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The stock market is among India’s most profitable investment options because the stock market can generate substantial profits in a short time. Investors use both the primary and secondary markets to transact on the stock market. The secondary market entails trading shares directly on the stock exchange. In contrast, the primary market is a place where investors participate in Initial Public Offerings (IPOs). This article will explain in depth what an IPO is, what an IPO subscription is, how it works, and other pertinent information.
Table of Contents
What Does IPO mean?
First and foremost, let us define IPO subscription. An Initial Public Offering, or IPO, is the procedure through which a private business can list itself in the stock market by offering its shares to the public for the very first time. By offering fresh shares to the public, businesses flog them to raise money. However, current shareholders also have the option of selling their shares to the general public without having to raise new funds.
How Does an IPO subscription work?
Let us now turn our attention to the procedure for distributing shares following an IPO subscription. As the entire process involves several types of investors, there are different guidelines pertaining to each of them. Here is how the IPO subscriptions pan out for different categories of participants.
The Procedure for Allocating IPO Shares to Qualified Institutional Buyers (QIBs)
Merchant bankers allocate IPO shares at their discretion for Qualified institutional buyers. Additionally, in the event of an oversubscription, the shares are distributed to the QIBs proportionally.
The Procedure for Allocating IPO Shares to Retail Investors
As per the rules of the Securities and Exchange Board of India (SEBI), retail investors can invest upto ₹2 lakh in an IPO.
- If demand is lower or equal to the shares being offered: The full allocation shall be provided to retail individual investors (RII) for all legally submitted bids if demand is below or equal to the retail share portion offered in the IPO.
- If demand exceeds the number of shares available: The maximum number of RIIs shall be given a minimum bid lot if demand exceeds the allocation to the retail component of the shares sold. By dividing the total number of equity shares available for allocation to RII by the minimum bid lot, the maximum RII allottees are determined.
The Procedure for Allocating IPO Shares to High Net-worth Individuals (HNIs)
Wealthy individual investors are individuals who make significant investments in initial public offerings (IPOs) above ₹2 lakhs. HNIs are also given proportionate shares in the event of oversubscription. Additionally, financial institutions frequently lend money to HNIs, so they may invest it in initial public offerings.
What Is the IPO Subscription Status?
The number of Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) subscribers to an initial public offering is known as the IPO subscription. Any exchange will accept bids from investors for initial public offering (IPO) shares. The received bids are shown in real time on each exchange’s website as IPO subscription status. For the most recent IPO, the website publishes an IPO live subscription. Through an initial public offering (IPO), a privately owned firm can raise capital and become publicly traded. Investor bids are received for the shares offered during the company’s initial public offering. Most of the time, the IPO receives bids for more shares than are being offered. Consequently, the IPO is oversubscribed.
How to Check IPO Subscription Status?
After you invest in an IPO, you may be curious to check at what stage your application is. Moreover, it’s always advisable to keep an eye on your IPO subscription. There is no harm in staying updated. Hence, we shall now demarcate the process of checking your IPO subscription. The steps to verify the NSE IPO subscription status are as follows:
- Visit the NSE India website.
- Choose ‘New Public Issue’ from the ‘Trade Data’ section of the ‘Market Data’ menu.
- All of the live IPOs are listed on the next page.
- Next, decide which issue you want the subscription details for.
- The Aggregate Bid Details and NSE Bid Details are available on the following page.
- Cumulative Bids display the aggregate demand and bids from the NSE and BSE.
- Only the bids submitted by NSE are displayed in NSE Bid Details.
Why Should You Track the Status of Your IPO Subscription?
The IPO Subscription status report gives investors a fast overview of how much market interest there has been in recent, continuing, and mainline IPOs. Users are kept informed about the entire IPO subscription proportion on the BSE and NSE stock exchanges across QIB, HNI, and RII. The audience might evaluate market emotions or IPO participation using the subscription status. Check out what an IPO Calendar is and how to stay up-to-date on the latest upcoming IPOs.
Conclusion
Investing in newly listed public businesses has the potential to be very profitable. You must be aware, though, that there is some risk involved and no assurance of success. Initial Public Offerings often provide profitable returns to investors over time. If you study the business and its management, consider investing in it. To identify promising opportunities among the numerous monthly IPOs, consider learning how to track upcoming IPOs, as intelligent investors tend to outperform by making informed choices. You just need to identify the businesses with the most potential among the many IPOs that are listed on the stock exchange each month and invest in them. Keep in mind that intelligent investors consistently outperform.
Additionally, understanding the difference between an Initial Public Offering and a Follow-on Public Offering is crucial, as IPOs represent a company’s first-time issuance of shares to the public, while FPOs involve the sale of additional shares by a company that is already publicly traded, each with its distinct dynamics and investment considerations.