An Initial Public Offering or better word to say IPO is the process by which a privately held company or a company that is owned by the Government need to raise the funds by offering the shares to the public. In another word, an IPO is when a privately held company or a government-owned company such as LIC issues their stocks for the first time to the common investors.
An IPO is the chance to get that issuer company’s share before it enters the market or we can say before it starts trading at stock exchanges like BSE and NSE. So, it gives an edge to the investors who believed in that company and wants to invest in that before everyone else.
While coming with the IPO the issuer company has to submit the offer document to the market regulator. In India, the issuer company has to file the offer document such as Draft Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) to the market regulator SEBI. SEBI is also known as the Security and exchange board of India. After getting approval from SEBI company floats its IPO in the market.
Every company which is coming up with an IPO wants some kind of benefits to fulfil. Such as Facilitating some acquisitions or liquidity needs for CAPEX. Supporting and diversifying equity base and enabling cheaper access to capital. They want Exposure, prestige and public image for the company. Also, the issuer wants to Attract and retain better management and employees through liquidity equity participation. Sometimes the issuer company want to fulfil their needs of multiple financing opportunities such as equity, debt, cheaper bank loans, etc…
[…] company that gets SEBI approval can come up with an IPO. In order to IPO process and to protect investors from fraud the capital market regulator SEBI made […]