Others

Bondada Engineering has fixed the record date for the split of equity shares. The firm has announced Monday, September 2, 2024, as the record date for the entitlement of shareholders to this corporate action.

Once the subdivision is approved, each equity share of ₹10 face value will be subdivided or split into five equity shares of ₹2. The purpose of this move is to reduce the unit price and make the shares more accessible to investors, which may eventually increase liquidity.

Read the official notification here

Company Overview

Bondada Engineering Limited is an engineering and construction company based in Hyderabad, Telangana. It has wide operational footprints in India and is known for its proficiency across multiple engineering domains, primarily in infrastructure development. Focusing on innovation and quality, Bondada has established a strong track record of project deliveries, achieving high benchmarks and earning a reputable image as a reliable partner in the industry.

Financial Performance

Bondada Engineering Limited is a profitable entity with a solid financial performance over the years, supported by its robust order book and efficient project execution. It has consistently grown its revenue while remaining profitable. For FY 23-24, the company generated a revenue of ₹801 crore with a net profit of ₹46 crore.

The latest decision to demerge some of its equity shares aligns with its strategic agenda of creating long-term shareholder value and broadening market participation.

Key Financial Metrics

Also Read – MIC Electronics Limited Bags Order Worth Rs. 2.54 Crore

Implications for Shareholders

The subdivision will see existing shareholders receive five times the number of shares they had before, while their total stake in the company, and thus its value subject to market fluctuations, remains unchanged.

For example, if a shareholder has 100 shares of ₹10 face value, after the split, they will have 500 shares with a face value of ₹2 each. This move is expected to attract more investors to the stock by lowering its share price, fueling greater trading volume, and sharper pricing in the market.

Shareholding Pattern

Conclusion

Bondada Engineering Limited announces the record date for the subdivision of its equity shares. This move makes the company’s shares more accessible to a broader range of investors, increasing market participation. The share split is anticipated to help Bondada Engineering’s market and shareholder value grow, along with the rest of its activities, as it continues to expand to serve a larger customer base.

VISIT THE OFFICIAL WEBSITE TO LEARN MORE

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.

In this article, we will discuss the GRP Ltd. share price target from 2025 to 2030. GRP is a rubber manufacturing company that primarily produces its products from recycled tyres.

Company Overview

• GRP Ltd was established in 1974.

• GRP Ltd produces high-quality reclaim rubber from end-of-life tyres, tread peelings, natural rubber, and butyl tubes. Their rubber is used in both tyre and non-tyre products.

• They also provide sustainable material solutions for engineering applications using Polyamide 6, Polyamide 66, and Polybutylene terephthalate. Additionally, GRP Ltd produces polymer composites made from 100% recycled rubber and plastic.

• These eco-friendly products are stronger and more durable than wood. They are suitable for use in logistics, construction, oil and gas, aviation, marine, industrial, and agriculture sectors.

Important Financial Metrics of GRP LTD

Here is a table summarizing the key financial data for GRP Ltd. as of August 2024:

ALSO READ – What is Dividend? – Complete Guide in Simple Words

GRP LTD Share Price Target 2025 to 2030

Predicting exact stock prices is challenging, but you can use a basic method to guess future prices.

For instance, if a stock is priced at ₹100 now and the company has grown by 18% each year, you might guess that the stock will increase at a similar rate if the company continues to perform well. This growth usually means the company’s revenue and profits are rising.

If the company maintains an 18% growth rate, the stock price might go up to about ₹118 (₹100 + 18% of ₹100).

On the other hand, if the stock has dropped by 10% due to poor performance, the price might fall to around ₹90 (₹100 – 10% of ₹100).

Remember, these are just rough guesses. The stock market is unpredictable, and predicting exact future prices is very difficult.

Focus on the company’s fundamentals when making investment decisions. Whether to stay invested or to exit should depend on the company’s financial performance. Stay informed by regularly analyzing the company’s performance.

GRP LTD Share Holding Pattern

This shareholding data is for the first quarter of FY25.

Source – trendlyne.com

Recent Developments

GRP Ltd. continues to attract investor interest due to its consistent performance and strategic initiatives. In August 2024, the company’s board approved the implementation of the GRP Limited Employee Stock Option Plan 2024, reflecting its commitment to incentivizing its workforce.

In summary, GRP Ltd. is a well-established company in the rubber processing industry with a strong financial performance and a robust market position. The company’s focus on innovation and sustainability is likely to drive its growth in the coming years.

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.

For more information, please visit the official site.

Ola Electric Mobility Ltd., one of the key players in the EV sector, recently announced its quarterly results for Q1 FY25. It has reported good revenue growth but has posted consolidated net losses, which have increased. Let’s deep-dive into the key financial highlights of operations, the product lines involved, and the future outlook of the company in question.

Revenue Growth Amidst Losses

Consolidated Net Loss:

• Ola Electric reported a consolidated net loss of ₹347 crore in Q1 FY25.
• This is an increase from the net loss of ₹267 crore in the corresponding period last year.

Revenue from Operations:

• The company’s revenue from operations increased by 32% in Q1 FY25.
• Revenue rose to ₹1,644 crore, up from ₹1,243 crore in the previous fiscal year.

The growth in revenue is primarily driven by the automotive segment.

Also Read –What do you mean by Net Profit? – Explained

Operational Performance

The revenue breakdown from electric vehicle sales and related services is ₹1,644 crore. The company’s EBITDA for the quarter was ₹205 crore, slightly lower compared to ₹218 crore posted in the same period last year. The EBITDA margin for the automotive division improved and came close to breakeven, with a margin of 1.97%.

Product Portfolio and Deliveries

Founded in 2017, Ola Electric has rapidly expanded its product offerings. There are now multiple options in the electric scooter segment, including the Ola S1 Pro, Ola S1 Air, and the S1 X series. In Q1 FY25, the company delivered 1,25,198 vehicles, compared to 70,575 units in the same period last year. The mass-market portfolio of the S1 X contributed to sustained growth, while existing products continued to experience strong demand.

Future Outlook

Ola Electric has significant plans in the pipeline. The company plans to integrate its in-house manufactured cells into its vehicles during Q1 FY26. Additionally, Ola Electric’s electric motorcycle portfolio is scheduled for launch on August 15 during its annual flagship event, targeting both mass and premium categories.

Challenges and Opportunities

Although impressive in terms of revenue growth, Ola Electric’s widening losses highlight the challenges it faces in managing operational costs. However, the company is likely to see positive results in the coming quarters from its strategy of leveraging scale to reduce manufacturing costs and optimize the supply chain. Its scalable platform-based product development and manufacturing technology is expected to continue benefiting the company in the long run.

Stock Performance

Ola Electric shares have performed well on the National Stock Exchange. The stock closed 2.6% higher at ₹111 apiece on the day of the earnings announcement. The company’s shares have jumped significantly since listing, with the stock surging 20% on its listing day.

Conclusion

Ola Electric’s Q1 FY25 results are a mixed bag. The company has grown its revenues and expanded its product portfolio but faces challenges in reducing net losses. It will be fascinating to see how the company navigates the competitive EV market in India as it progresses with its cell integration plans and new electric motorcycle launches. Investors and stakeholders will be watching closely as the company works towards profitability while maintaining its growth trajectory.

Visit the official website to learn more.

On Wednesday, the Indian rupee firmed up against the dollar, gaining 7 paise to reach 83.90 in early trade. This rise occurred as the US dollar weakened in the forex market.

Why Did the Rupee Gain?

Forex traders noted that the US dollar weakened after the release of the US Producer Price Index (PPI) data. The PPI reflects the change in prices received for domestically produced goods and services. The index came in softer than expected, indicating that the US dollar index may continue its correction.

How Did the Rupee Perform?

In the inter-bank foreign exchange market, the rupee opened at 83.90 against the US dollar, 7 paise higher than its closing level of 83.97 on Tuesday. On Tuesday, the rupee had settled flat without any significant change.

What’s on the Radar?

Forex traders are closely watching the US CPI data, which is important for understanding the inflation situation in the US. Depending on this data, the strength of the dollar may either increase or decrease, impacting the rupee’s value.

Also Read – Inflation and CPI Explained – What’s the Effect on the Stock Market?

US CPI Data Impact on World’s Various Markets

That’s an important figure because it shows how much prices for goods and services used in everyday life in the United States have risen. When the CPI jumps a whole lot more than expected, it potentially means inflation is running up faster than people were thinking just one week ago. This can trigger worry that the Federal Reserve may begin hikes of interest rates to control inflation. If interest rates are raised by the Fed, then usually the US dollar will gain strength because the investors will seek to invest in US assets that offer better returns.

The potential of other currencies, such as the Indian Rupee, getting weaker due to a stronger US dollar, or easing the fears related to rising inflation with a lower-than-expected CPI, which can make the US dollar weaker. This may result in the rupee showing some strength. That is why CPI is closely watched by traders and investors around the world, as that number can get most of the markets moving, and currency markets are no different.

RBI’s Role in Rupee Stability

The Reserve Bank of India intervenes in many ways to stabilize the Indian rupee. One of the ways is through its intervention in the foreign exchange market. For example, if the rupee starts to weaken against the US dollar, coming close to the 84.00 level, the RBI may sell portions of its US dollars and buy rupees, pushing the value of the rupee back up. This increases the demand for rupees, which helps stop the rupee from falling so much.

Its primary goal is to make sure that the rupee doesn’t lose too much value, which could lead to higher prices for goods and services in India. Stability in the rupee also helps build confidence in the Indian economy. A stable currency is important for businesses, investors, and consumers as it allows for better planning in the future.

Other Market Movements

Meanwhile, the dollar index added 0.10% to 102.66, while Brent crude, the global benchmark for oil prices, rose 0.57% to $81.15 per barrel.

Domestically, the stock markets were largely unaffected. The Sensex lost 24.66 points, or 0.03%, to settle at 78,931.37 points. The Nifty fell 11.10 points, or 0.05%, to 24,127.90 points.

Investor Activity

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth Rs 2,107.17 crore, according to data from the exchanges.

Conclusion

Analysts noted that the rupee’s gain against the dollar is a positive sign for the Indian economy. However, the market remains cautious as it awaits key data from both India and the US in the coming days. The outcome of this data will play a crucial role in determining the rupee’s future movement.

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.

GMR Airports Infrastructure Ltd recently announced its financial results for the first quarter of FY25. It posted a net loss of Rs 258.2 crore for the period. Though the revenue was upbeat, the loss pulled its stock price down by 3.3%. The stock closed at Rs 94.80 on the BSE.

About the Company

GMR Airports Infrastructure Ltd. is one of the major airport developers and operators in the country. Delhi, Hyderabad, and the new Manohar International Airport in Goa are some of the major airports managed by the company. GMR Airports has proved its mettle in efficient airport infrastructure development, making air travel easy and comfortable for passengers. Hence, it has emerged as one of the major players in Indian aviation.

Financial Highlights

In the first quarter of FY25, GMR Airports reported:

• A net loss of Rs 258.2 crore, compared to Rs 122.50 crore in the same quarter last year.
• Revenue from operations increased to Rs 2,402.20 crore, up by 19.06% from Rs 2,017.63 crore in Q1 FY24.
• EBITDA was Rs 1,016.35 crore, higher than Rs 860.82 crore in the same period last year.
• The EBITDA margin was 42.3%, slightly lower than 42.6% last year.

Despite earning more revenue, the company faced challenges in managing costs, leading to a higher net loss.

Key Financial Metrices

Shareholding Pattern

GMR Airports has a mix of shareholders. This includes the company’s promoters, institutional investors, and retail investors.

Company Vision and Plans

GMR Airports is focused on the expansion and upgradation of airports. This includes augmenting the international passenger capacity at Delhi Airport by 40-50% over the next 6-12 months. It has also invested in new technologies and better passenger facilities that will enable it to increase its capacity and help cater to the burgeoning demand for air travel in India. This commitment shows its aim to be an even greater player in the airport sector.

Also Read – What do you mean by Net Profit? – Explained

Conclusion

The Q1 of FY25 remained a mixed bag for GMR Airports. While it witnessed an uptick in revenue, the higher net loss affected investor confidence and pulled down its stock price. GMR Airports will focus on expansion and improvement in airport facilities in the coming times to rise above these challenges and regain investors’ confidence.

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.

Visit the official site to learn more

Net profit is an important term in business, but it can sound a bit confusing at first. Knowing what net profit is and how to calculate it can give us a clearer picture of a business’s financial health. In this article, we will understand the whole concept in a very simple way.

Let us first understand what profit means.

Profit is simply the extra money you earn after deducting your expenses.

How do you find profit?

Profit is calculated by subtracting total expenses from total revenue. The formula is:
Profit = Revenue – Expenses
If the result is positive, it’s a profit. If it’s negative, it’s a loss. This helps you understand if a business is earning or losing money.

What is Net Profit?

Net profit is the amount of money that remains after all the expenses and taxes. It is also known as net income. It’s the final profit figure that shows how much money a business actually makes after covering all its costs. Net profit is often called the bottom line because it’s the final number on an income statement.

How to Calculate Net Profit?

Let us understand it through two easy examples.

Example 1:

Imagine you run a small bookstore. You sell 100 books at ₹200 each. Your total revenue would be ₹20,000.

• Cost of Goods Sold (COGS): These are the direct costs of the products you’re selling. For your bookstore, this would include the cost of purchasing the books.

Example: If you spend ₹10,000 on purchasing the books, your COGS is ₹10,000.

• Gross Profit: This is what you get when you subtract COGS from total revenue.

Calculation: Total Revenue (₹20,000) – COGS (₹10,000) = Gross Profit (₹10,000).

• Operating Expenses: These are the costs of running your bookstore that aren’t directly related to buying the books. This includes things like rent for your bookstore, electricity bills, and salaries if you pay any staff.

Example: If you spend ₹3,000 on rent and ₹2,000 on electricity, your total operating expenses are ₹5,000.

• Operating Profit: This is what you get when you subtract operating expenses from gross profit.

Calculation: Gross Profit (₹10,000) – Operating Expenses (₹5,000) = Operating Profit (₹5,000).

• Other Income and Expenses: These might include additional earnings from other sources like interest on loans 9if you have given any).

Example: If you earned ₹1,000 from a small investment and paid ₹500 in interest on a loan, your net other income is ₹500 (₹1,000 – ₹500).

• Net Profit: This is the final profit after all expenses have been deducted from all income.

Calculation: Operating Profit (₹5,000) + Net Other Income (₹500) = Net Profit (₹5,500).

Example 2:

Suppose you have a small bakery.

Total Revenue: You make ₹5,00,000 in a month from selling cakes and cookies.

Cost of Goods Sold (COGS): You spend ₹2,00,000 on ingredients like flour, sugar, and butter.

Gross Profit: ₹5,00,000 (Total Revenue) – ₹2,00,000 (COGS) = ₹3,00,000.

Operating Expenses: You spend ₹1,20,000 on rent, utilities, and wages.

Operating Profit: ₹3,00,000 (Gross Profit) – ₹1,20,000 (Operating Expenses) = ₹1,80,000.

Other Income/Expenses: You earn ₹10,000 from a catering event and pay ₹5,000 in interest on a loan.

Net Profit: ₹1,80,000 (Operating Profit) + ₹5,000 (Net Other Income) = ₹1,85,000.

So, your bakery’s net profit for the month is ₹1,85,000. This means after covering all costs, your bakery actually made ₹1,85,000.

Why is Net Profit Important?

• True Profitability: Net profit shows the true profitability of a business. It’s the actual profit after all costs are considered.
• Business Health: A positive net profit means the business is making money, which is a good sign of health and sustainability.
• Investor Attraction: Investors look at net profit to determine if a business is a good investment. A higher net profit means more potential for returns on their investment. Knowing the net profit helps investors make informed decisions.

What is the difference between Net Profit and Revenue?

1. Revenue is the total amount of money a business earns from selling its products or services before any expenses are taken out. It’s often referred to as the top line because it appears at the top of the income statement.
2. Net profit, on the other hand, is the amount of money that remains after all expenses have been deducted from the revenue. This includes costs like materials, salaries, rent, and utilities. Net profit is often called the bottom line because it’s what’s left over at the bottom of the income statement after all costs are considered.

What is the difference between Gross Profit and Net Profit?

• Gross profit is the amount of money left after subtracting the cost of goods sold (COGS) from total revenue. COGS includes direct costs like materials and labor used to produce the products or services sold.

• Net profit is the amount of money left after subtracting all expenses (COGS, operating expenses, taxes, etc.) from total revenue.

While gross profit gives a snapshot of the efficiency in production, net profit provides a comprehensive picture of overall profitability after all costs.

Is Net Profit added to Capital on a balance sheet?

Yes, net profit is added to the equity section of the balance sheet. When a company earns a net profit, this amount is added to the retained earnings, which is part of the owner’s equity. Retained earnings represent the accumulated net profit of a company that has been reinvested in the business rather than distributed to shareholders as dividends. This increase in retained earnings boosts the overall equity of the company.

Conclusion

Net profit is an important measure of a business’s financial performance. It tells you how much money the company is actually making after paying for everything. Understanding net profit helps investors make smart decisions.

In this article, we will learn the complete concept of dividends. We often hear about the dividend payouts by companies listed on the stock exchange. Along with these, terms like Ex-dividend and Record Date can sometimes cause confusion. So, let us begin the learning.

What is Dividend?

A dividend is a portion of a company’s earnings that is paid to its shareholders. When a company makes a profit, it sometimes decides to share some of that money with the people who own its shares. This shared money is called a dividend.

Why is it called Dividend?

The word “dividend” comes from the idea of dividing something. In this case, the company is dividing its profits among its shareholders. So, it’s called a dividend because the company divides its earnings to give a part to each shareholder.

Is Dividend Good or Bad?

A dividend is generally considered good because it means the company is making enough profit to share with its shareholders. However, not all companies pay dividends. Some might choose to reinvest their profits back into the business to grow even more. Whether a dividend is good or bad depends on the goals of the investor. Some investors like receiving regular dividends, while others might prefer the company to reinvest in growth.

ALSO READ – What is the Stock Market? – Complete Basics in One Article

Are Dividends Paid Monthly?

Dividends are usually not paid monthly. Most companies pay dividends quarterly, which means every three months. Some companies pay them once a year or twice a year. It’s rare for a company to pay dividends every month.

What is Ex-Dividend Date?

The ex-dividend date is the date on or after which you will not be entitled to the company’s dividend if you purchase the share.

If you buy a stock on or after the ex-dividend date, you won’t receive the upcoming dividend. Instead, the dividend will be paid to the person who owned the stock before this date.

So make sure you buy your stocks before the ex-date to be eligible for the dividend.

What is Record Date?

The record date is typically considered the cutoff date for determining which shareholders are eligible for a particular corporate event.

In case of dividends, the record date is the date set by the company to determine who is eligible to receive the dividend. If you own the stock on this date, you will receive the dividend. The record date usually comes a few days after the ex-dividend date.

Note: The ex-dividend date is generally two days before the record date.

Why is the Ex-Dividend date and Record Date Important?

The settlement period is T+2 days, meaning if you buy a share today, you will gain ownership almost 2 days later.

And there is a 2 days difference between ex-date and record date.

If you buy stocks but your name isn’t registered with the company by the record date, you won’t get the dividend that the company gives to its shareholders. The ex-date is usually two days before the record date, so make sure you buy your stocks before the ex-date to be eligible for the dividend.

The Bottom Line

If you want to invest in the stock market for regular income in the form of dividends, it’s important to understand the full concept of dividends and the important dates. This knowledge will help you make more informed decisions.

Reference Site

Ola Electric’s stock has been performing exceptionally well since its market debut. After a flat start, the shares quickly rallied, closing at INR 91.18 on their first trading day. On August 12, 2024, the shares hit a new high of INR 109.41, representing a 20% increase from the previous close. The company’s market valuation now stands at approximately INR 48,258.89 crore.

Ola Electric went public with a valuation of $4 billion, which was a 25% reduction from its previous valuation of $5.4 billion during its last funding round in September 2023. Initially, the company had aimed for a valuation of around $10 billion for its IPO, but this was later adjusted following investor feedback.

Despite the company’s strong revenue growth, with operating revenue jumping over 90% to INR 5,009.8 crore in FY24, it reported a net loss of INR 1,584.4 crore for the same period, a 7.6% increase from the previous year.

Company Overview

Ola Electric Mobility Limited, led by Bhavish Aggarwal, is an electric two-wheeler manufacturer. The company recently made a successful debut in the stock market, with its shares experiencing a strong upward momentum. On Monday, August 12, 2024, Ola Electric’s shares jumped by 20%, hitting the upper circuit limit and reaching a new high of INR 109.41 on the Bombay Stock Exchange (BSE). This surge followed its listing at INR 75.99 per share, which was slightly below its IPO issue price of INR 76.

Also Read – What is an IPO in Simple Words? – 6 Important Steps to Know

Fundamental Overview

Ola Electric’s initial public offering (IPO) was highly anticipated, as it was the first by an electric vehicle (EV) manufacturer in India. The IPO, which opened for bidding from August 2 to August 6, 2024, was oversubscribed 4.27 times. The total value of the IPO was INR 6,145 crore, with a fresh issue of shares worth INR 5,500 crore and an Offer-for-Sale (OFS) of 8.49 crore equity shares.

The company has earmarked the funds from the IPO for several key initiatives:

• Capacity Expansion: Ola Electric plans to use INR 1,227.6 crore to expand its cell manufacturing plant’s capacity from 5 GWh to 6.4 GWh.
• Research and Development: INR 1,600 crore will be invested in research and product development to strengthen the company’s offerings.
• Debt Repayment: The company intends to use INR 800 crore to repay existing debts.
• Organic Growth: INR 350 crore will be allocated for organic growth initiatives.

Official Commentary

Ola Electric’s Red Herring Prospectus (RHP) detailed plans for the development and expansion of its Ola Gigafactory in Krishnagiri, Tamil Nadu. The first phase of this project will be funded through internal accruals and long-term borrowings secured by its subsidiary, Ola Cell Technologies Pvt Ltd. The company is focused on enhancing its manufacturing capabilities to meet the growing demand for electric vehicles and related components.

Founder Bhavish Aggarwal commented on the company’s IPO pricing strategy, stating that it was deliberately priced to attract a broad range of investors. This approach was intended to allow more people to participate in Ola Electric’s growth story, which the company believes has significant potential for future expansion.

Conclusion

Ola Electric’s successful IPO and subsequent stock market performance highlight the growing interest in electric vehicles in India. With plans to expand its manufacturing capacity and invest in research and development, the company is well-positioned to capitalize on the increasing demand for EVs. Investors will need to monitor the company’s financial progress closely as it works through the challenges of expanding its operations.

Visit the official website to learn more.

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.

In this article, we will go through the basics of the stock market in simple language. The stock market is a type of financial market and is also a part of the capital markets. This market helps companies raise funds for growth.

Complete Basics of Stock Market with an easy example

Someone gets a business idea. To start a business, he needs money, also called funding.

Initially, he gets that funding through his savings. He asks for money from his family and friends, which is called seed funding.

Next, angel investors, venture capitalists, and others provide funding to the company in exchange for equity. This means they receive a share of ownership in the company in return for their investment.

When he further needs a significant amount of money for capital expenditures (capex), he has two options: either go to a bank for a loan, which will be a liability for his business, or he can ask the public for money. If he takes a loan from the bank, he will have to repay the full amount even if his business incurs losses. On the other hand, if he raises money from the public, the risk is diversified across all the investors. Moreover, it will not be an obligation to repay the money as it would be with a bank loan.

The company then decides to go public with an IPO, also called an Initial Public Offering. The IPO process is assisted by investment banks that help determine a justified price band for the company’s shares.

After that, the company prepares a Red Herring Prospectus (RHP) and submits it to SEBI, the Indian securities market regulator.

Once SEBI approves the IPO, it is launched with a price band, and the window for applying to the IPO opens for a few days.

The normal retail public can participate in this IPO process by opening a demat account through a registered broker.

Note – There is a difference between a Demat account and a Trading account, although both can be opened through a broker.

As the IPO window closes, the shares get allotted to the investors. This phase is called the primary market, where the seller is the company and the buyers are the investors.

After 1 or 2 days, the shares get listed on the stock exchange, where the already issued shares are traded between investors. This phase is called the secondary market. Trading through the stock exchange does not provide any direct monetary benefit to the company, but it helps in building goodwill for the company.

To participate in share trading in the exchanges too, the investors needs to have a demat account. They can open a demat account through a registered broker in India.

ALSO READ – What is the true purpose of the stock market?

What are the benefits of Buying Shares?

1. You will receive a portion of the company’s earnings, which is called dividend income.
2. As the company grows, the value of your shares will also increase. You can sell your shares later at a higher price.

Note – A share’s value is made up of two components: its intrinsic value, which is based on the company’s actual performance and assets, and the market value, which is influenced by supply and demand in the stock market.

How to Study Stocks?

There are two ways to study stock:

1. Fundamental Analysis – In this method, the focus is mainly on analyzing a company’s overall performance.
2. Technical Analysis -In this method, a company’s historical price and volume are analyzed.

The Bottom Line

In conclusion, understanding the basics of the stock market is important for anyone interested in trading or investing. The stock market, as a key part of the capital markets, plays an important role in helping companies raise the funds they need to grow and expand. By understanding these fundamental concepts, you’ll be able to make informed decisions within the stock market.

Reference Site – Wikipedia

In this article, we will go over the entire process from IPO announcement to allotment and listing on major Indian stock exchanges like NSE and BSE, including steps to check the allotment status.

IPO stands for Initial Public Offering. It refers to the process where a company offers its shares to the public to raise capital.

If we were to explain an IPO in simpler terms, it is a process where a private company offers its ownership to the public for the very first time and gets listed on a stock exchange. This process allows the company to access funds from a wide range of investors, including large institutional investors and everyday retail investors.

Why Do Companies Go Public?

Companies decide to go public for several reasons:

(1) Raise Funds for Expansion or Debt Repayment:

• Expansion: When a company wants to grow, whether by entering new markets, developing new products, or increasing production capacity, it often needs a lot of money. An IPO (Initial Public Offering) provides a way to raise this capital by selling shares to the public. This infusion of funds can support the company’s growth strategies and help it expand its operations effectively.
• Debt Repayment: Companies sometimes take on debt to fund their operations or growth. By going public and raising funds, they can use some of the proceeds to pay off this debt. Reducing debt lowers interest expenses and can improve the company’s financial health, freeing up resources for other uses.

(2) Provide an Exit Opportunity for Early Investors:

• Angel Investors and Venture Capitalists: These investors often provide funding during the early, riskier stages of a company’s development. In return, they typically seek a significant return on their investment. An IPO offers them a chance to sell their shares and realize their gains. This liquidity event allows them to exit their investment and often serves as a way to distribute the financial rewards of their risk-taking.

(3) Enhance Company’s Reputation and Credibility:

• Visibility and Credibility: Being listed on a major stock exchange brings a company into the public eye, which can enhance its reputation. This increased visibility can attract more attention from customers, business partners, and potential employees. A public listing also signals to the market that the company has met stringent regulatory requirements and is considered stable and trustworthy, which can enhance its credibility in the business world.

(4) Improve Access to Capital Markets:

• Easier Access to Funds: Once a company is public, it has more options for raising additional funds. It can conduct secondary offerings to issue more shares and raise more capital. Additionally, being a publicly traded company often makes it easier to secure loans or issue bonds. The ability to raise capital through these various means can provide the company with financial flexibility for future projects or to navigate economic downturns.

Stages of a Company’s Funding

(1) Promoter’s Fund:

• Initial Funding: At the very beginning, a company is usually funded by its founders and their close family members. This stage is known as the “seed” or “self-funded” stage. The promoters, or founders, invest their own savings to get the business off the ground. This initial funding is often used to develop a prototype, conduct market research, and cover initial operating expenses. This stage is crucial for laying the foundation and proving the concept of the business.

(2) Angel Investors:

• Early-Stage Investment: As the company begins to show promise, it may seek additional funding from angel investors. Angel investors are usually wealthy individuals who provide capital in exchange for equity or convertible debt. They often have experience in the industry and can offer valuable advice and connections in addition to funding. Angel investors are crucial for early-stage companies that need more capital to refine their product, expand their market reach, or scale their operations. Their investment helps bridge the gap between the initial self-funding and more substantial venture capital funding.

(3) Venture Capital:

• Growth Funding: Once a company has demonstrated potential and needs substantial capital to grow, it turns to venture capital firms. Venture capitalists (VCs) are professional investors who manage large funds and invest in startups with high growth potential. They provide significant funding in exchange for equity, and they often take an active role in guiding the company’s strategy and operations. Venture capital is typically used for scaling the business, entering new markets, or developing new products. This stage often involves multiple rounds of funding, each intended to support specific growth milestones.

(4) IPO (Initial Public Offering):

• Public Funding: When a company reaches a stage where it is ready to expand further, achieve broader market visibility, or provide liquidity for early investors, it may go public through an IPO. During an IPO, the company offers its shares to the public on a stock exchange. This process involves creating and selling new shares to raise capital from a wide range of investors, including institutional investors and individual retail investors. The funds raised through an IPO can be used for various purposes, such as further expansion, paying down debt, or investing in research and development. Going public also provides the company with ongoing access to capital markets for future funding needs.

Each of these stages plays a vital role in a company’s growth and development. They reflect the evolving needs of the business as it matures from a startup to a publicly traded entity.

The IPO Process

1. Investment Bank Hiring:

• Role of Investment Bank: The company looking to go public hires an investment bank, also known as an underwriter. The investment bank plays a crucial role in managing the IPO process. It helps the company with various aspects such as valuation, regulatory compliance, and marketing. Major banks like ICICI, Axis, SBI, and HDFC often have dedicated investment banking divisions that specialize in handling IPOs.
• Choosing an Underwriter: The company selects an investment bank based on their reputation, expertise, and the quality of their services. The underwriter’s job is to ensure the IPO is successful and to manage the risks associated with issuing new shares.

2. Due Diligence and Filings:

• Underwriting Agreement: The investment bank agrees to buy the shares from the company and sell them to the public. There are two main types of underwriting:
  • Firm Commitment: The investment bank buys all the shares from the company and assumes the risk of selling them. If the shares don’t sell, the investment bank absorbs the loss.
  • Best-Efforts Commitment: The investment bank agrees to make its best effort to sell the shares but does not guarantee the sale of all shares. The company may end up with unsold shares.
• Red Herring Prospectus (RHP): This is a preliminary document that provides information about the company’s business, financials, and management. It helps potential investors make informed decisions. The RHP includes details about the company’s promoters, business model, competitive advantages, capital structure, and financial data. It’s called a “red herring” because it often has a disclaimer stating that the final price and number of shares may change.
• Compliance and Filings: The company must comply with regulations set by authorities such as the Securities and Exchange Board of India (SEBI), stock exchanges, and other relevant regulatory bodies. This includes submitting the RHP, financial statements, and other required documents.

3. Pricing:

• Valuation of the Company: The investment bank assesses the company’s value using various methods, including financial analysis, market conditions, and comparable company analysis. This valuation helps determine how much the company’s shares should be priced.
• Issue Price: The price at which shares will be offered to the public can be set in two ways:
  • Fixed Price: The company and underwriter set a specific price for the shares.
  • Book Building: A price range (price band) is set, and investors place bids within this range. The final price is determined based on the bids received and the level of demand. This process helps find the optimal price for the shares.

4. Distribution:

• Marketing the IPO: The company, with the help of the investment bank, promotes the IPO to potential investors. This involves roadshows, presentations, and meetings with institutional investors (such as mutual funds and pension funds) and retail investors. The goal is to generate interest and demand for the shares.
• Investor Applications: During the IPO period, investors submit their applications to purchase shares. They can apply through various channels, including online platforms and brokers.

5. Application and Allotment:

• Allotment Process: Once the application period ends, the shares are allotted to investors. The allotment is based on several factors:
  • Oversubscription: If the IPO is oversubscribed (i.e., demand exceeds supply), shares are allocated based on a lottery system or proportional allocation.
  • Investor Categories: Shares are typically allocated to different categories of investors, including Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and retail investors. Each category has a specific quota.
• Refunds: If an investor does not receive the full allotment or is not allotted any shares, the application money is refunded.

6. Listing:

• Trading Begins: After the IPO process is completed, the company’s shares are listed on a stock exchange. Trading typically begins within a few days after the IPO closes. This allows investors to buy and sell shares in the secondary market.
• Market Performance: The performance of the company’s shares in the stock market can be influenced by various factors, including market conditions, company performance, and investor sentiment. The company’s stock price will fluctuate based on supply and demand in the market.

This detailed process ensures that the IPO is conducted smoothly and transparently, providing the company with the capital it needs while offering investors the opportunity to participate in the company’s growth.

Conclusion

Understanding the IPO process is important for investors who are looking to participate in public offerings. By raising funds through an IPO, companies can fuel their growth, pay off debts, and provide liquidity for early investors. However, investing in IPOs involves risks, and potential investors should conduct thorough research or consult financial advisors before making decisions.

Key Terms Explained

• Book Building: A method of pricing shares where investors bid within a specified price range.
• Underwriter: An investment bank that guarantees the sale of shares in an IPO.
• Syndicate Underwriting: Multiple investment banks collaborate to manage the IPO.
• QIB: Qualified Institutional Buyers, like mutual funds and pension funds, that invest large sums.
• NII: Non-Institutional Investors, typically high net worth individuals.
• ASBA (Application Supported by Blocked Amount): A system that blocks funds in an investor’s account until shares are allotted.
• UPI: A payment method that can be used for IPO applications.
• Minimum Lot Size: Investors must buy at least a minimum number of shares.
• Over-subscription: When demand for shares exceeds the number of shares available.
• Listing Time: Shares typically begin trading on the stock exchange within three days after the IPO closes.

Disclaimer: This information is for educational purposes only and does not constitute financial advice. Always conduct your own research and consult with financial professionals before making investment decisions.