Initial Public Offering refers to the selling of shares by a private company to the public for the first time.

Initial Public Offering is a source of funds raised from the primary market. All subsequent public offerings are known as Follow-on Public Offerings or Secondary Market Offerings. An IPO is an abbreviation for Initial Public Offer. When a company goes public for the first time or issues a fresh stock of shares, it offers it to the public directly. This happens in the primary market. The primary market is where a company makes its first contact with the public at large.

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PREFRENTIAL

PUBLIC

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ISSUES

The part of the capital market dealing with new securities is known as Primary Market. It is also known as New Issue Market. Both private and or public sector organizations can get funds by selling new shares or bonds.

Primary Market Offer consist of1.FPOs,new offerings of listed companies that have sold securities to the public before, and 2.IPOs,where an unlisted company is selling securities to the public for the first time.

INITIAL ISSUES ARE FLOATED1.Through prospectus. 2.Bought out deals/Offer for sale. 3.Private placement. 4.Rights issue. 5.Book building.

 Investing

in IPO has its own set of advantages and disadvantages. Where on one hand, high element of risk is involved, if successful, it can even result in a higher rate of return. The rule is: Higher the risk, higher the returns The significance of investing in IPO can be studied from 2 viewpoints for the company and for the investors. This is discussed in detail as follows:

When a privately held corporation needs additional capital, it can borrow cash or sell stock to raise needed funds. Or else, it may decide to go public. "Going Public" is the best choice for a growing business for the following reasons:
Cost Never repaid

Appreciation

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investors often see IPO as an easy way to make money. One of the most attractive features of an IPO is that the shares offered are usually priced very low and the companys stock prices can increase significantly during the day the shares are offered

 Regulators Stock

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Registrars Underwriters

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Institutional Investors Bankers

Merchant Primary

Dealers

Investing in IPO is often seen as an easy way of investing, but it is highly risky and many investment advisers advise against it unless you are particularly experienced and knowledgeable. The risk factor can be attributed to the following reasons:

UNPREDICTABLE:

NO PAST TRACK RECORD OF THE COMPANY

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RISK

ASSESSMENT

1. Valuation: First thing to look at is how aggressively the IPO is Priced. The more aggressively it is priced the lesser the chances of price appreciation. 2. Promoters Goodwill: the Promoters Goodwill is an important parameter in analyzing an IPO as a goodwill creates trust in taking decision for applying for an IPO. 3. Brokers Report: Brokers can provide an investor with all the info he needs on the co. so an investor must take advice from his stock broker before applying for an IPO.

4. Ratings: SEBI has now made it mandatory for every co. to get its IPO rated through any approved rating agencies like CRISIL, ICRA etc. but remember that it does not provide guarantee of success.