INITIAL PUBLIC OFFERING (I P O)

In the last couple of years the IPO's have got very popular with retail investors .There are many reasons for it.

1. They are easy to apply for.
2. 90% of the IPO give return of as high as 100% on the very day of listing.
   

   Man carrying bundles of IPO forms
   

Some of the Biggest IPO's to hit the stock markets in the last one year are NTPC (up121 %), TCS (up 129%) and Suzlon Energy (up 174%) gave 100% return while Jet Airways (down 10%) has eroded shareholders wealth.
The big IPO winners are Indiabulls (+1253%), Ramkrishna Forgings (+ 675%), Nandan Exim (+544%), Bharti Shipyard (+497%) and Dishman Pharma (+495%). This are the figures as on april 2006.

Before you guys pull up your socks to invest in the IPO's there is a word of caution.These days most of the companies are tapping the IPO route not because they want to but just because they can.So you have to be really careful.The trend in most of the last 20 IPO listing has been that they have had handsome opening and have given great returns on the opening day itself (recently Reliance Petro IPO opened at Rs 101 and went upto Rs 105 against the issue price of Rs 60 on the opening day,it was trading at Rs 59 two days back) but have eroded investor wealth there after. The point is there are always some investors who are left holding the bag in the end.I would suggest few things before anyone invests in any IPO.

1. Read the offer prospectus carefully.
2. Keep a realistic upward target and stop loss before investing.
3. Read about the company in the newspaper , NSE and BSE sites,surf the net to find out if there is any negative news about the company

Now let me familiarise u with some other kinds of issues.

1. Public Issue v/s Private Placement

When an issue (or offer) is not made to only a select set of people but is open to the general public , it is a public issue .However if the issue is made to a select set of people , it is called private placement.According to companies act 1956,an issue becomes public if it is offered to more than 50 people.

2. Follow on public issue (FPO)

When an already listed company makes a public offer for the second time it is called an FPO.Punjab Natioanal Bank and Syndicate Bank have come out with their FPO's in the past.It could either be a fresh issue of securities or an offer for sale to the public,thru an offer document.

3. Rights Issue

When a listed company proposes to issue fresh securities to its existing shareholders as on a record date. The rights are offerd in a particular ratio to the securities held before the issue. This route is followed by companies who would like to raise capital without diluting stake of its existing shareholders.

4. Preferential Issue

It is an issue of shares or of convertible securities to a select group of people.This is a faster way for companies to raise equity capital.

to be continued........