IPO

Investors, both private and institutional, who believe that the company will grow, buy these shares. The volumes of shares the company sells and the price at which they are sold, determine the company’s new equity value. A private company usually has fewer shareholders, including the founders, their families and friends, and other financiers like venture capitalists who have invested in the company. Though most companies wait till they are reasonably strong and stable, companies with strong fundamentals and a strong profit potential can also qualify for an IPO, provided they meet the listing requirements. When a company goes public, the shares owned by the original investors become worth the public trading price.

IPO investments are done through a process called ASBA (Applications Supported by Blocked Amount) where the amount you want to invest is blocked in your bank account but is not debited from it. To apply for an IPO, you need to fill out a few forms with your personal details, which also includes your demat account number. Many online brokers including ICICIdirect offer facility to apply for an IPO online making the process convenient for investors. Alternately, you may also submit a hard copy of the IPO form to your brokerage provider. Post that, you need to wait for the company to allot the shares, which can take up to 10 days. Remember that SEBI has suspended physical share certificates. As such, once the shares are allocated, they are credited in the digital or electronic format into your demat account. The amounts you have blocked are debited fully or partially depending on the number of shares that are allotted.