IPO: Less known Secret to Enhance the Returns on your Money...
When a companyrnintroduces an initial public offering (IPO), it means that the private businessrnhas determined to issue shares to the common public and small investors for thernforemost time. This is the precise time when a company enables and decides torngo public with an IPO application listed in Indian stock markets.
An IPO is thernpreferred option accessible for businesses to raise capital, involvingrninvestment opportunities to small investors.
Benefits of IPOS
· rnEasy Access to High-Quality Stocks: Byrninvesting in IPOs, even small investors get access to superior quality unlistedrnstocks for comparatively low valuations. This capacity to get low valuationrnstocks is probable merely by an IPO. Once the stocks' listing occurs in thernsecondary markets, the probability of the company's valuations soaring isrnrelatively on a higher side, which puts off small investors from investing inrnleading companies. In recent years, we have seen IPOs of many superior qualityrnunlisted shares.
· rnDisinvestments of PSU Organizations: Therndisinvestments offer small investors opportunities to invest in higher qualityrnshares of PSUs. For instance, the prime outperformers of the preceding 15rnyears, Maruti was sold right to the public by the Government using the IPO.
· rnHigh Level of Transparency: An IPOrnis exceedingly transparent. The Red Herring Prospectus contains all of thernapplicable information and details about the company filing for the IPO. Fromrnmonetary information to its shares' precise pricing details, all the stuff isrnlaid out to the likely investors. Investors can get information on the companyrnmerely through company prospectus. There is no other basis for communication.rnHence, the institutional investors, insiders, and analysts do not havernpreference or edge over small investors regarding information accessibility.
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· rnApplication Supported by Blocked Amount: There is an exclusive benefit of investing in IPO over the customrnstock dealings. Application Supportedby Blocked Amount (ASBA) facilitates thatrnthe amount is accredited merely when the shares are directly allotted to therninvestors.
· rnDiscounts for Retail Investors: ManyrnIPOs provide discounts of 10% on the issue price of their shares right tornretail investors. This scenario enables small investors to single out thernstocks at a price that's even lesser than the overall issue price, offeringrnthem a significant benefit over big institutional investors as well as high netrnworth individuals. This is something that's not accessible in the secondaryrnmarkets.
· rnEasy Creation of Wealth: Byrninvesting in IPOs, one gets to chip in the wealth creation progression. Forrninstance, the issue price of the DMart IPO in the year 2017 was around Rs. 300rnper share. Now, the shares of DMart are trading at a much higher price. So, ifrnsomeone had picked up its shares by its IPO, there would be an incomparablernwealth generation for him.
Key Takeaways
For thesernsignificant benefits, an IPO is an exceptional investment opportunity for investorsrnlooking to turn a quick profit and people fascinated in creating long-termrnreturns.
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