What is IPO Subscription Data? How Can It Help Investors?

IPO meaning

Before delving into the intricacies of IPO subscription data, let's understand the meaning of an IPO. An IPO is a vital step in a business growth where it acquires funds from the public through capital markets. In simple terms, an IPO happens when a company offers its shares to the public for the first time. A company becomes a publicly traded entity after its IPO and gets listed on stock exchanges. Through an IPO, a company sells a portion of its stake to investors.

IPO subscription meaning

IPO subscription is the number of shares investors have bided for in an IPO till its subscription period. In other words, it shows how many times investors have subscribed to the shares offered. This figure is available in real-time for all categories of investors. This includes retail investors, non-institutional investors (NIIs), and qualified institutional buyers (QIBs).

If an IPO receives more bids than the number of shares available, it is said to be oversubscribed. On the contrary, it's said to be undersubscribed if it gets fewer bids than the shares available. For instance, if a company offers 1 lakh shares but receives bids for 5 lakh shares, the IPO is said to be oversubscribed. However, if it gets bids for only 50,000 shares, the IPO is said to be undersubscribed.

IPO subscription charges

Applying for an IPO entails certain charges known as subscription charges. IPO subscription charges are the costs associated with applying for shares in an IPO. They cover various expenses and can be deducted from the amount you invest. IPO subscription charges come under various heads, such as:

• Brokerage fee

This is the fee you must pay your broker to facilitate your IPO application. It varies across brokers.

• Transaction fee

This is the charge levied by stock exchanges for processing your IPO application. Check out these charges before applying for an IPO to avoid surprises later.

IPO subscription data meaning

When you apply for an IPO, you might have come across information such as the X category of investors who have subscribed Y times. The IPO subscription data is the number of times an IPO has been subscribed against the number of shares on offer. It gives you insights into the level of participation from different categories of investors. Some key components of IPO subscription data include:

• Total subscription

Total subscription shows demand for overall shares. For example, if an IPO is oversubscribed five times, it means the demand for its shares is five times the number of shares available.

• Category-wise subscription

It shows the subscription figures from different categories of investors, such as retail investors (individual investors), qualified institutional buyers (banks, insurance companies, etc.), non-institutional investors (high-net-worth individuals), and employees.

• Day-wise subscription

It provides the breakdown of an IPO's subscription status at the end of each day. The table below shows how an IPO subscription data generally looks like:

As per the table, on day 1, QIB subscribed 0.5 times, retail investors 1.2 times, and NII 2 times. On the second day, QIB subscribed 2.5 times, retail investors 2 times, and NII 4 times. On the third day, QIB subscription was 0.5 times, retail 1.5 times, and NII 3 times.

Benefits of IPO subscription data for investors

IPO subscription status and data can be pretty valuable for you, the investor, as it:

• Shows demand for a company's shares

IPO subscription data acts as a demand indicator for a company's shares. High subscription levels show high demand, suggesting the majority of investors are optimistic about a company's prospects and growth potential. On the other hand, low subscription demand reflects a lack of investors' confidence.

• Reflects the possibility of a premium listing

High subscription levels can lead to an increase in stock price on the listing date. If a stock lists at a premium, it can help you make early gains from the IPO.

• Gives you insights about share allocation chances

IPO subscription figures can give you insights into your chances of getting shares allotted. This is especially true in the case of oversubscribed IPOs. You can better plan your investment strategy if you know whether you will get shares per your category applied for.

Conclusion

An IPO subscription status and data are crucial in understanding how markets look at a company's growth prospects. Investing in an IPO allows you to be a party to a company's growth. If a company performs well, investing in it can help you bolster your wealth.

To invest, open a Demat account and a trading account with a trusted broker like Kotak Securities. Once you do so, you can easily invest in your chosen IPO. However, go through the company’s red herring prospectus and ensure the IPO fits your overall financial strategy. Happy investing.

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