IPO: How to apply?

Continuing inflationary pressure has surged the equity market investment as equity shares deliver higher rate of return as compared to other havens. However, the investors have faced many complexities in understanding the equity market. We have tried to make the concept of equity shares a cakewalk through our YouTube videos, just click on the link to get the elementary knowledge of Equity market:

What is a Share? Why should we invest? (link)

Benefits of owning a share!! (link)

In order to be able to invest in share market in India, the following procedure is need to be followed.

untitled

Investor has a choice of timing for investment in equity shares, firstly when the shares are issued to the public to raise capital and secondly when these shares are traded on the stock exchange. The primary objective of investing is to buy the shares at low price and sell at a higher price. If a stock promises potential future growth and is under-priced in comparison to it’s book value during its Initial Public Offering (IPO), then it is most profitable time to buy the stock.

A common investor can apply for an IPO of a company in following procedure:

  1. The first step is to choose the IPO that applicant wishes to apply for. One can find the list of upcoming IPOs on Securities and Exchange Board of India’s (SEBI’s) website. The best way to decide is by going through the companies’ prospectus available on SEBI’s site. The prospectus gives a fair idea about the company’s business plan and its purpose.
  2. After the selection of desired IPO, investor has to ensure sufficient funds in his or her account.
  3. A Demat account is a prerequisite to apply for an IPO. A Demat account is nothing but a facility to store your stocks and financial securities electronically. The account can be opened by submitting your PAN card, Aadhaar card, address and identity proofs.
  4. Now, IPO can be applied through Trading or bank account. Sometimes trading, demat and bank accounts are clubbed together by the banks for better facilities. Applicant needs to bid while applying for shares, as per the lot size mentioned in the prospectus. Lot size is the minimum number of shares applicant has to apply during an IPO.
  5. The company usually sets a price band. The upper limit is known as the cap price while the lower is called floor price. Applicant has to bid for shares in this price range.
  6. When this application is submitted, applicant’s account doesn’t get debited until shares are allotted to him or her. During the IPO process banks are authorized to block the amount of application in applicant’s account as per ASBA (Applications Supported by Blocked Amount, a process developed by the India’s Stock Market Regulator SEBI for applying to IPO).
  7. If the applicant gets full allotment then he will receive a Confirmatory Allotment Note (CAN) within six working days after closure of the IPO process. On the other hand if the applicant gets fewer shares than he had applied for or fails to get allotment then bank will unlock the bid money (in part or full).
  8. Final step is to wait for the listing of shares on stock exchanges, which is done within seven days from the finalization of issue. After the listing investor can either sell the shares (partly or fully) or keep his money invested in that company.

Xiaomi: India’s No 1 selling smartphone fail to get investor confidence. Why So?

 

450682480

On May 3rd 2018: Xiaomi, the Chinese smartphone giant filed an IPO at Hong kong Stock Exchange. It was expected to be the largest listing by a Chinese tech company in almost 4 years. The listing value of the company was $100 billion. But in the initial bidding Xiaomi was getting muted response for retail investors. The grey market price was at 11% discount before the listing. On July 9th 2018 Xiaomi shares open 2.9% down in Hong Kong.

Xiaomi has become the world’s third largest smartphone maker. Xiaomi’s goal 100$ billion valuations cut down to size of 50$ billion valuations on listing. There was regulatory concern as well which led down to this valuation. Xiaomi, the maker of phones to “Qicycles” has been growing rapidly outside China as well. India is one of the fastest growing markets. It has open 6 factories in the country as well for “Make in India” project which gave them the opportunity to get tax benefits which lead to cheaper prices for smartphone. Xiaomi has taken on competition with Samsung, Apple, Huawei by offering additional features at relatively low prices. Earlier they were selling online to cut down the cost of distribution & dealers commission etc, but now they are penetrating the offline market by opening official store & exclusive partner store to counter the strong presence of Oppo & Vivo in this sector. Sources claimed that Ratan Tata was the biggest investor in the Indian arm business which Xiaomi has tripled his investment in few years.

Despite the strong business model & its presence Xiaomi has been facing issues to penetrate the global market in US & Europe. Recent tussle between U.S- China making it more difficult to capture the global markets. What will be the next move of Xiaomi…?