ALL ABOUT IPO

WRITTEN BY: KIRAN KUMAR KAR

India is the second fastest growing economy as per economists and statisticians in the world over. The Bombay stock exchange (BSE), as it is called the indicator of economic strength or weakness of the country was a very slow growing economy till the late 80’s. After India opened its door to the world in 1990, the economy picked up at a very rapid rate. We have seen financial crisis, high inflation rate and high crude oil price in the time of 2008-09.At the same time GOI did various plan to revive the stock market. Also at end of 1st Q, Economy is growing at the rate of 6.1%. Economics like china and India have weathered global crisis. Also we know that , India has a largest market and immense opportunities. We always need solutions in various sector. Also we have seen that most of companies have came up with new product for public in market. I believe that in recent time NEW PRODUCT means IPO i.e. Initial public offering. It means The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

WHAT IS IT ?, Lets see

A stock market starved of enough good news turning up the decibels on the success of a few recent IPO. We know that allotment IPO guarantees a positive return. However, that’s misconception. In fact , investors are still carrying the baggage of the pre-liberalization era, when the controller of Capital issue used to decide how much capital a company can raise and at which price share should be issued. Typically, this price used to be much lower than what the company could otherwise have got. So the opportunity to make money at listing was much high higher,but the dynamics have changed completely. Now , it’s for the company to decide at what price it wants to sell its share, and investors should always keep in mind that promoter wil try to make the most of issue.

FACT BEHIND IPO

In the year of 2005, the total IPO hit the market, only 11.54% gave negative listing returns, while rest managed to remain the green .so, the chances of success were fairly good at around 90%.but the trend did not last very long. In 2006, 30% of total issues posted negative listing returns, so the percentage rose through 2007 and by 2008, about half of IPOs gave negative return on listing. The ipo drought of over a year was primarily due to bad market conditions.

IN THE TIME OF 2009

Most of experts have different opinion on the ipo market, one section is looking at the investors’ response towards IPOs of Adani Power and NHPC , which got oversubscribed around 21 and 24 times respectively. I believe that this two issue are indicating there is a revival in IPO market. In recent IPOs, the institutional and retail investor subscribed over 30 times and 2-3 times their allocated portion .in case of Adani power, the listing gain per share was no enough to cover interest cost. The listing of NHPC , from which investors had enough hopes, also failed to cheer the leverage investors. I feel, if listing gains from another 2-3 IPOs is not high, it may dampen investors’ sentiments. So investing in an IPOs would mean that you are there in the market for listing gains, while investing in a company would mean that you would like to hold the shares allotted in the medium to long run.

Buying the right stock at right prices is the key to investing.