What is Initial Public Offering?
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Let us understand this concept with an example. Sachin owns a medium size company in Pune and he intends to expand his business outside the city. To do this, he needs to increase one crore of his capital. Hence, Sachin decides that he would sell a part of his business to the public and to do this, he needs to issue his shares through IPO Sachin decides to sell 10% of his ten core company by issuing one lakh shares at hundred rupees each. These shares are bought by the interested lot of people through stock exchange. As time passed, the share prices of the company increased enabling Sachin’s company to expand. The investors who initially bought Sachin’s company shares through IPO sold the shares at higher price thus creating large profit. With this example, you can understand that you too can buy shares of an IPO through partnership with your share broker.
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