Ongoing IPOs & Upcomming IPOs – December 2024

December 2024 is a bustling month for IPOs in India, with companies across various sectors aiming to raise significant capital. Among the ongoing IPOs, Inventurus Knowledge Solutions leads the way with an issue size of ₹2,497.92 crore, followed by the International Gemmological Institute, which plans to raise ₹4,225 crore. The SME space is also active, with Yash Highvoltage and Hamps Bio aiming to collect ₹110.01 crore and ₹6.22 crore, respectively. Upcoming IPOs include Mamata Machinery, set to raise ₹179.39 crore, and Rosmerta Digital Services, targeting ₹206.33 crore. Notable big-ticket offerings like Snapdeal (₹1,250 crore), Boat (Imagine Marketing) (₹2,000 crore), and Avanse Financial Services (₹3,500 crore) are also on the horizon, promising a dynamic end to the year for investors.

What is an IPO?

Imagine a company opening its doors to the public for the first time. That’s what an Initial Public Offering (IPO) is all about. It’s when a private company decides to offer its shares to everyday investors and transforms into a publicly traded company. This major milestone helps the company raise money while giving the public a chance to own a piece of its growth story.

Why Do Companies Launch IPOs?

Companies go public for several reasons, and here are the main ones:

1. To Raise Funds: The biggest reason is to get money for expansion, developing new products, paying off debts, or other big plans.
2. Boost Visibility: Being publicly listed makes the company more visible and credible in the eyes of customers, investors, and partners.
3. Reward Early Backers: Founders, early investors, and employees can cash in on their shares.
4. Growth Opportunities: With more resources, public companies can pursue mergers and acquisitions more easily.

How Does the IPO Process Work?

Launching an IPO is no small feat. It involves several steps, requiring collaboration between the company, regulators, and financial experts. Here’s a simplified version of the process:

1. Hiring Experts: The company ropes in investment banks (called underwriters) to guide the IPO, decide on pricing, and promote the shares. Legal advisors, auditors, and registrars also join the team.
2. Filing a DRHP: A Draft Red Herring Prospectus (DRHP) is submitted to the Securities and Exchange Board of India (SEBI). This document explains the company’s financials, goals, risks, and how the IPO money will be used.
3. Regulatory Approval: SEBI reviews the DRHP to ensure all rules are followed. Once they give the green light, the IPO can move ahead.
4. Roadshows and Marketing: Company leaders and underwriters travel around to showcase the IPO to potential investors, like mutual funds, banks, and individuals.
5. Setting the Price Band: A range is decided for the share price, based on demand and the company’s valuation.
6. Bidding and Allotment: Investors bid for shares during the subscription window. Shares are then allocated based on demand, and the remaining ones are listed on the stock exchange.

How is the Issue Price Decided?

Pricing an IPO is a balancing act, and there are two main methods:

1. Fixed Price Issue: Here, the price is pre-decided and announced in advance. Investors know exactly what they’ll pay per share.
2. Book Building Process: In this method, a price range (the “price band”) is set. Investors place bids within this range, and the final price is determined by demand. This is the most common approach.

Factors that influence the issue price include:

• The company’s financial health.
• How similar companies are valued in the market.
• Current market trends and investor sentiment.
• Future growth potential and industry prospects.

Common IPO Terms Explained

Here are some key terms you’ll come across in the world of IPOs:

1. Underwriters: Financial institutions or banks that handle the IPO process and ensure shares are sold.
2. Draft Red Herring Prospectus (DRHP): A document that gives investors detailed insights into the company and the IPO.
3. Price Band: The range within which investors can bid for shares in a book-building IPO.
4. Lot Size: The smallest number of shares an investor can bid for in an IPO.
5. Oversubscription: When more people want shares than the company has offered.
6. Listing Day: The day the company’s shares start trading on the stock exchange.
7. Lock-In Period: A set time during which certain shareholders, like company promoters, cannot sell their shares.
8. Grey Market: An unofficial market where IPO shares are traded before they are officially listed.

Why Should You Invest in IPOs?

The Upsides:

1. Early Access: IPOs let you invest in a company at the very beginning of its public journey.
2. High Potential Returns: Many IPOs experience a surge in share price on their first trading day.
3. Diversification: Investing in IPOs gives you a chance to add new industries or companies to your portfolio.

The Risks:

Market Conditions: Even great companies can see poor IPO performance if the overall market is down.

Uncertainty: IPOs can be volatile, and there’s no guarantee of profits.

Limited Information: Unlike established companies, IPOs come with less historical data for analysis.