IPO's

IPO or Initial Public Offer is a way for a company to raise money from investors for its future projects and get listed on Stock Exchange. In other words, an Initial Public Offer (IPO), is the first sale of shares by a privately owned company to the public. The companies going public raises funds through IPOs for working capital, debt repayment, acquisitions, and a host of other uses.

From an investor’s point of view, IPO gives a chance to buy shares of a company, directly from the company at the price of their choice (In book build IPOs). Many times there is a big difference between the price at which companies decide on their shares and the price at which investors are willing to buy shares and that gives a good listing gain for shares allocated to the investor in IPO.

From a company perspective, IPO helps them to identify their real value which is decided by millions of investors once their shares are listed on stock exchanges. IPOs also provide funds for future growth or for paying their previous borrowings.

Basis of Allotment (or Basis of IPO Stock Allocation) is a document published by the registrar of an IPO after finalizing the share allocation based on SEBI guidelines. This document provides information about the demand for IPO stock.

The IPO allotment information is categorized by the number of shares applied by investors. For each such category, detailed bidding information is provided in this document including the number of valid applications received, the total number of shares applied, the ratio of the allotment, and the number of shares allocated to the applicants.

The ratio of the allotment is a critical factor for IPO’s oversubscribed multiple times. This field tells how many applicants will receive a single lot of shares among a certain number of applicants. For example, ratio 1:8 means only one out of eight applicants received one lot of shares; ratio value ‘FIRM’ means all the applicants are eligible to receive a certain amount of shares.

The primary market provides investors, with opportunities to buy shares at a reasonable price before its upcoming IPO listing price. Additionally, retail investors also enjoy discounted rates while applying for Upcoming IPOs. Holding on to the shares also provides an opportunity to participate in the future success of these companies.