Something new is always something fun. In all areas of life, something new always comes up that makes us twice as happy as we already are. For example, the launch of the iPhone 14 generated excitement among all existing iPhone users. Well, even though they already have one, they’d be excited to know that they now have access to a new iPhone. Well, although the existing one is completely fine, new means that it is paving the way for new opportunities.
Same stands for IPO: An IPO, which stands for Initial Public Offering, is a company that goes public for the first time. This means that you have access to become a partial investor in this company.
But first of all, what is an IPO?
Meaning of an IPO – Explained
An initial public offering (IPO) is the procedure of releasing new shares to the public for the first time in a private company. A corporation can raise capital funds from the general public through an Initial Public Offering.
How does an initial public offering work in India?
- A private company decides to raise money by going public.
- The company contracts with an underwriter, usually a group of investment banks, who determines the price range, number or value of shares to be issued, and other factors after assessing the company’s financial needs.
- The underwriter then participates in the preparation of the approval request (to SEBI), which includes information on the company’s past financial performance, including earnings, debts/liabilities, assets, and equity. The proposal also outlines the intended use of the money to 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 initial public offering is known as a “red herring prospectus.” The performance of the company in the past is also described.
- Executives participate in what is known as a “road show” to meet and attract potential investors to buy shares of their company.
- Although normally available for five days, an IPO can start and last anywhere from three to twenty-one days.
- Retail investors can make online offers for stocks right now through their banks or brokers.
- To participate in an IPO, investors must have a PAN card and a Demat account.
- The shares you bid on will be credited to your Demat account after the initial public offering subscription.
Most successful IPOs in the last 2 years
Here are some of the IPOs you can’t take your eyes off because they’ve been so successful in recent years:
a) The Railway Catering and Tourism Corporation of India
You have probably heard of the Indian Railways Tourism and Catering Corporation, or IRCTC as it is more often known. At Indian Railways, IRCTC monopolizes the provision of catering services, bottled drinking water and online ticketing. It launched an initial public offering (IPO) in October 2019 with an issue size of Rs 645.12 cr. 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 got off to a fantastic start on domestic exchanges, as predicted.
The shares were quoted at Rs 644, which is more than double the issue price, the listing gains for the investors who were allocated shares in this initial public offering were over 100%. The best part is about to begin.
You may be surprised to learn that the closing price of one share on February 19, 2021 is Rs 1,685. This comes after the shares hit an all-time high of Rs 1,994, which is more than 500% higher than the price when they were first issued three years earlier.
Investor confidence in the business and its strong financials are attributed to the rise in IRCTC shares. In FY2019–20, IRCTC’s after-tax profit increased to Rs 272 crore from Rs 220 crore in the previous year. Both the company’s stock price and earnings per share (EPS) increase year over year.
b) Technologies of happier minds
In September last year, Happiest Minds went public with an issue price of Rs 166 per share. With a premium of 111.4% over the issue price, it had a dynamic listing. Therefore, the share price at the time of listing at Rs. 351 more than double. On the day of listing, investors who received shares were overjoyed. This is in accordance with the current share price of Rs 541 of Happiest Minds Technologies Ltd. at the close of 19th February 2021. This translates to a return of 54.1% of the listing price and a return of 225% of the issue price in just five months.
The business was founded in 2011 at the beginning of the last decade and has grown significantly in just ten years. They provide engineering, digital transformation and IT infrastructure services. They are experts in cloud-based IT solutions, big data and analytics. The revenue growth rate of this company is reasonable each year, with profit after tax rising significantly from Rs 4 cr in FY 2018–19 to Rs 73 cr in FY 2019–20, which shows the strength of its foundations.
c) The HDFC AMC
One of India’s most anticipated IPOs, HDFC AMC, finally debuted in July 2018 at Rs 2,800 cr. Problem size. With 13 shares in one lot, the price range for each share was Rs 1,095 to Rs 1,100. Investors submitted numerous offers and multiple lots in a frenzy as they anticipated a grand opening. The share started trading for Rs. 1739.
This was a 60% increase on the day of listing, and on the same day it reached Rs. 1842.
The price of a share at market close on 19th February 2021 was Rs 2,930, a staggering 166% gain over the issue price of the share. At Rs 3,446, the 52-week high share price is much higher and speaks volumes about the confidence investors have in this business. Company fundamentals are also encouraging, with 20% revenue growth, 19% increase in after-tax earnings, and 34% return on equity.
Its assets under management (AUM) has grown by 28% and is also on an upward trend. They are industry leaders in the Indian AMC business.
New IPOs keep popping up every day, but the ones that make it to the end are always the ones with better strategies, products, and more. When you’re considering investing in an IPO, you may want to keep these factors in mind and walk with them.