IPO (Initial Public Offering)
IPO means Initial Public Offering. It is a process by which a privately held company becomes a publicly-traded company by offering its shares to the public for the first time. A private company that has a handful of shareholders shares the ownership by going public by trading its shares. Through the IPO, the company gets its name listed on the stock exchange. A private company goes in for an IPO to raise capital to expand its operations, and also use the opportunity to reduce promoter and create value for them.
At the time of the IPO, shares are allocated to different investor categories such as Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs) and Retail Individual Investors (RIIs). When the demand is greater than the allocation that is the number of shares applied is more than what the issue size is open for, it is known as oversubscription. So, if the IPO has 5 times subscriptions; it is known as the IPO is over-subscribed five times. As an individual investor, you are allowed to invest in small lots worth Rs 10,000-15,000. As a retail investor, you can apply for a maximum of Rs 2 lakh in an IPO. Example of a recent IPO being that of Nazara Technologies which opened on May 17, 2021 with the issue price at Rs 1,101.