Detailed

understanding of IPO
- Karan Singh
Table of Contents

01 What Is an IPO? 02 How an IPO Works in the

Indian Stock Market

03 History of IPOs in indian 04 The IPO Process

stock market
Table of Contents

05 Pros and Cons 06 Performance of an IPO in an

indian stock market
 01
What Is an IPO?
IPO - (Initial Public Offering)

Ek Initial Public Offering (IPO) wo process hai

jismein ek privately held company pehli baar
stock exchange par publicly traded banti hai.
IPO ke dauraan, ek company apne shares
institutional investors aur general public ko
bechti hai. Ye aksar expansion ke liye capital
raise karne, debt repay karne, ya phir early
investors aur company founders ko apni
investment monetize karne ke liye kiya jata
hai.
 How an IPO Works in the Indian Stock
Market
Indian stock market mein IPO conduct karne ka process kai steps aur Securities and Exchange Board of India
(SEBI) dwara set kiye gaye regulatory requirements ka paalan karne par adharit hota hai. Yahaan ek detailed look
hai ki India mein IPO kaise kaam karta hai:

 Pre-IPO Planning:

• Company aur uske promoters decide karte hain ki public jaana hai aur various intermediaries jaise merchant
bankers, legal advisors, auditors, aur underwriters ko appoint karte hain.
• Detailed financial statements, business plans, aur anya relevant documents prepare karne padte hain.

 Due Diligence and Documentation:

• Appointed merchant banker ek thorough due diligence process conduct karta hai, jo company ki financial
health, business model, aur regulatory compliance ko examine karta hai.
• Company ek Draft Red Herring Prospectus (DRHP) prepare karti hai jo business, financial statements, aur risks
ke baare mein detailed information contain karta hai. Ye document SEBI ko approval ke liye submit kiya jata
hai.

 SEBI Review and Approval:

• SEBI DRHP ko review karta hai aur additional information ya clarifications maang sakta hai. Jab SEBI satisfied
hota hai, toh wo IPO ke liye approval issue karta hai.
 How an IPO Works in the Indian Stock

Market
Pricing of Shares:

• Company, merchant bankers ke saath milkar, IPO ke liye price band decide karti hai. Ye fixed price method ya
book building process ke through ho sakta hai.
• Book building process mein, investors ek specified price range ke andar shares ke liye bid karte hain. Final
price received bids ke basis par determine hota hai.

 Marketing and Roadshows:

• Company aur uske advisors institutional investors ko IPO market karne ke liye roadshows conduct karte hain.
Ye roadshows presentations aur meetings involve karte hain taaki potential investors attract kiye ja sakein.

 Subscription:

• Jab IPO subscription ke liye open hota hai, investors ASBA (Application Supported by Blocked Amount) ya anya
methods ke through shares ke liye apply kar sakte hain.
• Subscription period typically 3-5 din tak hota hai, jismein investors apni applications submit karte hain.
 How an IPO Works in the Indian Stock
Market
 Allotment of Shares:

• Subscription period ke khatam hone ke baad, demand aur chosen pricing mechanism ke basis par investors ko
shares allot kiye jaate hain.
• Agar IPO oversubscribed hota hai, toh shares pro-rata basis ya retail investors ke liye lottery system ke
through allot kiye jaate hain.

 Listing on Stock Exchange:

• Shares allot hone ke baad, unhein stock exchange par list kiya jata hai aur trading shuru hoti hai.
• Company ke shares phir secondary market mein buying aur selling ke liye available ho jaate hain.
 History of IPOs in the Indian Stock Market
• India mein IPOs ka itihaas kai dashkon purana hai, jo desh ke economic growth aur regulatory evolution ko
reflect karta hai. Yahaan kuch key milestones hain:

 Early Days:

• Pre-independence era mein, IPOs rare the aur mostly British-owned companies tak seemit the jo India mein
operate karti thi.
• Post-independence, Indian government ne public sector enterprises banane par focus kiya, jinme se kai baad
mein stock exchanges par list hui.

 1990s Economic Liberalization:

• Early 1990s mein Indian economy ki liberalization ne IPOs mein ek surge laaya, jab private companies ne
expansion ke liye capital raise karna shuru kiya.
• Is period mein notable IPOs mein Infosys aur Reliance Industries shamil hain, jo aaj India ki sabse badi
companies mein se hain..

 Tech Boom and Bust (2000s):

• Early 2000s mein ek tech boom dekha gaya, jismein kai IT aur technology companies public hui.
• Dot-com bust ne, however, IPO activity mein temporary slowdown laaya.
 The IPO Process
• India mein IPO process kai stages involve karta hai, jo successful public offering ke launch ke liye critical hain.
Yahaan ek comprehensive breakdown hai:

 Preparation and Planning:

• Company apni IPO ke liye readiness evaluate karti hai, jismein market conditions, financial health, aur
strategic goals ko consider kiya jata hai.
• Key stakeholders, including board of directors aur major shareholders, public jaane ke decision par agree karte
hain.

 Selection of Intermediaries:

• Company merchant bankers, also known as lead managers, appoint karti hai, jo IPO process manage karne ke
liye responsible hote hain.
• Anya intermediaries mein legal advisors, auditors, aur underwriters shamil hote hain.

 Draft Red Herring Prospectus (DRHP):

• DRHP ek preliminary registration document hota hai jo SEBI ko submit kiya jata hai. Ismein company, uske
financials, business model, aur involved risks ke baare mein detailed information hoti hai.
• SEBI DRHP ko review karta hai aur additional information ya modifications maang sakta hai.
 The IPO Process
 Regulatory Approval:

• DRHP review karne aur regulatory requirements ke compliance ensure karne ke baad, SEBI IPO ke liye approval grant
karta hai.
• Company phir final Red Herring Prospectus (RHP) file karti hai, jismein issue size, price band, aur anya important
information ke details hoti hain.

 Pricing and Marketing:

• Company IPO ke liye price band decide karti hai, aksar book-building process ke through jahan investors specified range
ke andar shares ke liye bid karte hain.
• Roadshows aur marketing campaigns conduct kiye jaate hain taaki potential investors, dono institutional aur retail,
attract kiye ja sakein.

 Subscription:

• IPO subscription ke liye open hota hai, typically 3-5 dinon ke liye. Is period mein investors shares ke liye apply kar sakte
hain.
• Applications ASBA ya anya methods ke through submit ki ja sakti hain, jo funds ko block karte hain jab tak shares allot
nahi hote.
 Allotment and Listing:

• Subscription period ke khatam hone ke baad, demand aur pricing mechanism ke basis par investors ko shares allot kiye
jaate hain.
• Company ke shares phir stock exchange par list kiye jaate hain, jo secondary market mein trading ke shuruaat ka
 Pros and Cons of IPOs
Pros:

 Capital Raising:

IPO ka ek primary advantage substantial capital raise karne ki ability hai jo expansion, debt repayment, ya anya
strategic purposes ke liye hota hai.

 Increased Visibility and Prestige:

Public jaana aksar company ki visibility aur prestige enhance karta hai, jo customers, partners, aur potential
employees ke liye more attractive banata hai.

 Liquidity for Shareholders:

IPO existing shareholders ko liquidity provide karta hai, jo open market mein apne shares bechne ka mauka deta hai.

 Access to Cheaper Capital:

Public companies typically private firms ke comparison mein cheaper capital access kar sakti hain, due to increased
credibility aur transparency.

 Growth Opportunities:

Increased capital ke saath, public companies growth opportunities jaise acquisitions, research and development, aur
market expansion pursue kar sakti hain.
 Pros and Cons of IPOs
Cons:

 Regulatory Compliance:

Public companies stringent regulatory requirements ke subject hoti hain, including regular financial disclosures, audits,
aur SEBI regulations ke compliance.

 Cost:

IPO process expensive ho sakta hai, jo underwriting fees, legal expenses, marketing costs, aur anya related expenses
involve karta hai.

 Market Pressure:

Public companies constant pressure face karti hain from shareholders aur analysts to perform aur quarterly earnings
expectations meet karne ka, jo kabhi-kabhi short-term decision-making lead kar sakta hai.

 Loss of Control:

Founders aur existing shareholders company par kuch control lose kar sakte hain jab naye shareholders stakes acquire
karte hain aur decisions influence karte hain.

 Disclosure Requirements:

Public companies sensitive information disclose karne ke liye required hoti hain, jo competitors ke liye beneficial ho
sakta hai.
 Performance of IPOs in the Indian Stock Market
Indian stock market mein IPOs ka performance widely vary kar sakta hai based on various factors, including market conditions,
company fundamentals, aur investor sentiment. Yahaan kuch general observations hain:

 Short-Term Performance:

IPOs aksar apne initial trading days mein volatility experience karte hain. Kuch IPOs significant price increases dekh sakte hain, jabki
anya declines face kar sakte hain.

 Long-Term Performance:

Long-term performance company ki ability par depend karta hai ki wo apne business promises aur growth potential deliver kar sakti
hai ya nahi.
Historically, India ki kuch most successful companies, jaise Infosys aur Reliance Industries, ne apne IPO investors ko substantial
returns deliver kiye hain.

 Sectoral Trends:

IPO performance sector ke hisaab se bhi vary kar sakta hai. For instance, technology aur consumer-focused companies ne recent
years mein robust performance dekhi hai, driven by high growth potential.

 Economic Factors:

Broader economic factors, jaise interest rates, inflation, aur economic growth, IPO performance ko influence kar sakte hain. Ek
favorable economic environment aksar better IPO performance lead karta hai.

 Investor Sentiment:

Market sentiment crucial role play karta hai. Positive sentiment strong demand aur higher valuations drive kar sakta hai, jabki
 Conclusion

Indian stock market mein IPOs ko samajhna inke complex process,

historical context, aur various factors influencing their performance ko
recognize karna involve karta hai. IPOs companies ko substantial capital
raise karne ka significant opportunity aur investors ko potentially high-
growth ventures mein participate karne ka mauka offer karte hain, lekin ye
risks aur challenges ke saath bhi aate hain. IPO process ko carefully
navigate karke aur pros aur cons ko consider karke, companies aur
investors informed decisions le sakte hain taaki maximum potential
benefits achieve kiye ja sakein.
THANKS