The Indian stock market is abuzz with a flurry of Initial Public Offerings (IPOs) from various firms this year. Notable companies such as Honasa Consumer, the parent company of Mamaearth, and Cello World are preparing for their market debuts.
Companies often decide to go public for reasons that include raising capital for expansion, debt repayment, research and development (R&D), creating shareholder liquidity, enhancing visibility and credibility, as well as regulatory compliance, according to Amar Ranu, another financial analyst. The IPO process involves several steps: hiring underwriters or investment banks, registering for the IPO by filing a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for compliance verification, applying to stock exchanges for share issuance, promoting the IPO through roadshows and advertisements, fixing the IPO price via book building, and determining share allotment with underwriters.
A term often associated with IPOs is 'anchor lock-in', which refers to a period during which pre-IPO traders are prohibited from selling their shares post-IPO. This measure is implemented to stabilize trading during the initial days after the IPO.
Investors considering participating in an IPO should evaluate multiple factors. These include the company's ability to grow within its market and its aggressive function within that market. They should also understand the financials and valuation of the company, study its management team, comprehend the objective of the IPO, and determine their investment horizon.
Eligible applicants for an IPO encompass a wide range of individuals and entities: anyone above 18 years old, retail investors, institutional investors, High Net Worth Individuals (HNIs), Qualified Institutional Buyers (QIBs), individual traders, business investors, and company employees. Investing in an IPO can offer several benefits such as growth potential, liquidity, early-stage investment opportunities, potential for capital appreciation, and portfolio diversification. However, potential downsides include high risk, lack of historical data, potential overpricing of stocks, and excessive hype surrounding the IPO.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.