What are the Different Types of IPOs in India?

An Initial Public Offer (IPO) is a first step in a company's public offering. It allows people to raise funds by issuing shares to the public. IPOs attract new investors and market participants, offering an opportunity to invest in a company at an early stage of its growth cycle. Companies can use IPOs to finance new projects, scale the business, or offer partial or full exits to early investors. As an equity financing method, IPOs are cheaper and more affordable. To invest in an IPO, companies must understand the different types of IPO, including fixed price issues and book-building issues.

Types of IPOs

Here are the two IPO types:

The initial public offer can take various forms, known as types of IPO, including the fixed price issue, the book building issue, or a combination of the two.

Fixed Price Issue

During the fixed-price IPO process, the company and its underwriters assess the company's assets, liabilities, and other financial aspects. These numbers determine a price per issue to raise the required funds. The set price per issue is printed on the order paper. The order document justifies the pricing using both qualitative and quantitative elements. The demand for securities is only known after the offering has closed. Fixed-price products have large oversubscription levels, perhaps by several hundred times.

Book Building Issue

The concept of book-building is new in India compared to western countries. The price of the book-building issue was discovered during the first public offering (IPO). There is no set price, however there is a pricing range. The 'floor price' is the lowest in the band, while the 'cap price' is the highest. The pricing band is printed on the order paper. And investors can bid for the required shares at the price they pay. The share price is determined by the bids received. The securities are priced higher or equal to the floor price. The demand is known daily while the book is being created.

Differences Between Fixed Price Issues and Book Building Issues

Here are the differences between fixed price issues and book-building issues in two types of IPO:

What are IPOs?

The first time shares are offered to the public is through an IPO, or initial public offering. The company has a limited number of shareholders (founding members and angel investors) prior to an IPO. A company cannot be purchased by you as a retail investor until it makes its shares available for purchase to the general public. You can ask a company's owners to purchase shares if it is not listed on a stock exchange, but they are under no need to do so. When a public company offers the public access to trade a portion of its shares on the stock market, this process is known as an IPO or "going public."

How to Apply for IPOs

Now that we've covered the various sorts of IPOs, we'll look at how to apply for one.

To apply for an IPO, an individual must have a Demat account where the securities may be held safely and digitally. A trading account is used to simplify the buying and selling of shares, as well as a bank account where the cash can be sent to apply for the IPO.

• The first step in applying for an IPO is to open or log into an account with a broker.
• After logging in, go to the IPO area, where the many IPOs available for subscription are displayed.
• After deciding on a chosen IPO, an investor can place an order. An investor can specify the lot size and price they want to bid.
• In the event of a book-building issue, the bid price will be deducted from your account after the order is placed. If the shares are not assigned, the cash will be credited to your account. Alternatively, one can apply for an IPO via a bank's Application Supported by Blocked Amount (ASBA).
• The IPO is deemed complete when the shares are assigned and posted on the stock markets.

Conclusion 
The company's practice of fixing share prices is the reason why there are more fixed prices than there are book building issues. However, following market price adjustments, the capital raised through the book building issue is higher than the fixed price issue. Since book building issues enable numerous investors to list their stock quickly and readily on the stock market, they are typically used by several investors in initial public offerings (IPOs). Finally, to enter the market you have to have a reliable online trading app.