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You would have come across this news lately that an Indian start-up turned unicorn and went ahead with the step to go public through their Initial Public Offerings. You would have heard about Zomato (online food delivery and restaurant discovery) IPO opening up for the subscription. So, the question is what is an IPO, and how does it work. We will find out the answer to this question through this article. In this article, we are also discussing on the eligibility to invest in an IPO.
IPOs refer to a process where a private company goes public by offering its shares to the commoners for the first time. Through this process, an investor can get the shares of the company in exchange for an amount. The companies may go public in this manner in order to raise capital for their growth and expansion. Therefore IPOs are regarded as a valuable mechanism for companies to broaden their business. It also provides an opportunity to retail investors to grow their money over time.
However, one should not have a false impression that all of them could be a great opportunity. One must assess the fundamentals of the company and its growth potential before subscribing to a company’s IPO.
The following conditions should be fulfilled by a company before going public through an IPO:
The companies that seek to go public through this process are required to follow the guidelines and regulations laid down by the capital markets regulator, SEBI.
SEBI scrutinizes such company to determine if it is eligible to file for an IPO. The procedure is as follows:
The eligibility criteria to invest in an IPO are:
Usually, Initial Public Offerings are regarded as beneficial as it allows the issuer company to enlarge the equity base and increase the exposure as well. It also benefits investors as they get an opportunity to get great returns. However, as stated above, all of them may not be a great opportunity therefore, one should be careful and aware about the financial metrics to know which opportunity to cling to. So do your research well and be watchful about the latest IPOs.
Read our article:Things to Know Before Subscribing to IRFC IPO
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