A company may get established with funds from angel investors, venture capitalists and it can even be self-funded. However, for a company to grow and develop, it must have sufficient funding. After it has been created, the owners/promoters may find it challenging to produce funds in order for the company to expand. Owners’ resources soon get depleted and funding from elsewhere has to be arranged. There are two options that owners of a company may consider in such scenarios. Either they may borrow funds from banks, or propose and offer an IPO (initial public offering). A less desirable alternative may be borrowing funds from banks as they charge heavy interest which a new company can ill afford. Offering IPOs is a better option for companies as investors investing in an IPO can cash in on a nascent company’s growth curve and the company can obtain funds for it to grow.
To invest in an IPO, you will require to open a Demat account. A Demat account is needed for any investments you may make, be it stocks or IPOs. A Demat account is an account that stores your invested assets in electronic form. Opening a Demat account is easy with any broker, who is a depository participants., or DP, like Motilal Oswal. A DP is authorised to open Demat accounts and hold shares on behalf of investors. In a Demat account, you can not only store investments in the form of IPOs, but also equity stocks and bonds. Once you have opened a Demat account, you can go ahead and invest in an IPO as you have an account to store your IPO assets. Investing in IPO company-related stocks is easily done online with a proficient broker like Motilal Oswal. However, there are more details about IPOs you should be informed about before you plunge in and invest.
In advance of your investment in any upcoming IPOs, there are some aspects of IPOs you should be aware of. An IPO, or an initial public offering, is, by definition, an offering of equity stocks by a company. These equity stocks are offered to the public for the very first time (hence ‘initial’) on the stock market (the open market). The company that offers an IPO does so to raise capital via trading IPO stocks and shares. When an IPO is traded on the open market, a fraction of stocks and shares is reserved for individual investors. The rest may be offered to high net-worth people and institutional purchasers.
You may already hold investments such as a mutual fund investment , or bonds. These may be held in a Demat account. You may want to allocate your additional funds to different asset classes and invest in an IPO with a view to diversifying your portfolio. Before you do this, it's vital that you learn about key features of IPOs mentioned below:
The first and foremost thing to do to apply for an IPO is to open a Demat account with a registered broker like Motilal Oswal. Opening a Demat account is easy online and all you need to do is follow these steps:
Since application to an IPO involves an investment in a company’s equity stocks, you need a Demat account opened. This is automatically linked to a trading account with most brokerage firms. When you choose an IPO to invest in, through your broker, you can easily invest in it by filling in an online application with your Demat details. This is an online menu-driven process and is very quick and simple. Your Demat account is invariably connected to your bank account so funds can be used for subscription to any given IPO.
You can expect the following benefits from investing in an IPO, whether it is for bonds, stocks or non-convertible debentures:
The moment you have a Demat account set up, and which is linked to an online trading account, you can make your choice of IPO to invest in. However, you will need to do some homework to know how to invest in IPOs. The IPO invested in should suit your requirements, both financially and based on your long-term goals. Here are some handy hints of how you should go about investing in an IPO:
By investing in an IPO, investors encourage the growth and upward path that any nascent company should take. The basis of capitalism lies in entrepreneurship and this is a key factor that plays a role in shaping any economy in the world. For economies to witness growth and prosperity, companies within it must grow, and grow with the backing of wealth. Investing in an IPO does just this. For companies to expand and investors to extend their wealth allocation, IPOs hold the promise of a win-win situation for both. If you wish to know about upcoming IPOs, an eminent broker like Motilal Oswal can help you find one to meet your investment demands. While you think of IPOs, you may just come across more investment avenues on Motilal Oswal. You can also download the MO Investor app and make your investment decisions while on the move.