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Initial Public Offering (IPO)

Context

Hyundai Motor India Ltd. (HMIL) announced India’s largest ever initial public offer (IPO) of Rs 27,870 crore.

What is Initial Public Offering (IPO)?

  • An Initial Public Offering (IPO) is a crucial process for companies looking to raise capital by selling securities to the public in the primary market.
  • It allows businesses to access funds for growth and expansion while enhancing their credibility and visibility.
  • In an IPO, investors buy shares directly from the company, becoming its owners and contributing to its share capital.
  • This influx of funds enables the company to create fixed assets necessary for operations.
  • A vibrant IPO market signals a healthy economy, as it indicates investor confidence and facilitates capital formation.
  • Once shares are issued, shareholders can also sell their investments in the secondary market, ensuring liquidity.

Fact Box: Capital Market

  • The Capital market represents the “Primary Market” and the “Secondary Market”.
  • The capital market has two interdependent and inseparable segments, the new issuers (the primary market) and stock (secondary) market.
    • Primary market is used by issuers for raising fresh capital from the investors by making initial public offers or rights issues or offers for sale of equity or debt.
    • Secondary market promotes the growth of the primary market and capital formation, since the investors in the primary market are assured of a continuous market where they have an option to liquidate their investments.
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