Something new is always something amusing. In every walk of life, something new always pops up and makes us twice as happy as we already are. For instance, the launch of the iPhone 14 sure did bring up excitement for all the existing iPhone holders. Well, though they already have one, they would be excited to know that now they have access to a new iPhone. Well, though the existing one is completely fine, new means it’s paving the way to newer opportunities.
The same stands for IPOs – an IPO, which means Initial Public Offering, is a company going public for the first time. This means you have access to become a part investor with this company.
But, firstly, what is an IPO?
Meaning of an IPO – Explained
An initial public offering (IPO) is the procedure of releasing fresh shares of stock to the public for the first time in a private firm. A corporation can raise equity funding from the general public through an Initial Public Offering.
How Does an Initial Public Offering Work in India?
- A private business decides to raise money by becoming public.
- The company hires an underwriter, typically a group of investment banks, which determines the price range, the amount or value of the shares to be issued, and other factors after evaluating the company’s financial needs.
- The underwriter then takes part in the preparation of the application for approval (to SEBI), which includes information on the company’s prior financial performance, including profits, debts/liabilities, assets, and net worth. The proposal also describes the intended use of the money that will be raised.
- After carefully reviewing the application and confirming that all eligibility requirements have been met, SEBI authorizes the issuance of the “red herring prospectus” by the company.
- A document issued by the company that lists the number of shares and the issue price/price band (price per share) to be offered in the IPO is known as a “red herring prospectus.” The performance of the company in the past is also described.
- Executives engage in what is referred to as a “roadshow” to meet and entice potential investors to purchase shares of their company.
- Though typically available for five days, an IPO can start and last for three to twenty-one days.
- Retail investors can place online bids for stocks at this time through their banks or brokers.
- To participate in an IPO, investors must have both a PAN card and a Demat account.
- The equities you bid on will be credited to your Demat account after the IPO subscription.
Most Successful IPOs in the Last 2 Years
Here are some of the IPOs you just can’t take your eyes away from because they have just been so successful roundabout in the last couple of years:
a) The Indian Railway Catering and Tourism Corporation
The Indian Railway Catering and Tourism Corporation, or IRCTC as it is more often known, is likely something you have heard of. In the Indian Railways, IRCTC monopolizes the provision of catering services, packaged drinking water, and online ticketing. It released an initial public offering (IPO) in October 2019 with a Rs 645.12 cr issue size. There were 40 shares in a single lot, with a price range of Rs 315–320 per share. On the day of its listing, IRCTC had a fantastic beginning on domestic exchanges, as was predicted.
The stock got listed at Rs 644 – which is more than double the issue price, the listing gains for investors who were assigned shares in this IPO were greater than 100%. The finest part is about to begin.
You’ll be shocked to learn that the price of a share as of closing on February 19, 2021, is Rs 1,685. This comes after the stock reached a lifetime high of Rs 1,994, which is more than 500% higher than the price when it was first issued three years prior.
Investors’ confidence in the business and its strong financials is credited with the increase in IRCTC stock. In the fiscal year 2019–20, IRCTC’s profit after tax increased to Rs 272 crore from Rs 220 crore in the year before. Both the company’s share price and earnings per share (EPS) are rising year over year.
b) Happiest Minds Technologies
In September of last year, Happiest Minds went public with an issue price of Rs 166 per share. At a premium of 111.4% – over the issue price, it saw a brisk listing. Thus, the share price at the time of listing at Rs. 351 more than doubled. On the day of the listing, the investors who received shares were overjoyed. This is according to the current share price of Rs 541 for Happiest Minds Technologies Ltd. as of the closing on February 19, 2021. This translates to a return of 54.1% from the listing price and a return of 225% from the issue price in just five months.
The business was founded in 2011 at the turn of the last decade and has grown significantly in just ten years. They provide engineering services, digital transformation, and IT infrastructure. They are experts in cloud-based IT solutions, big data, and analytics. The revenue growth rate of this company is reasonable each year, and the profit after tax increased significantly from Rs 4 cr in the financial year 2018–19 to Rs 73 cr in the financial year 2019–20, demonstrating the strength of its fundamentals.
c) The HDFC AMC
One of India’s most eagerly anticipated initial public offerings, HDFC AMC, eventually debuted in July 2018 with a Rs 2,800 cr. Issue size. With 13 shares in one lot, the price range for each share was Rs 1,095 to Rs 1,100. Investors submitted numerous bids and multiple lots in a frenzy as they anticipated a huge opening. The share began trading for Rs. 1,739.
This was a 60% increase on the day of the listing, and that same day, it reached Rs. 1,842.
The price of a share as of the market’s close on February 19, 2021, was Rs 2,930, a staggering 166% gain over the share’s issuance price. At Rs 3,446, the 52-week high share price is much higher and says a lot about the confidence investors have in this business. The company’s fundamentals are also encouraging, with 20% revenue growth, a 19% increase in profit after taxes, and a 34% return on equity.
Their asset under management (AUM) has grown by 28% and is also trending upward. They are industry leaders in India’s AMC business.
Conclusion
New IPOs keep coming up every day, but the ones that make it to the end well and good are always the ones that come up with better strategies, products, and much more. When you are looking into investing in an IPO, you might want to keep these factors in mind and walk with them.
