How to Buy IPO Online in India
An investor’s introduction to the world of stock market is quite simple - all you have to do is open a demat account and trading account. But from there, the investor can go in any number of directions as the opportunities presented by the stock market are endless. One such opportunity that various investors in the market are always on the lookout for, are IPOs.
If you too have had an interest in knowing more about the what, why and how of investing in IPOs, here is a closer look at these queries.
What is an IPO?
The term IPO is an abbreviation that stands for Initial Public Offering, and is often also referred to as ‘going public’ with respect to a company. It refers to the process by which a private company raises capital by selling their shares to the general public. You can buy IPO shares on a stock exchange and trade with them by using your trading and demat account.
For the company itself, an IPO is an opportunity to become better regulated and more transparent. Moreover, the public offering brings with it an influx of capital that can help the company expand and grow at a faster pace. The process of IPOs involves the company selecting an underwriter and selecting the stock exchanges on which the shares of the company can be distributed publicly.
Why Should You Invest in IPOs?
Now that we understand what IPOs are, let us review why you as an investor should invest in them. Here are some of the primary reasons why investing in IPOs might be a beneficial move for you:
- By investing in the IPO shares of a company, you as an investor can gain a crucial advantage. By making the right IPO investment at an early stage, you also get an early chance to own stakes in a promising company that might reap high dividends for years to come.
- IPO investments are also a good option for investors looking for long-term investments in the market. This is because by investing in the IPO shares of a company, you also align yourself as an investor in the company’s long-term success.
- IPOs are also a more transparent form of investment since their price per security has to be explicitly stated for all public investors. Since the same information is available to all investors, big or small, IPO investments level the playing ground.
Before You Invest in IPO Shares
So, you might have familiarised yourself with the concept of IPOs as well as whether they are the right investment for you. However, there are still certain factors that you should consider before you take the leap:
- Before making an IPO investment, you must first determine your essential investment criteria. These include your investment capital, your risk appetite and your long-term financial goals. You can then be in a better position to select the IPO listing that best meets these criteria.
- Exercise caution before making your selection of IPO listings. This includes conducting a thorough round of research about the company’s fundamentals, valuation and historical performance.
- Make use of all sources of information available about the IPO listing, such as the details in their released prospectus. Pay attention to the company’s plans of action, expansion ideas, forays into other sectors and other important details about their long-term goals.
How Do You Invest in IPO Shares?
Once you have resolved the queries mentioned above, all that remains is to invest in the IPO of your choice. In order to invest in IPO shares, you must first open a demat account as well as a trading account. The trading account allows you to trade in the shares of your choosing while the demat account holds your purchased shares in an electronic format.
An important thing to note is that only demat accounts are typically required to purchase shares in an IPO. However, if you wish to sell those IPO shares to a secondary market in the future, you will need to both open a demat account and trading account.
An IPO or an Initial Public Offering, can no doubt be a lucrative investment opportunity for a variety of investors in the stock market. However, like all investments, any potential IPOs should first be researched and thoroughly vetted by the investor. You too can start investing in the various IPOs available on the stock market by opening a demat account and trading account with IIFL.