Initial Public Offering (IPO): Types, Benefits, and Upcoming IPOs in 2024

Going public is a crucial moment for any company, unlocking new avenues for growth. The process of an Initial Public Offering (IPO) is how private firms transition to become publicly traded entities, opening up their shares to investors in the open market. 

This article explores the complexities of IPOs—the different types, the benefits they offer, and the exciting lineup of upcoming IPO opportunities in 2024 that you can explore through your daily investment app. By understanding the IPO allotment process, you can potentially uncover ways to make the most of the opportunities.

Understanding Initial Public Offering (IPO)

When a company decides to go from private to public, they rely on the process of an Initial Public offering, or IPO. In India, companies need to go through an IPO process to offer their shares to the public for the first time. 

A company turns into a publicly traded company where traders and investors can trade in the open market to raise capital for different operations, including debt payoffs, expansion plans, funding, and research, to name a few.

The number of times a public offering is subscribed to on the BSE and NSE is known as the IPO Subscription. The demand for a particular IPO is shown by its IPO subscription status. In an IPO, an offering is considered oversubscribed if the subscription period exceeds one.

Also read: 5 Top Stock Brokers in India with Lowest Brokerage Fees: A Detailed Analysis

Types of Initial Public Offerings

Initial Public Offerings come in two primary categories.

Fixed Price Offerings

In a fixed-price offering, the price of the units or shares is set before they are offered to the public. The company determines a fixed price per share in this approach. This set price stays the same throughout the IPO. Companies usually collaborate with underwriters and financial experts to set this price in a fixed-price offering. 

In India, this type of IPO is generally favoured by traditional businesses for raising capital and investors for the transparent method. To participate in this kind of IPO, investors need to pay the full price of the shares at the time of the application. 

Book-Building Offering

When an organisation initiates an IPO, it provides investors with a 20% price band on the stocks in the case of a book-building IPO. Before the final price is set, interested parties place bids on the shares. In this case, the investors must indicate how many shares they want to purchase and how much they are ready to pay for each share. 

“Floor price” denotes the lowest share price, while “cap price” represents the highest stock price. The ultimate determination of the share price is made by investor bids.

Benefits of applying to Initial Public Offering

Applying for IPOs is advantageous for many reasons, some of which are mentioned below.

• Raising capital

The huge capital available after going public may significantly change a company’s growth trajectory. After becoming public, an ambitious firm could experience financial stability again.

Among other things, this way a business can support R&D, capital expenditure financing, hiring new staff, facility establishment, debt repayment, and the acquisition of new technology.

• More brand recognition

When a company goes public and gets listed, it becomes more credible and reputable to the investors. Companies that are listed and become public become more trustworthy than private companies. An IPO helps garner media attention for the company as well. 

• Opportunity to diversify

When an IPO takes place and the company becomes public, it gets traded on an exchange. Because no single investor holds a disproportionate amount of the outstanding shares of the business, investor diversity is increased. Consequently, investing in publicly traded companies’ shares can aid in portfolio diversification for investors as well.

• Cost-efficient acquisition

When a company goes public, it often offers its shares at a discount. This makes it possible for investors to purchase shares at a reduced cost. This might result in the development of long-term wealth should the business see rapid growth.

Also read: How to invest in stocks? A beginner’s guide to stock investments

Upcoming IPOs in 2024

IPO	Starting date	Closing date
Sunlite Recycling Industries Limited IPO	Aug 12, 2024	Aug 14, 2024
Positron Energy Limited IPO	Aug 12, 2024	Aug 14, 2024
Saraswati Saree Depot Limited IPO	Aug 12, 2024	Aug 14, 2024
Broach Lifecare Hospital Limited IPO	Aug 13, 2024	Aug 16, 2024

For more information on upcoming IPOs, click here. 

Bottom line 

Companies going public bring the promise of enhanced brand recognition, access to broader sources of capital, and the potential for portfolio diversification. With innovative platforms like the Dhanush app making the IPO application process more accessible, investors can conveniently explore these offerings and potentially capitalise on the growth stories of tomorrow.