore this year. With the government selling a 5-10% interest in the insurance company, it is projected to be India’s largest-ever initial public offering. Through the share sale, the government is expected to raise between Rs 80,000 crore and Rs 1 lakh crore.
3. MobiKwik IPO
MobiKwik is a significant provider of Buy Now Pay Later (BNPL) and mobile payment services. The digital payment company aspires to meet the credit needs of the constantly growing online population. On this platform, services such as peer-to-peer payments via UPI, MobiKwik Wallet, and MobiKwik Wallet to bank payments are offered. MobiKwik’s initial public offering (IPO) will be worth Rs 1900 crore. It involves a fresh share offering worth up to Rs 1500 crore and a Rs 400 crore offer for sale.
4. Ola IPO
Ola is a cab-hailing service founded by Bhavish Aggarwal in 2010 and modeled after Uber in the global market. Ola has raised roughly $4 billion since 2010, and the projected IPO is expected to be valued at $8-9 billion. The initial public offering is projected to be worth roughly Rs 15000 crore.
5. BYJU’S IPO
BYJU’s is connected to education and provides online education to students. The app is primarily designed for students in grades 4 through 12. In addition, it contains information about competitive exams like as JEE, NEET, and IAS. Byju’s is anticipated to raise roughly Rs 4500 crore through its initial public offering.
6. PharmEasy IPO
The company offers a variety of health-related services, including teleconsultation, radiological examinations, and medical product and gadget delivery to patients’ homes. It intends to raise Rs 6,250 crore through the issuance of new equity shares.
7. The Bajaj Energy IPO
The Bajaj Energy IPO is one of Uttar Pradesh’s largest private-sector thermal power businesses. It is responsible for the development, financing, and operation of thermal power plants in India. The corporation has a total gross installed capacity of 2,430MW, with 450 MW coming from five operational facilities with a combined capacity of 90 MW. The company plans to raise Rs 5450 crores through this offering. The offer consists of a Rs 5,150 crore fresh issue and a Rs 300 crore offer-for-sale of shares.
8. Go Airlines’ Initial Public Offering (IPO)
GoAir is a ultra-low-cost- carrier (ULCC). Its domestic market share has climbed from 8.8% in fiscal 2018 to 10.8% in fiscal 2020, making it one of India’s fastest-growing carriers. As of January 31, 2020, the airline’s fleet inventory consists of 56 aircraft, with a network of 28 domestic and nine international destinations. Its initial public offering would consist of a fresh issuing of equity shares worth up to Rs 3,600 crores.
9. The Gemini Edibles and Fats IPO
The Gemini Edibles and Fats IPO is related to the edible oil industry. They are also one of the world’s top integrated palm oil plantation enterprises, with oil palm plantations in Indonesia as one of their core interests. It intends to generate Rs 2500 crore through an initial public offering (IPO).
10. National Stock Exchange
The country’s largest stock market, the NSE, is expected to go public next year. Through the share sale, the NSE hopes to raise Rs 10,000 crore. SBI, LIC, IFCI, IDBI Bank, Goldman Sachs, Stock Holding Corporation, Tiger Global, and Citigroup are among the company’s major shareholders.
What are the Steps to Investing in an Initial Public Offering (IPO) ?
Concentrate on the Initial Public Offering (IPO) Choice
It is critical to choose the initial public offering (IPO) to apply for. To gain a complete grasp of the business model, management experience, income stream, risks, strengths, the viability of the business plan, and the logic for the fundraising, one can obtain the company prospectus from the SEBI website.
Getting the Broker to Open the Required Account
For purchasing shares in an initial public offering, you must have the following three accounts.
Account in a Bank
When purchasing shares in an initial public offering (IPO), funds are transferred from a bank account to a trading account to complete the transaction. The bank account would be linked to the trading and Demat accounts by the stockbroker.
Account for Trading
This account allowed users to make buy and sell orders for IPO shares. A trading account can also be used to invest in derivatives, options, mutual funds, and other financial instruments.
The shares are held in this account in a dematerialized or electronic form.
Procedure for Submitting an Application
To apply, go to the broker trading platform’s website. For IPO applications, the ASBA option Applications Supported by Blocked Amount has been made mandatory
This provision allows banks to set aside an amount equal to the value of the shares that have been applied for. Bidding information, such as the number of shares applied for, must be shared. ASBA is available in both physical and electronic form.
Process of Bidding
Bidding for shares must be done according to the lot size mentioned in the prospectus. The lot size is the minimum number of shares that must be applied for during the initial public offering (IPO) application process.
The company establishes a price band, with the cap price as the upper limit and the floor price as the lower limit. A potential investor must bid for a specific number of shares if the bid price is within this range.
Stage of Allotment
It’s possible that demand for shares issued in the primary market outnumbers supply. As a result, one may receive fewer shares than originally requested for, or none at all. The money stored as ASBA would be unblocked in these instances.
Within 6 working days of the book-built issuance, if allocation is obtained, the investor will get a Confirmatory Allotment Note (CAN). The shares are credited to the Demat account upon allotment. Within seven days of the issue’s closing, the shares are listed on the stock exchange. Following the listing, investors can trade or sell their shares to profit.
The Indian IPO market is likely to have another record-breaking year in 2022. It will be interesting to observe which of these initial public offerings (IPOs) succeed in the first half of the year.