Why invest in an IPO and it's benefits?
Putting money into initial public offerings (IPOs) can be profitable because of the potential for high returns. IPOs allow businesses to raise capital even in recessionary times when banks are hesitant to extend credit.
To any company, an IPO is a mega event. It helps the privately held company transition into a public company which comes with several advantages both to the firm and the investors. In this blog, we will explore the key merits of an IPO for a company and the benefits it provides to investors.
Merits to the Firm
- Raising Capital: IPO helps a company to generate a huge amount for financial growth, expansion, capital expenditure, and repayment of debt.
- Exit Route for Promoters and Early Investors: It allows promoters and early investors to sell their shares.
- Cost-Effective: Interest on capital or repayment of capital raised by a company through an IPO is not required to be paid.
- Easy Accessibility to Finance: Readily available access to financial capital due to increased transparency of operations to one and all.
- Improved Profile and Brand Image: Due to media coverage and openness of operations, the company profile and brand image are enhanced.
- Prestige and Confidence among Staff: This enhances the morale and confidence of the employees. The staff will be proud to work for a public company. This aids in better staff retention and recruitment.
- Adequate Valuation: The IPO allows the market to reflect the correct value of the company.
- Discipline in Management: There will be a sense of accountability to the shareholders; hence, there will be discipline in the management.
- External View: It provides the external investors' view, thereby aiding the company to strategize for more excellent opportunities.
Benefits to Investors
- Zero Cost Investment: No charges payable to apply for an IPO, unlike secondary market transactions.
- Simple and Hassle-Free: No hassle is involved in applying for an IPO. It is pretty easy and simple to apply.
- Participation in High-Growth Companies: A chance to invest in profitable and high-growth companies
- High Profits and Wealth Creation: High returns in case premium listings come and chances of long-term gains.
- Professional and Secure Market: Tight IPO norms ensure the investment environment is professional and secure.
- Informed decisions: About the relevant information of the Company, RHP provides the same to the investor.
- Shareholder Rights: Provided allotment is successful, the investors become shareholders and participate in corporate actions; they can vote in matters of the Company
Indeed, IPOs are found to come loaded with several benefits for both companies and investors. For firms, it is an opportunity to raise capital, enhance their profile, and better their management practices. For the investors, IPOs offer zero-cost, non-hassle investment chances with potentially high gains and long-run benefits. Therefore, in the future, with more and more blockbuster companies like Danieli, it will be all the more imperative for all market players to develop the right insight toward these merits and advantages of IPOs.
