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Top 10 Highest Dividend Paying Penny Stocks in India

The Indian stock market has witnessed a record rise in the number of market participants in the past few years. Many new investors enter the stock market in search of quick returns, but there are few investors who wish to hold stocks for the long term and earn a dividend income along the way. The annual returns increase substantially if the stock is a penny stock, as these stocks can deliver multi-bagger returns.

In this blog, we will give you an overview of the top dividend-paying penny stocks, their benefits, and disadvantages.

What are the High Dividend Penny Stocks?

Stocks with extremely low prices and high dividend yields are referred to as high-dividend penny stocks. These stocks offer high dividends with the potential to deliver multi-bagger returns in the near future. However, these stocks are highly risky, and investors must ensure whether or not high dividends are supported by strong financial performance. Investors who are thinking about purchasing high-dividend penny stocks should be aware that doing so could result in losses because the shares of these companies are less liquid and have higher volatility than other equities.

List of Penny Stocks That Pay Highest Dividends in 2025

S.No.	Penny Stocks	Dividend Yield (%)	Stock Price(₹)
1	Taparia Tools Limited	435.26	9.19
2	Gujarat Toolroom Limited	7.54	13.9
3	Gothi Plascon Limited	5.21	38.4
4	Ujjivan Small Finance Bank Limited	4.56	33.6
5	Saven Technologies Limited	3.51	57.4
6	Radiant Cash Management Limited	3.38	76
7	Vibrant Global Capital Limited	3.01	65.5
8	Yug Decor Limited	2.9	35
9	Advani Hotels and Resorts (India) Limited	2.73	66.63
10	Poojawestern Metaliks Limited	2.49	39.4

(all the above data is of 26 November 2024)

Highest Dividend Paying Penny Stocks – An Overview

An overview of the Highest Dividend Paying penny stocks is given below:

1. Taparia Tools Limited

In 1969, the company was founded to produce hand tools for the Indian market. The company was the result of a technical collaboration with Bahco, a Swedish company. The company’s ISO 9001 certification guarantees the company’s commitment to superior production quality. To ensure a consistent supply of goods, the corporation has a wide network of dealers around the nation. By offering almost a thousand different kinds of hand tools, the company can meet the demands of a wide range of industries. The company’s main office is located in Mumbai.

2. Gujarat Toolroom Limited

Gujarat Toolroom Limited was founded in 1983 under the name Pirnmatic Engineering Private Limited to produce alternatives to imported textile machines. The slump in the Indian textile sector from 1984 to 1986 caused the company to change its focus from textile machines to the plastic industry. In 1990, the company amalgamated with Kunal Fabricators Private Limited. In 1991, it became a public limited company and changed its name to Gujarat Toolroom Limited. The face value of the company’s equity dropped from INR 10 to INR 1 during a 10:1 stock split. The company’s head office is located in Ahmedabad, Gujarat.

3. Gothi Plascon Limited

In 1994, the business was established as Gothi Plascon (India) Ltd., a public limited company. Initially, the company’s primary focus was on producing disposable plastic goods. In response to the shifting market dynamics, the company strategically shifted its focus to the real estate sector. Its primary source of income comes from renting out buildings. Gothi Plascon (India) Limited’s main office is located in Puducherry.

4. Ujjivan Small Finance Bank Limited

The bank was established in 2016 as a subsidiary of the microfinance firm Ujjivan Financial Services Limited, later becoming a prominent small finance bank in India. The Reserve Bank of India granted it a license to operate as a small finance bank in 2017, and later, in 2019, the bank was listed on the Indian Stock Exchange. The bank primarily caters to the underserved segment while also providing services to the retail market. The bank has been focusing on enhancing its digital banking services to better serve its customers. The company’s main office is located in Bengaluru.

5. Saven Technologies Limited

The company was founded in 1993 and specializes in technology services, including the design, development, and implementation of technology-based solutions. It has a strong service delivery record. The company has branches in the United States and the United Kingdom. Its employees are highly qualified and proficient in offering innovative solutions. The company’s headquarters are located in Hyderabad.

6. Radiant Cash Management Limited

The company is an integrated cash logistics service provider with a focus on retail cash management. It was founded in 2005 by Colonel David Devasahayam. It offers a range of services, including cash pickup and delivery, ATM management, cash van rental, and network currency management. The company went public with its initial public offering (IPO) in December 2022. Operating a fleet of over 750 vehicles and more than 5,000 locations, it processes more than INR 500 crore of cash daily. The company’s headquarters are located in Chennai.

7. Vibrant Global Capital Limited

The company was founded in 1995 and was then known as Raisoni Finance Pvt. Ltd. It was a non-banking financial organization that was involved in lending, manufacturing of iodized salt, and trading in steel products and polyester films, among other things. The business changed its name to Vibrant Global Capital Limited in 2010 to better reflect its diverse operations. The head office of the organization is located in Mumbai.

8. Yug Decor Limited

Yug Decor Limited was founded in 2003 and produces adhesives under the YUG-COL brand. Among their many products are resin adhesives, natural rubber adhesives, synthetic binders, etc. In 2017, the business made its initial public offering (IPO) under the Small and Medium-sized Enterprises (SME) category. Chandresh S. Saraswat, the company’s chairman, has over 33 years of experience in the plywood and adhesive industry. Clients of Yug Décor are present throughout Asia, Europe, Africa, Bangladesh, Dubai, and other places. Its main office is located in Ahmedabad.

9. Advani Hotels & Resorts (India) Limited

When the company was founded in 1987 by Haresh G. Advani and Sunder G. Advani, it was called Ramada Hotels (India) Limited. The company launched its IPO in 1989, and later, in 1999, it changed its name to Advani Hotels and Resorts (India) Limited. The corporation owns and operates Caravela Beach Resort in Goa. The company’s headquarters are located in Mumbai.

10. Poojawestern Metaliks Limited

The firm was established in 1991 and started manufacturing, importing, and exporting brass products. The company imports a variety of items, including brass ingots, plumbing sanitary fittings, etc. The company can produce 5000 kg of brass hollow bars and solids daily. The company has clients in the Gulf and America. The company was listed on the Indian Stock Exchange in 2017. The company’s headquarters is located in Jamnagar, Gujarat.

Key Performance Indicators (KPIs)

Company	Operating Margin (%)	Net Profit Margin (%)	ROCE (%)	Current Ratio
Taparia Tools Limited	16.13	12.04	41.77	4.29
Gujarat Toolroom	14.04	13.16	97.94	1.19
Gothi Plascon Limited	47.37	35.04	14.65	11.06
Ujjivan Small Finance Bank Limited	8.71	22.57	4.88	–
Saven Technologies Limited	25.22	18.93	17.99	11.61
Radiant Cash Management Limited	16.04	11.50	23.89	4.60
Vibrant Global Capital Limited	23.22	19.73	34.90	3.98
Yug Decor Limited	7.36	4.62	21.67	2.3
Advani Hotels and Resorts (India) Limited	31.88	23.67	42.75	2.56
Poojawestern Metaliks Limited	6.23	2.84	25.24	1.30

(all the above data is of the year ended March 2024)

Benefits of Investing in High-Dividend Penny Stocks

There are numerous benefits of investing in high-dividend penny stocks, a few of which are mentioned below-

1. Affordability – Penny stocks have lower share prices, which allows an investor with limited funds to invest.

2. Potential High Returns – The penny stock companies have higher growth potential, which can provide higher investment returns.

3. Diversification – Investors can easily diversify their portfolio by investing in penny stocks; however, one should consider their risk profile before investing.

4. Possibility of Acquisition– Generally, small companies are an acquisition target of more established companies in that sector. When these small companies are acquired, the shares of the target company increase in value.

5. Dividend – These penny stocks or companies have historically paid high dividends apart from capital appreciation.

Read Also: Top 10 Steel Penny Stocks in India

Disadvantages of Penny Stocks That Pay Dividends

The significant risks related to investing in penny stocks, which pay dividends, are as follows-

1. Financial Instability – The financial performance of smaller companies may not be strong, which means they may not be able to distribute dividends in the long run.

2. Volatility – Penny stocks are considered more volatile as these stocks can be particularly targeted by speculators.

3. Lack of Liquidity – Generally, penny stocks lack liquidity and have low trading volume, which makes it difficult for investors to buy and sell shares.

4. Lack of Information – Most penny stocks have limited publicly available information, which makes the process of analyzing them more difficult.

5. Frauds – Penny stocks are generally manipulated by the promoters or other big investors. They can be a part of a pump-and-dump scheme.

How to Invest in High-Dividend Penny Stocks?

One can easily invest in high-dividend penny stock companies by following the steps mentioned below-

Visit the website of Pocketful.
Click on the “Open Demat Account” Tab.
Complete your KYC and fill in all the relevant details, such as name, e-mail ID, and mobile number. Enter the OTP received to verify the information provided.
Submit the bank details and upload the scanned copies of documents, including PAN card, identity proof, address proof, income proof, etc.
Next, you will be asked to complete the in-person verification process using a webcam or smartphone. E-sign the demat account opening form to complete the application process.
After successful verification, you will receive the login credentials on your registered mail ID.
Revisit the website and click on the Login Section on the Home Page.
Log into your demat account and begin investing.

Read Also: 10 Best FMCG Penny Stocks in India

Conclusion

On a concluding note, investment in dividend-paying penny stocks can be an investment option for investors who are looking for income in the form of dividends. However, there are certain risks involved while investing in penny stocks, such as lack of public information about the companies, illiquidity, etc. It is always suggested that you must consult a financial advisor before investing in penny stocks.

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Frequently Asked Questions (FAQs)

Which penny stock pays the highest dividend?
Taparia Tools Ltd. has the highest dividend yield of 435.26% as of 25 November 2024.
Which penny stocks are profitable?
Some of the profitable penny stocks are Taparia Tools, Gujarat Toolroom, Saven Technologies Limited, etc.
Which stocks pay monthly dividends in India?
There are no stocks in the stock market that offer dividends every month.
What are the risks associated with investing in penny stocks?
Investing in penny stocks can be extremely risky as these companies usually have limited publicly available information and are usually illiquid. Due to their low prices, these shares are targeted by speculators and can experience wide price fluctuations.
What are the benefits of investing in dividend-paying penny stocks?
The major benefit of investing in dividend-paying stocks is that these stocks provide a dividend income along with the potential for high investment returns.
Is Taparia Tools Limited a profitable company?
Taparia Tools Ltd. is a profitable company with a positive net profit margin of 12.04%.

November 26, 2024

Apply in IPO Through ASBA- IPO Application Method

Investing in Initial Public Offerings (IPOs) remains one of the most popular ways to create wealth and diversify investment portfolios. Investing in an IPO allows individuals to take an ownership stake in companies during its initial phases or just before it uses the funds raised in the IPO for future growth. However, applying for IPOs can be challenging, particularly if you are new to the stock markets. That is where the Application Supported by Blocked Amount (ASBA) comes into the picture. ASBA is a SEBI-approved mechanism that simplifies the process of applying in IPOs.

This detailed guide outlines the basics of an IPO, how ASBA works, and its advantages. Whether you apply for an IPO online or offline, this guide will provide the steps and tips to ensure a smooth investing experience.

What is an IPO?

IPO refers to the first time the shares are offered to the general public by a private company. This makes it possible for a company to raise capital from the general public and make it a publicly traded company on the stock exchange.

Why Do Companies Launch IPO?

Different reasons why companies launch an IPO are mentioned below:

Capital for Growth: Companies use IPO proceeds to expand operations, invest in new projects, or pay off debt.

Enhance Market Position: An IPO increases the visibility and credibility of a company in the market.

Liquidity for Founders and Early Investors: IPOs offer an exit opportunity for early investors or founders wishing to liquidate part of their stake.

Advantages to Investors

The advantages of IPOs to investors are listed below:

Equity Ownership: Investors have an opportunity to buy shares in a company with good future growth prospects.

Strong Returns: In most cases, an IPO can result in significant listing day returns. This is particularly true if the company has priced its shares lower than the actual value to attract more investors and cause oversubscription.

Regulated Process: SEBI’s oversight ensures fair pricing and transparency in the IPO process.

How to Apply for IPO Online & Offline

Applicants can submit IPO applications either online or offline, as it suits the applicant. Let’s divide each into detail.

Online Application for IPO

Today, the method of applying for IPOs online has received an excellent response primarily because of its convenient and speedy application process. Here is a step-by-step guide for online application.

1. Open a Demat Account

A Demat account is essential for filing IPOs because it stores shares electronically if the shares are allotted to the investors.

2. Log in to Your Trading Platform

3. Select an IPO & Enter

Look for the IPOs open for subscription. Based on your analysis, select the IPO you wish to apply for. Select the investor category and enter the number of lots you wish to apply for.

4. Submit ASBA request

Enter the UPI (Unified Payments Interface) ID. You will receive a request to approve the ASBA request.

5. Authorize Fund Blocking

Authorize the ASBA request to block funds in your bank account. The funds are only blocked and not debited until shares are allotted.

6. Track Your Application

You will be able to track the status of your application from your trading account and the registrar’s website.

Offline IPO Application

Here is the process an individual can follow to apply for IPOs offline.

1. Get the IPO Application Form

Get this form from the nearest branch of your bank.

2. Fill up the Form

Fill out the IPO application form with the required details, such as a Demat account, PAN card, and bid information. Provide the bank account number or UPI ID you want to use for the ASBA process.

3. Submit the Form

Sign the mandate instructing the bank to block the amounts in your bank account and submit it along with the IPO application form.

4. Confirmation and Tracking

Once submitted, receive an acknowledgment slip from the bank branch. Track the status of your application using the reference number on the slip.

What is ASBA?

Application Supported by Blocked Amount (ASBA) is a mechanism introduced by SEBI to facilitate the IPO application process. In this mechanism, the applicant does not need to transfer any money when applying for the IPO. Instead, the money stays in the bank account but remains blocked for the IPO application.

Key Features of ASBA

The key features of the ASBA mechanism are:

Funds are Blocked in Your Account: The amount required, according to the bid information in the IPO application, gets blocked, but it continues to earn interest in your savings account.

No Withdrawal till Allotment: Funds get debited only if shares are allotted.

Refund Without Delay: If no shares are allotted, the blocked amount is automatically released.

Transparency: The ASBA process is secure as no amount is deducted from the bank account.

Eligibility to Apply for IPO Through ASBA

To apply for an IPO using ASBA, you must have all the following:

Valid Demat Account: You must have a Demat account wherein your shares will be held in electronic form.

Bank Account with ASBA Services: Your bank should have ASBA services. Most of the big banks operating in India support ASBA.

PAN Card: Applying for an IPO requires a valid PAN card.

Sufficient Funds: Your account should have sufficient funds required to apply for an IPO.

How to Apply for IPO through ASBA (Online and Offline)

Online Process

Navigate to the IPO section and select the desired IPO.

Fill out the details related to bid price, quantity, investor type, etc., and submit the UPI ID.

Approve the ASBA request for blocking funds in your bank account and monitor the status of your IPO application.

Offline Process

Visit the nearest branch of your bank and collect the IPO application form.

Fill out the form with details related to the bid price, quantity, Demat account number, etc. Approve the mandate that allows your bank to block the funds required for IPO applications and submit them at your bank’s branch.

Upon submission, the bank verifies the credentials and blocks funds in your bank account.

Obtain an acknowledgment slip, which can be used to track your IPO application.

Advantages of Applying through ASBA

The advantages of applying for IPO through ASBA are:

Interest on Funds: The blocked funds in your bank account earn interest until shares are allotted.

No Refund Hassles: Before ASBA was introduced, investors had to wait for refunds in case of non-allotment of shares as amounts were deducted at the time of application. In ASBA, the funds are released immediately as they were only blocked in the bank account.

No Additional Charges: ASBA applications do not have extra processing fees.

Conclusion

Applying for an IPO through ASBA is a safe and hassle-free process, wherein your money will be blocked until the shares are allocated. Moreover, investors don’t have to wait for a refund if the shares are not allotted and the funds continue to earn interest in their bank accounts. It is a SEBI-approved process that ensures hassle-free IPO investments.

Whether applying for an IPO online or offline, ASBA has been a key component in the IPO application process due to its reliability and convenience. As IPOs witness a rise in participation by retail investors, ASBA has become a preferred method of payment in IPO applications.

Frequently Asked Questions (FAQs)

What is ASBA in an IPO?
ASBA stands for Application Supported by Blocked Amount, a mechanism introduced by SEBI that permits applicants to apply for an IPO by blocking application amounts in their bank accounts. In this scenario, the funds are safe and deducted only from the applicant’s account when the shares are allotted.
Can I apply for an IPO without a Demat account?
Investors require a Demat account to apply for IPOs. The Demat account stores stocks in electronic form if the investor gets allotted shares.
ASBA or UPI: Which is better for an IPO?
ASBA doesn’t require investors to have a smartphone, and thus, it allows offline IPO applications. On the other hand, UPI offers convenience as investors can easily apply for IPOs through mobile apps.
How would I know the status of my IPO application?
You can track the status of your application by entering your details on the registrar’s website.
Can an IPO application form be canceled or modified?
Retail investors can cancel or modify their IPO bids. However, QIBs and NIIs can only increase their bid and are not allowed to cancel their IPO applications.

November 26, 2024

Tata Penny Stocks List – Benefits, and How to Invest?

Suppose you are an investor who continuously searches for new investment opportunities in the stock market. In that case, you must be looking for a few reliable companies with a low share price that have the potential to provide multi-bagger returns over the next few years. There are many penny stocks in the Indian stock markets, but they may not present a reliable investing opportunity. But what if I told you that you could invest in the penny stocks of one of India’s most famous corporate groups?

In this blog, we will give you an overview of the Tata penny stocks, the benefits of investing in them and how they differ from other penny stocks.

What is Tata Group Penny Stock?

Those companies owned by the Tata Group, which have a lower market price and lesser market capitalization than the flagship companies under the Tata Group, are referred to as Tata Group penny stocks. Investors looking to buy these stocks should be aware of the extreme volatility in the share prices of penny stocks. Due to the lack of sufficient information and the unreliability of their operations, investors avoid penny stocks. However, Tata penny stocks are not the same as they have the brand name of the Tata Group, which signifies reliability and ethics.

Tata Penny Stock List With Price

The two Tata Group penny stocks under ₹100 are as follows-

S.No.	Stock Name	Stock Industry
1.	Tayo Rolls Ltd	Castings, Forgings & Fastners
2.	Tata Teleservices (Maharashtra) Ltd	Telecomm-Service

1. Tata Teleservices (Maharashtra) Limited

The primary goal of Tata Teleservices (Maharashtra) Limited, often known as TTML, is to provide internet and IT services in India. The firm was first established in 1995 as Hughes Ispat Limited. Tata Teleservices (Maharashtra) Limited was the new name for the company after the Tata Group bought the majority of its shares in 2003. The company became the first private telecommunications operator to offer 3G services in 2010. However, intense competition, large losses and huge debts forced the organization to sell its consumer mobile business to Airtel in 2017. Currently, TTML offers broadband, cloud & SaaS, cyber security services, etc. The company’s head office is situated in Mumbai.

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
-16.44%	-50.03%	3,176.60%

(As of 23 December 2024)

2. Tayo Rolls

As a joint venture between Tata Steel, Nissho Iwai Corporation and Yodogawa Steel Works, Tata-Yodogawa Limited was established in 1968. The company’s main business was to manufacture cast iron and cast steel rolls for metallurgical industries. Its other products include forged rolls, engineering forgings and ingots. The business launched its IPO in 1969 to raise funds from the general public. The funds were used to increase its capacity to meet the demands of customers worldwide. The business expanded its product line later in 1995 and began producing special castings for power plants. The company’s name was changed to Tayo Rolls in 2003. The company began experiencing financial difficulties and decided to close its operations in 2016. The headquarters of Tayo Rolls is situated in Jamshedpur.

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
-7.45%	-30.56%	254.06%

(As of 23 December 2024)

Caution: Tayo Rolls closed its operations in 2016, but its share continues to trade on the stock market. After Covid, the stock increased from INR 19 to INR 200, which caught the attention of most new investors. This increase in share price was not due to strong financial performance but largely due to speculative activities. Many market experts termed trading activities in this stock as a part of the pump and dump scheme. Investors should remain cautious and consult a financial advisor before investing in any security mentioned in this blog.

Read Also: Best Adani Penny Stocks

What is the Difference Between Normal Penny Stock and Tata Group Penny Stock?

The following are the primary distinctions between normal penny stocks and Tata penny stocks:-

Particulars	Normal Penny Stocks	Tata Penny Stocks
Credibility	A typical penny stock is of a lesser-known company.	These shares are issued by companies that are owned by the Tata Group.
Business	Normal penny stocks may have an unproven track record.	Tata Group penny stocks have a proven track record.
Manipulation	Normal penny stocks can face high levels of manipulation.	Tata Group penny stocks usually face lower manipulation.
Growth Potential	These companies typically have lower growth potential as they don’t have strong fundamentals.	Tata Group penny stocks have long-term growth potential as they are supported by Tata Group.
Liquidity	Normal penny stocks may have lower liquidity.	The liquidity in Tata Group stocks is better than other penny stocks.
Market Capitalization	These penny stocks generally have lower market capitalization.	The Tata Group penny stocks have higher market capitalization than other penny stocks.

Benefits of Investing in Tata Group Penny Stock

The advantages of investing in Tata Group Penny stocks are listed below-

1. Low Cost – Because of their low prices, Tata penny stocks are accessible to investors with small investment amounts.

2. High Returns – These companies can grow their businesses considerably in the future, which can result in substantial returns for investors.

3. Portfolio Diversification – Investing in penny stocks of the Tata Group can help investors diversify their portfolios.

4. Brand Value – The brand name of Tata Group can positively impact stock performance as investors have faith in them.

5. Long-Term – The fact that Tata Group companies are engaged with almost all sectors puts them in a powerful position for long-term growth.

6. Merger Possibility – Tata Group could merge these companies with its other well-established companies.

7. Dividend – The Tata Group companies consistently pay dividends along with capital appreciation.

Future of the Tata Group

The companies included in the Tata Group are one of the largest business corporations in India and the world. Its companies operate in various industries and offer a wide range of products. These companies are committed to sustainability and innovation. The ongoing transition from fossil fuel to renewable energy supports long-term growth prospects for the Tata Group as its companies are already market leaders in electric vehicles and renewable energy. Some of the major companies of the Tata Group are Tata Consultancy Services (TCS), Tata Steel, Tata Motors, Tata Power, etc. TCS has been focussing on artificial intelligence and cutting-edge technology. Tata Motors is a well-known EV manufacturer, and Tata Power has been working on renewable energy initiatives. In conclusion, the Tata Group has a bright future.

Read Also: Best Mukesh Ambani Penny Stocks

How to Invest in the Tata Group Penny Stock

If you are looking to invest in Tata Group Penny Stocks, then you must follow the below-mentioned steps –

Visit the website of Pocketful.
Click on the “Open Demat Account” Tab.
Complete the Know Your Customer (KYC) process and enter all the relevant information for opening a Demat account. Verify your contact details using an OTP.
Enter the Bank Account details of the bank account you want to link with your trading account. You can transfer funds from this bank account to your trading account to buy or sell securities. After the successful execution of trades, the shares are either credited or debited from the Demat account.
Submit scanned copies of documents such as PAN card, Aadhaar card, income proofs, etc.
Complete the in-person verification using a webcam or smartphone and E-sign the Demat account opening form.
After verification of the information and documents provided, your demat account will be opened with us.
The login credentials will be sent to your registered mail ID.
Visit the website again and click on the Login Section on the Home Page. You can also download our mobile application to trade and invest.
Log into your account and search the stocks you want to invest in and purchase them.

Read Also: Best Trading Apps in India

Conclusion

To sum up, investing in Tata penny stocks gives you the chance to make money over the long term. However, penny stocks also pose several dangers, including a lack of liquidity and weak financial performance. You should only consider investing in penny stocks if you are willing to take these risks. However, because the Tata Group backs the stocks mentioned in the blog above, these penny stocks are more trustworthy than others. Additionally, it would help if you spoke with your investment advisor before making an investment decision.

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Frequently Asked Questions (FAQs)

In which company Tata Group has invested?
Apart from its well-established businesses in various sectors, the Tata Group has made investments in numerous businesses, such as Zivame, Paytm, and Ola.
How many stocks are there in Tata Group?
There are 26 publicly listed Tata Group companies spanning various industries.
Which company is a Tata Group penny stock?
TTML or Tata Teleservices (Maharashtra) Limited and Tayo Rolls can be considered penny stocks as both of them have a share price below INR 100.
Which is the most valuable Tata Group company listed on the stock market?
Among all the Tata Group’s listed corporations, TCS, or Tata Consultancy Services, is considered the most valuable. It offers consulting services in the IT sector and has a large market capitalization.
Who is the current chairman of Tata Group?
The chairman of the Tata Group is Natarajan Chandrasekaran, as of 25 November 2024.
Which Tata share is under INR 100?
TTML or Tata Teleservices Limited and Tayo Rolls’ share price is below INR 100.

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November 25, 2024

What is the IPO Cycle – Meaning, Processes and Different Stages

The process of going through an IPO is key for any private companies looking to raise funds and get listed on the stock markets. The IPO process is sometimes referred to as the IPO cycle. However, the IPO cycle is very complex and includes many processes that involve different regulations, financial disclosures, and compliance. Understanding the IPO cycle is a necessity not only for companies but also for potential investors when making investment decisions.

This blog provides an extensive overview of the IPO cycle, its stages, advantages, and potential drawbacks.

What is an IPO?

IPO, short for Initial Public Offering, refers to the process by which a private company issues or offers shares to the public and consequently becomes an entity listed on the stock exchange. The main reasons why companies go public include raising more capital that can be used for expansion, debt repayment, research, and development. By launching an IPO, a firm offers the general public an opportunity to become shareholders and become part of the future growth of the company in exchange for their investment. On the other hand, an IPO also gives early investors the chance to get their investments back.

The process of an initial public offering consists of many sub-processes with clearly defined responsibilities of the company, underwriters, regulators, and stock exchanges. The company seeking to launch an IPO must disclose its financials, business operations, and risks in the form of a prospectus, which is reviewed and approved by regulatory authorities, ensuring compliance with applicable standards. This public disclosure would offer potential investors insights into a company’s operations, thus ensuring that they make informed investment decisions.

What is the IPO cycle?

The IPO cycle consists of all the stages ranging from when the firm first considers going public to getting listed on a stock exchange. Stages of the cycle include preparation of prospectus, regulatory filing, pricing, and listing. All of these stages are very important and must be undertaken in compliance with the regulatory standards.

A well-structured IPO cycle ensures that it meets regulatory requirements and provides transparent disclosures to those investors who want to invest in it, establishing credibility and market value for the company before its shares hit the stock markets.

Different Stages of IPO Cycle

The IPO cycle consists of various stages, and all these stages are essential for a successful IPO. Let’s understand each stage in detail.

Pre-IPO Stage or Preparation

Financial Data: The company assesses its financials to ensure that it meets all the accounting standards and is in good financial health to pass the regulatory tests. In this stage, auditor appointments and amendments in financial practices for transparency have been observed.

Restructuring: The company may restructure its business model by reducing debt, settling legal disputes, focusing on productive segments, or starting new ventures that would increase its attractiveness to investors before IPO.

Hiring of Underwriters: Underwriters can be investment banking companies. Underwriters are hired by the companies to look after the processes of an IPO. They take responsibility for determining company value, setting the IPO price, and getting investors to participate in the IPO.

Regulatory Filing and Review: Draft Red Herring Prospectus or DRHP

Preparation of DRHP: The company prepares, in consultation with underwriters and legal counsel, a draft red herring prospectus or DRHP. A DRHP is a document consisting of information about the business, financial information, management, risks, and other important information.

The DRHP document is submitted to the regulatory authority for approval. The regulator ensures that the information in the document complies with all the relevant regulations. In India, once the DRHP is approved by SEBI, it is finalized into the Red Herring Prospectus (RHP). RHP serves as an important document for investors when making decisions about whether to invest in an IPO or not.

Roadshow and Marketing

Roadshow Events: A roadshow is a series of presentations and meetings during which company representatives and underwriters pitch the opportunity to invest in the IPO to potential investors. This stage is important in building investor interest and garnering feedback.

Building Interest: This stage helps the company determine investor sentiment and adjust its IPO strategy if needed. Investor demand can significantly affect the IPO price and the number of shares to be issued.

Pricing and Allocation

Determination of IPO Price: After the roadshow, the company and the underwriters determine a price for the shares issued in an IPO. The price is determined by the investor demand, market sentiment, and future growth potential of the company. Determining the optimal IPO price is, therefore, crucial because it affects the capital-raising activities of a company.

Allocation of the Shares: There are different categories of investors, each with a reserved quota in the IPO. If the IPO is not fully subscribed, each investor gets the number of shares one has applied for. On the other hand, if the IPO is oversubscribed, investors are allocated shares by lottery method. However, the minimum shares allotted and lock-in period vary across different investor categories.

Listing on the Stock Exchange

Going Public: On the scheduled listing day, shares issued by the company are listed on the stock exchange, and the trading commences. Investors who didn’t get an allotment can buy shares or sell their allotted shares on this day, which can cause price fluctuations.

Post-IPO Stabilization: The lock-in period for anchor investors ensures the stock price gets some stability during the initial post-listing phase.

Benefits of an IPO to a Company

The benefits of launching an IPO for a company are:

Capital Raising: Companies, through an IPO, raise significant amounts of capital to expand the business, settle debts, or conduct research and development.

Public Profile and Credibility Increases: The IPO enhances the company’s profile and credibility, which helps attract talent, build customer trust, and create partnerships.

Liquidity to Early Investors: The IPO enables early investors to sell their shares in the open market.

Expansion: Companies can acquire other businesses by using the funds raised from IPO and hence expand their market share.

Drawbacks of Going Through an IPO Cycle

The various disadvantages of going through an IPO cycle are:

Significant Costs: The process of launching an IPO is very expensive as it costs money to hire underwriters and legal consultants.

Regulatory Compliance/Restrictions: Public companies are required to follow strict regulations and report financials at regular intervals, which requires a dedicated accounting and compliance team, thus increasing operational costs.

Short-term Focus: Shareholders seek continual quarterly performance, thus creating short-term pressures and it may inhibit the long-term objectives of the company.

Loss of Control: Owners may lose some control over the decisions of the firm due to the influence of other shareholders.

Market Volatility: Stock prices can experience market fluctuations, which impacts the company’s market capitalization and investor sentiment.

Conclusion

The IPO cycle is a complex but very rewarding process by which companies raise money from the general public and get listed on the stock exchange. However, the process is cumbersome and involves many sub-processes, ranging from the decision to launch an IPO to seeing its share trading on the stock exchange. It can take anywhere between 3 months to 12 months to get through the IPO cycle, based on company preparedness, regulatory processes, and market conditions. Companies should thoroughly compare the benefits and challenges involved in the IPO cycle before going through the IPO cycle.

Frequently Asked Questions (FAQs)

What is an IPO cycle?
The IPO cycle is the step-by-step procedure a private company has to adopt to become a publicly listed company. The IPO cycle involves the preparation of documents, regulatory filing, pricing and listing.
Why do companies go through the IPO cycle?
Companies opt for an IPO to raise funds, gain more visibility and ensure liquidity for their early investors. The funds can support future growth and expansion in the days to come.
Is a Demat account required to invest in IPOs?
Investors need to have a Demat account to invest in an IPO, as it will store the shares allotted to the investors.
What are the main phases of the IPO cycle?
The primary phases of an IPO cycle include pre-IPO preparation, regulatory filing, road show, pricing, and listing on the stock exchange.
Are there any disadvantages of going through an IPO cycle?
Launching an IPO can be expensive due to the costs involved in hiring underwriters, preparing marketing materials, and meeting higher regulatory requirements.

November 25, 2024

What is Face Value in an IPO?

Investment in an IPO has been extremely popular among new investors entering into the stock market. In order to make good investment decisions and make consistent returns in the market, it is quintessential to know key terms associated with an IPO, such as “face value.” In an IPO, face value defines the original nominal value of each share. It is also known as par value.

In this blog, we will explain face value in an IPO, how shares are sold at face value, and how to calculate face value, which will help you clearly understand the importance of face value while investing in an IPO.

What is an IPO?

An Initial Public Offering, or IPO, is the process through which a private company offers its shares to the public for the first time. Companies go public for one or more of these reasons: to raise funds to further grow the business, pay off some debt, or for other strategic purposes. The investors attempt to become partial owners of the company and have a chance to profit if the company continues performing well.

The IPO shares are traded on the stock exchanges and, hence, accessible to the general public. To invest in an IPO, the investors would need a Demat account, which is an electronic account that lets investors hold and manage securities. For the companies, the process involves seeking regulatory approval and determining the issue price and the face value of shares with the help of investment banks.

What is the Face Value of an IPO?

Face value refers to the fixed base price assigned to every share of the company. Unlike the market price, which changes continuously after the IPO, face value is constant and reflects the base accounting value of a share.

For instance, if there are 1,00,000 shares outstanding and the equity share capital of the company is INR 10,00,000, then the face value of the shares is calculated by dividing the equity share capital by the total number of outstanding shares. The face value of shares in the above example is equal to INR 10.

Face value is different from the trading price of the share at a stock exchange. The trading price depends on market demand and the performance of a company; however, face value is a constant number used for accounting purposes and even for ascertaining dividends.

How Shares are Sold at Face Value?

In an IPO, the face value for the shares issued by the company is fixed at values such as INR 1, INR 10, etc. The price of the shares credited to the Demat account of the investors includes a premium over the face value, which is calculated by the underwriters based on the expected market demand, current market sentiment and the company’s past financial performance.

Example of Face Value and Premium Pricing

If the company has determined the face value of the share is fixed at INR 10 and the IPO price at INR 100. In this case, the difference between the face value, which is INR 10, and the IPO price, which is INR 100, is called the premium. The premium here is INR 90, which is decided by the company in collaboration with its advisors based on the demand for the company and valuation.

This premium over face value will enable companies to raise adequate capital through the IPO. It is important for investors to understand that the face value itself is purely nominal, but the premium reflects market interest and the company’s expected growth potential.

How to Find Face Value in an IPO?

Even though the face value is pre-established by the company, the steps to calculate it are below. Investors can also readily access this information.

Check Prospectus: To issue shares through an IPO, the company must publish a prospectus. This prospectus includes all the critical financial information. It also contains information regarding the face value of shares, issue price, and so on.

The face value can be obtained by dividing the total equity capital of a particular company by the outstanding shares.

For Example: If equity capital is 100 crores and outstanding shares are 10 crores, then the face value would be INR 10 (100 crore/10 crore).

Financial Platforms and Stock Exchanges: Most financial platforms and stock exchanges publish the face value of IPO shares.
Brokerage Websites: Most of the time, the details of the IPO, including the face value of the shares, are available on brokerage websites.

Why does Face Value matter in an IPO?

It is important for investors to understand the meaning of the face value of shares in an IPO due to the following reasons:

Dividend Calculation: Generally, dividends are declared based on the face value of the shares. For example, if a company declares a 10% dividend on a share with a face value of INR 10, then every share will get INR 1 as a dividend.

Stock Splits: In a stock split, companies divide the face value of its shares to make them affordable for more investors as the share price decreases. It also increases the number of shares available for trading in the market. For example, a company splits a share with a face value of INR 10 into two shares with a face value of INR 5 each. Suppose the current market price was INR 300. Then, after the stock split, the shares of the company will trade at INR 150.

Accounting Records: The face value is of much importance in accounting and is employed in the financial statement of a company to signify the original contribution of shareholders.

How to Invest in an IPO with Knowledge of Face Value

Investing in an IPO requires investors to have knowledge of face value when judging the pricing of the IPO. The face value can be used to evaluate the premium at which the IPO price is set. Favorable market sentiments could be reflected by a high premium, but the investors should ascertain if such a premium is justified by the strong financials and future growth prospects of the company.

Conclusion

The face value of shares in an IPO is one of the most critical data that investors must understand. By understanding what is face value in an IPO, an individual can better assess dividends, stock splits, and financial statements. Even though the face value doesn’t influence the market price, it helps gain insight into the pricing of the company’s IPO. Armed with this knowledge, investors are better equipped to make informed investing decisions.

Frequently Asked Questions

What is the face value of an IPO?
Face value is the nominal accounting value assigned by the issuing company to each share.
Why is face value important in an IPO?
Face value is important for judging the pricing of the IPO, calculation of dividends, and stock splits.
Are shares sold at face value in an IPO?
Usually, IPO shares are issued at a price that is more than their face value. The price of the shares issued in an IPO consists of a premium above the face value, reflecting market demand and future growth prospects of the company.
What is the difference between face value and market value?
The face value is fixed, while the market price fluctuates based on factors like market demand, the company’s financial performance, and market sentiment.
How do I find the face value of a share in an IPO?
Generally, you can get the face value from the company’s IPO prospectus, stock exchange platforms, or through the IPO details given on brokerage platforms.

November 23, 2024

Downside Tasuki Gap Candlestick Pattern

Have you ever seen a scenario in which the asset price is consistently declining and suddenly starts consolidating before moving further down? The scenario described can be seen on the chart in the form of a Downside Tasuki Gap pattern. Traders constantly search for such opportunities to make huge profits.

In this blog, we will discuss the Downside Tasuki Gap pattern and its interpretation. Moreover, we will understand the trade setup with the help of a real-world example.

What is the Downside Tasuki Gap pattern?

The Downside Tasuki Gap is a bearish continuation pattern seen in candlestick charts, indicating the potential ongoing downward momentum in stock or asset is expected to continue. This pattern appears during a downtrend and is made up of three distinct candles.

First Candle: The first candle is bearish, which signifies selling pressure.
Second Candle: The second candle opens with a gap down, continuing with the negative sentiment, and closes considerably below the close of the first candle.
Third Candle: The third candle is bullish, opens within the previous candle’s body and attempts to fill the gap created between the second candle and the first candle. However, it fails to fill the gap.

Interpretation

The Downside Tasuki Gap pattern is interpreted as a strong bearish signal, suggesting that selling pressure is dominant and a downtrend is likely to persist. When this pattern forms, it indicates that the sellers are pushing the prices lower, with buyers unable to regain control even as they attempt to fill the gap with the third bullish candle. The inability of the third candle to close above the gap signals a bearish sentiment and a lack of buying momentum. Traders view this as a confirmation of the downtrend, often using it to enter or add to short positions in anticipation of further declines. In essence, the pattern reflects sustained bearish sentiment, reinforcing the notion that the downward momentum is still intact.

Read Also: Bullish Tasuki Line Pattern

How to Determine Target and Stop-Loss?

Setting the Target and Stop-loss (SL) levels while trading using the Downside Tasuki Gap pattern requires careful technical analysis to manage risk and maximize the potential gains. Here’s a guide to determining each:

Target Price

Gap Size Measurement: Measure the distance between the close оf the first bearish candle and the open of the second bearish candle. This gap size provides an initial estimate of the likely downward move after the formation of the pattern. Project the gap below the close of the third candle to get a target price.

Support Levels: Identify nearby support zones based on historical price movements. Set the target price just above these support levels as the prices often pause or reverse near established support.

Fibonacci extensions: Technical traders often use Fibonacci extensions to set more precise targets.

Stop Loss (SL)

Above the gap: Set the stop-loss just above the gap between the first and second candles. If the price closes above the gap, it indicates the bearish signal is weakening, making the stop-loss necessary to limit losses.

Key Resistance Levels: Individuals can place a stop-loss just above the nearest resistance level, as a breakout above resistance could indicate trend reversal.

Risk-to-Reward Ratio: Ensure the target and SL offer a favorable risk-to-reward ratio, typically 1:2 or 1:3, to optimize potential profits while controlling the losses.

Example of Downside Tasuki Gap of Reliance Industries Ltd.

The above image displays the chart of Reliance Industries (RIL) stock on a daily timeframe. The stock made a high of INR 1,608 on 8 July 2024 and then declined to a low of INR 1,563 on 10 July 2024, indicating a resistance zone near the INR 1,600 level. The stock again tried to give a breakout above the resistance on 15 July 2024 but failed to do so and made a Downside Tasuki Gap pattern on 18 July 2024. The stock fell from 1,586 to INR 1,500 within the next two days.

Advantages of Downside Tasuki Gap Pattern

The advantages of using a Downside Tasuki Gap pattern are:

Clear Bearish Signal: The pattern strongly indicates a continuation of the downtrend, making it valuable for traders looking to capitalize on bearish market movements.

Clear entry and exit points: The Downside Tasuki Gap provides the specific points for setting the entry, target and stop-loss (SL) levels, helping individuals in strategic trade planning and effective risk management.

High Reliability in Downtrends: The Downside Tasuki Gap pattern is more reliable in established downtrends, reflecting sustained selling pressure.

Versatile Across Markets: The pattern works across various financial instruments, including stocks, forex and commodities, allowing the traders to apply it in different markets.

Easy Identification: Consisting of only three candles, the Downside Tasuki Gap is easy to identify, making it accessible for traders of all experience levels to spot bearish continuations.

Limitations of Downside Tasuki Gap Pattern

The limitations of using a Downside Tasuki Gap pattern are:

Limited Accuracy in Isolation: The pattern may not reliably indicate a downtrend if used alone. It works best when combined with other technical indicators to confirm the bearish signal.

Risk of False Signals: In choppy or sideways markets, the Downside Tasuki Gap can produce false breakouts, which can result in losses.

Not Ideal for All Market Conditions: This pattern performs best in clear downtrends and may not work well in low volatility or consolidation markets.

Short-Term Reversal Risk: If the gap fills or if buying pressure emerges, the trend may reverse, which can potentially result in unexpected losses.

Read Also: Upside Tasuki Gap Pattern

Conclusion

The Downside Tasuki Gap pattern can be a valuable tool for traders to identify bearish continuation signals in a downtrend. It offers clear entry and exit points, is easy to recognize and is most effective when used in combination with other technical indicators to confirm trends. Its reliability decreases in choppy or consolidation markets as it can generate false signals, which can lead to a bullish reversal. Understanding how to set accurate stop-loss and target is essential. Overall, the Downside Tasuki Gap is a useful chart pattern for experienced traders when applied strategically in suitable market conditions.

Frequently Asked Questions (FAQs)

What is the Downside Tasuki Gap pattern?
The Downside Tasuki Gap is a bearish continuation candlestick pattern that occurs in a downtrend. It features two bearish candles with a gap between them and is followed by a bullish candle that doesn’t fully close the gap, signaling the potential continuation of the downward trend.
How to identify the Downside Tasuki Gap pattern?
The pattern consists of three candles: a bearish candle, a second bearish candle and a bullish candle with a gap between the first two candles. The third bullish candle partially fills the gap and doesn’t close above it. This confirms that bearish sentiment remains strong.
What does the Downside Tasuki Gap indicate to traders?
The Downside Tasuki Gap pattern indicates that sellers are in control, and the downtrend is likely to continue. Traders often interpret it as a bearish signal to enter or add to short positions.
What are the limitations of using the Downside Tasuki Gap pattern?
It can produce false signals in sideways or consolidation markets. Additionally, setting the accurate stop-loss (SL) and target can be challenging without combining it with other indicators.
Can the Downside Tasuki Gap be used in any market?
The Downside Tasuki Gap pattern can be applied in various financial markets, including stocks, forex and commodities, but it is the most effective in a strong downtrend.

November 22, 2024

Why Invest in an IPO and its Benefits?

Initial Public Offering (IPO) has long been one of the ways companies raise funds from the general public, but recently, many IPOs have been receiving extraordinary interest from investors. The rising popularity of IPOs is due to the various benefits they offer to investors.

In this blog, we will explore the reasons why companies launch an IPO and the various benefits of investing in an IPO.

What is an IPO?

A firm that intends to be listed as a public company must first raise money via an IPO or initial public offering. The funds raised can be used for growth, repayment of debts, acquisition, etc. There are also situations when shares offered in an IPO are sold by the early-stage investors or the firm’s promoters. After the IPO, the shares of the company are listed on the stock exchange and can be traded.

Why Do Companies Offer IPO?

Companies choose initial public offerings (IPOs) for the following reasons:

1. To raise capital: Businesses typically seek to raise funds for business expansion since they can use the funds to expand their operations.

2. Debt Repayment: With the money raised, the company may pay off its current debt and improve its debt ratios, making this another reason for raising capital.

3. New Opportunities: Businesses can use the funds to establish operations in overseas markets by exporting their goods and services.

4. Research: Companies can use the money raised from the initial public offerings (IPOs) to improve the quality of their goods and services by developing new technologies.

5. Liquidity for Current Investors: Founders, venture capitalists, and early investors occasionally sell their ownership stake through an initial public offering (IPO) process and look for other investment opportunities.

6. Acquisitions: Funds raised in an IPO can be used by the company to acquire other businesses.

7. Increase in Popularity: A successful initial public offering (IPO) increases the popularity of the company among investors and its customers, which can result in higher sales and profits.

Why Should You Consider Investing in an IPO?

The primary reasons to consider investing in an IPO are as follows-

Listing Gains – In an IPO, if the shares trade at a price higher than the offer price on the listing date, then the investors can sell their shares and realize substantial listing gains.
Investment Opportunity – An IPO offers individuals a chance to invest in companies in their early stages.
Portfolio Diversification — If the company is operating in a different sector than the ones you are currently invested in, individuals can invest in IPOs of such companies and minimize their overall portfolio risk.
Potential Long-Term Growth — Companies with strong historical performance tend to have longer-term growth potential. Investors can judge the past performance of the company by using the data provided in the Red Herring Prospectus (RHP).
Lower Pricing – Some initial public offerings (IPOs) are intentionally issued at a lower price to attract more investors, making them an excellent investing opportunity for traders or investors.
Transparency – The annual reports and other documents of companies launching an IPO are subject to strict regulations, which makes them more transparent.
Liquidity – Once a firm makes its shares public, its shares can be easily bought and sold on the stock exchange.

Benefits of Investing in IPO

The major benefits of investing in an IPO are as follows:

1. Immediate Gains: If the company opens at a price higher than the offer price, investors can choose to exit by selling the shares received and realizing substantial listing gains. There were several instances in the recent past when the shares offered in an IPO increased substantially as the investors who didn’t get the allocation tried to purchase it on the listing date.

2. Flexibility: Investors can purchase and sell shares at any time without incurring high transaction costs in the stock market, as the company is publicly listed.

3. Fair Opportunity: SEBI has several regulations in place to ensure that small investors have an equal opportunity to receive shares in an initial public offering (IPO). In case of an oversubscribed issue, a lottery system is used to allot IPO shares to the general public. However, if the IPO is not fully subscribed, each IPO applicant receives the number of shares they have applied for.

4. Compliances: SEBI has established strict regulations for companies launching an IPO to safeguard individual investors. To allow investors to make an informed choice, the company’s prospectus must include all necessary information, such as performance, financials, growth, risks, and plans.

5. Purchase at a Discount: Companies can choose to offer their shares at a reduced price when they go public to attract more investors. Due to the initial low price, the shares typically list at a premium, which creates a positive image of the company and results in listing day gains for the investors.

6. Ownership: Investors who are allotted shares in an IPO are regarded as shareholders of the business and can cast their votes at the annual general meetings.

7. Early Stage Opportunity: An initial public offering (IPO) allows investors to purchase stock of a company during its early stages. Some of these companies can become a major success in the future and deliver multi-bagger returns to their investors.

8. Consistent Income: Several companies distribute dividends to their shareholders. Therefore, investing in these dividend-paying businesses allows you to generate a steady income.

Conclusion

On a concluding note, you may be considering investing in an IPO the next time an opportunity comes across by reading the advantages mentioned above. However, keep in mind that an IPO’s performance solely depends on the subscription data of a particular IPO. Market sentiment on the listing date and several other factors also affect listing gains. To make an informed investment decision, one must conduct a thorough financial analysis, which includes evaluating the company’s historical performance, growth prospects, and reasons for raising funds. Before making any investing decisions, you, as an investor, must speak with your investment advisor.

Frequently Asked Questions (FAQs)

Why does the company launch an IPO?
A corporation launches an initial public offering (IPO) to raise funds, which it might utilize for debt repayment, business expansion, and other purposes.
Is an IPO a good option for short-term or long-term investments?
Shares allotted in an IPO can be kept for the long term as well as the short term, depending on the future growth prospects of the company. The holding period also depends on the investor’s goal; some may seek listing gains, while others hold it for long-term potential growth.
Can I apply for an IPO without a Demat Account?
Investors cannot apply for an IPO if they do not have a Demat account.
How are the IPO’s issue prices determined?
In a fixed price issue, the company’s underwriter sets the price at which the investors can purchase shares. In a book-building issue, the company announces a price range, and the investor bids within that range to determine the issue price.
Is it right to invest in every Initial Public Offering (IPO)?
No, it is not wise to participate in every initial public offering (IPO) since there may be instances where the company may be aggressively priced, and the IPO’s issue price may be too high. Instead, it is advised to research the company’s fundamentals before investing.

November 22, 2024

What is NII in IPO?

An IPO is an opportunity for a company to raise capital by offering shares to the general public for the very first time. Companies use the funds raised to expand, pay off debts or acquire other companies. In the world of IPOs, the investors are classified into anchor investors, retail investors, qualified institutional buyers, and non-institutional investors, all of which play an imperative role in making an IPO successful.

In this blog, we are going to discuss what NIIs are, categories of investors in the NII category, rules and regulations, key features of the NII category, and how investors impact IPO success. This information will allow you to make informed decisions for investment in IPOs, whether you are an experienced investor or new to the stock market.

What is NII?

The NII full form is Non-Institutional Investors. A retail investor invests relatively smaller amounts in an IPO, whereas NIIs are high net worth individuals or entities with the ability to invest large amounts of money, often higher than the minimum amount defined under the market regulations. Any individual, company, trust, or other entity except retail and institutional investors can be referred to as an NII.

For example, in India, a company applying for more than INR 2 lakh in an IPO is considered an NII. NII quota in an IPO is equal to 15%, i.e., 15% of the shares offered in the IPO are reserved for NIIs. NIIs are different from QIBs as they are not SEBI registered. NIIs compete for the allocation of IPO shares in their category based on demand and supply in the NII segment of the IPO.

Since the NIIs are sophisticated investors, their participation in an IPO is an affirmation of the company’s potential and stability. High levels of NII participation increase the perceived value of an IPO and positively influence other investors, hence increasing the overall subscription.

Categories of NII in IPO

The NII category consists of several subtypes that have varying attributes and investment objectives. Below are some of the main categories under NIIs:

High-Net-Worth Individuals (HNIs): HNIs form a significant chunk of the NII category. Usually, HNIs are individuals with a high income and a net worth of at least INR 5 crore. HNIs could comprise entrepreneurs, high-income earners, experienced investors, etc., seeking sizable returns from IPO allocations.

Corporations and Trusts: The NII category often consists of applications from corporations, partnerships, and trusts, among others, that are not part of the retail segment. Corporations invest in IPOs to diversify their asset portfolios or to acquire stakes in companies that are perceived to have growth potential within their industries. Trusts may also seek IPO allocation for the management of wealth, among other growth strategies.

Family Offices: Family offices managing the wealth and assets of high-net-worth families are also a part of the NII category in IPOs. The investments are generally long-term growth plays, as they look to buy stakes in promising companies in their initial phase.

NIIs Rules and Regulations

The NII segment is highly regulated by rules and regulations, which are different from the regulations applicable to retail and QIB segments in IPOs. A few of the significant rules are as follows:

Quota Allocation: At least 15% of the total IPO issue size is reserved for NIIs. This percentage is known as the NII quota in the IPO. All the remaining shares are allotted to Retail Investors, QIB Investors, etc.

Minimum Investment: NIIs must apply for IPO shares worth more than INR 2 lakhs, with no upper limit to the investment amount. NIIs are further categorized into sNII and bNII. Investors with IPO application amounts between INR 2 lakhs to INR 10 lakhs are categorized as small NII or sNII. Meanwhile, those investing more than INR 10 lakhs fall under the bNII category.

Allotment Rules: In oversubscribed IPOs, each NII applicant is allotted shares worth minimum application size, i.e., INR 2 lakhs, subject to the availability of equity shares in the NII portion. The same is applicable for both sNII and bNII.

IPO Application Modification and Cancellation: Once the IPO application is submitted, NIIs cannot cancel their bid. NIIs can modify their application and are allowed to increase the bid quantity or price.

Features of an NII Category

The features of the NII category specify the type of behavior that the investor adopts in the IPO market. Some of the basic features of NIIs include the following:

High Investment Threshold: NIIs are required to invest a minimum of INR 2 lakhs in IPO. In India, retail investors can invest a maximum of INR 2 lakhs in an IPO. High investment requirements clearly distinguish NIIs from retail investors.

Flexibility in Lot Size to Invest: The NIIs, on the other hand, are not subject to this maximum investment amount applicable to the retail investor.

High Risk and Reward: Given that NIIs invest more, a higher risk is associated with the participation of NIIs. However, often, this risk is balanced by the prospect of high returns when IPOs perform well post-listing.

Strategic and Informed Investment Approach: Unlike retail investors, NIIs typically do extensive research before applying. They rely on market analysts, financial advisors, or in-house teams to assess the company’s financials, management, industry position, and potential for future growth.

Tax Considerations: They also have to weigh the tax implications of their investment returns. NIIs can sell their shares on the listing date but need to be cautious of the taxes applicable to the returns realized.

Conclusion

In conclusion, NIIs play a crucial role in the success of an IPO, as they invest substantial amounts of funds and also affect the overall subscription levels. Investment flexibility, high net worth, and special quota reserved for them are some of the key features of the NII category. NIIs lend credibility and attract greater interest and participation from retail investors.

Every high-net-worth investor, as well as a corporate body intending to invest in an IPO, should be aware of the nuances in the NII category, due to which only those with relevant experience and capital can participate in the NII segment in IPOs.

Frequently Asked Questions

What is NII in IPO?
NII stands for Non-Institutional Investor. This refers to an individual or organization investing substantial amounts in an IPO, usually exceeding INR 2 lakh in India.
How much is reserved for NII in an IPO?
NIIs have 15% of the IPO size reserved for them.
Are NIIs required to be registered with SEBI?
No, NIIs are not required to be registered with the SEBI.
Do HNIs fall under the category of NII?
High Net-Worth Individuals (HNIs) fall under the category of Non-Institutional Investors (NIIs).
Can NIIs cancel their IPO bids?
NIIs are not allowed to cancel their IPO bids but can modify them by increasing the quantity or price.

November 22, 2024

Bullish Belt Hold Pattern

Imagine you are closely monitoring the charts of a stock that has been in a downtrend for several days. Every attempt to rebound appears weaker, and the downtrend shows no signs of weakening. Suddenly, one candlestick draws your attention: a big green candle that closes near its high, standing out against the bearish backdrop. Could this be the reversal sign you’ve been waiting for?

In this blog, we will introduce you to the Bullish Belt Hold Pattern, a simple yet impactful single candlestick pattern that may suggest the initial phase of a bullish trend reversal. We will learn about its advantages, disadvantages and steps for setting entry, targets, stop-loss, etc.

What is the Bullish Belt Hold Pattern?

The Bullish Belt Hold is a single candlestick pattern indicating a possible reversal of a downtrend. This pattern, rooted in the Japanese candlestick charting methodology, is used by technical analysts to spot changes in market sentiment.

The Bullish Belt Hold pattern consists of a long green candlestick with minimal or no lower shadow. The candlestick opens near its low and then closes much higher, slightly below the high of the trading session. The pattern usually forms at the bottom of a downtrend, indicating a possible shift to bullish sentiment. The candlestick has a non-existent lower shadow and a short upper shadow.

The Bullish Belt Hold pattern shows that while sellers may initially drive prices down, buyers promptly intervene, resulting in a significant price surge and a closing near the peak. The change from negative to positive sentiment may signal the onset of an uptrend.

Additionally, traders often look for validation from subsequent candles. A bullish candlestick after the formation of the Bullish Belt Hold pattern reinforces confidence in the bullish reversal.

How to Determine Target and Stop-Loss?

An individual can follow the below steps to determine price levels for entry, target and stop-loss:

Entry: Enter a long position when the price closes above the high of the Bullish Belt Hold candlestick or after the formation of a confirming bullish candle. Even though the candle suggests a trend reversal, it is safer to wait for a second bullish candle to confirm the shift.
Stop-loss: Set the stop-loss just below the lowest point of the Bullish Belt Hold candle for optimal protection against losses. This ensures that if the pattern gives false signals, your losses are limited. Also, allow a slight buffer of around 0.5% below the lowest point to avoid getting the stop-loss triggered due to minor price fluctuations.
Target: The most common approach for determining targets involves measuring the size of the Bullish Belt Hold Candle (from open to close) and projecting this distance upwards from the closing price. For instance, if the pattern’s candle is of 10 points, you could aim for a target that is 10 points higher than your entry point.

Additionally, you can also identify the closest resistance level or recent high to use as a target point. When the price nears a strong resistance level, it is wise to take profits or keep a trailing stop-loss.

Read Also: Closing White Marubozu Pattern

Example of Bullish Belt Hold Pattern of Aarti Pharmalabs Ltd.

The image above shows the clear formation of the ‘Bullish Belt Hold’ pattern on the daily timeframe of Aarti Pharma Labs Limited, a manufacturer and seller of pharmaceutical and nutraceutical products. It can be seen that the pattern formed on 15 April 2024, and the stock’s closing price was INR 460. On 16 April 2024, the stock price increased to INR 468 and gave a breakout above the high of the pattern’s candlestick. The stock was in an uptrend and made a high of INR 515 on 25 April 2024.

Advantages of Bullish Belt Hold Pattern

The advantages of the Bullish Belt Hold pattern are:

Clear Reversal Sign: The pattern signals a possible bullish reversal in a downtrend, making it easier for traders to identify a change in the market sentiment.
Simple Pattern: Its distinct structure- a lack of lower shadow paired with a strong close near the high- makes it easy to identify for traders.
Versatile across Multiple Time Frames: This pattern can be used on daily, hourly or minute charts, making it suitable for different trading styles, such as intraday and swing trading.

Limitations of Bullish Belt Hold Pattern

The limitations of the Bullish Belt Hold pattern are:

Unreliable in Strong Downtrends: In a strong downtrend, a Bullish Belt Hold pattern may just represent a temporary pullback rather than a bullish reversal, leading to false signals.
Single Candlestick Pattern: Though useful, the pattern lacks the contextual insights that multi-candle patterns offer, making it inherently riskier to depend on without further analysis or supportive indicators.
Confirmation Needed: To enhance reliability, it is often necessary to seek confirmation from subsequent candles or indicators, but this can lead to delayed entry and diminished possible profits.

Conclusion

To summarise, the simple structure and ability to predict changes in market trends make the Bullish Belt Hold pattern a useful tool for traders. Despite its effectiveness, this single candle pattern does have its limitations, especially in volatile markets or strong downtrends. Hence, one should remember that the pattern can give false signals if used alone, so combining it with other indicators like resistance levels, trendlines, or volume analysis is best. Ultimately, understanding the context in which the ‘Bullish Belt Hold’ appears is important for making good trading decisions. By incorporating this pattern into a comprehensive analysis, traders can confidently navigate changing market dynamics.

Frequently Asked Questions (FAQs)

In what market conditions is the Bullish Hold most effective?
It is most effective in a downtrend.
Does the Bullish Belt Hold pattern work across all markets?
Yes, the pattern can be used to trade in different markets such as stocks, forex, commodities and currencies.
Should I wait for confirmation before taking a position based on the Bullish Belt Hold pattern?
Traders should wait for confirmation from other indicators to reduce the risk of false signals.
How does it differ from other bullish reversal patterns?
Unlike other bullish reversal patterns, the Bullish Belt Hold is a single-candle pattern that provides a quick reversal signal.
Is the Bullish Belt Hold pattern suitable for day trading?
Traders use the Bullish Belt Hold pattern for day trading and swing trading because of its reliable bullish reversal signal.

November 21, 2024

What is an IPO Subscription & How Does it Work?

You may be interested in investing in an Initial Public Offering (IPO) as a new investor. Still, you may need to check IPO subscription status before investing to gauge the demand for IPO shares. Moreover, after applying for the shares, you might be curious about the status of your allocation.

In this blog, we will discuss the IPO subscription procedure and how to verify the IPO’s subscription and allotment status.

What is an IPO Subscription?

The procedure by which an investor applies for the shares of a company when they are first made available to the public is known as an Initial Public Offering (IPO). The goal of such an issue varies from company to company; some may use the proceedings to pay off debt, while others may use them to expand their operations. IPO subscription is the process in which the investor applies for the shares offered in the IPO. The investors specify the quantity and the price in their IPO application to subscribe to the IPO. The corporation offers its stock or shares to the public to raise money, and investors subscribe to these shares. This process is known as an Initial Public Offering (IPO).

How Does an IPO Subscription Work?

The steps which are involved in IPO subscription are as follows-

1. Announcement – A prospectus that includes all of the firm’s information, such as its business model, financials, and the way the funds will be used, must be released when a company chooses to go public and seek money through an initial public offering (IPO).

2. Setting The Price – The company must set the price of the issue at which they want to offer their shares to the public in a fixed price issue. On the other hand, in a book-building issue, companies specify a price range within which investors can bid for the shares.

3. Subscription Period of an IPO – The dates on which the investors can apply for an IPO must be announced. Generally, the IPO opens for 3 to 5 days.

4. Categorization of Investors – In an IPO, there are different categories of investors, subject to different rules for participating in an IPO. Different types of investors are mentioned below:

Retail Investors – These small investors can apply up to INR 2 Lakhs.
Non-Institutional Investors – These investors are considered HNI individuals or corporate houses and invest large amounts.
Qualified Institutional Buyers – This category includes banks, mutual fund houses, insurance companies, etc.
Anchor Investors – These include large institutions that apply for shares before the issue opens for subscription for the general public.

5. Bidding – During this phase, the investors apply for the shares. They can specify the quantity and the price at which they wish to apply for IPO shares.

6. Status of Subscription – Real-time tracking of IPO subscriptions is possible. If the IPO is popular and the investor’s demand for shares exceeds the number of shares offered, the offering is deemed oversubscribed.

7. Allotment of Shares – The shares offered in an IPO are allotted to the investors in the following way:

Allotment to QIB: Shares are allocated to QIBs at the discretion of merchant bankers. But if the IPO is oversubscribed, shares are allotted proportionately.
Allotment to Retail Investors: If the IPO is undersubscribed or fully subscribed, retail investors receive the number of shares they applied for. On the other hand, if the IPO is oversubscribed, the investors will be allotted shares based on a lottery system.
Allotment to HNIs: In case of an oversubscription, shares are allotted to HNIs proportionately.

8. Credit of Shares – The allotted shares will be credited to the investor’s demat account.

9. Listing – Finally, the shares get listed on the stock exchange and become available for trading for investors.

What is the IPO Process?

The significant steps of the IPO process are as follows-

1. Deciding the Issue Size – The first step would be deciding on the issue size or the amount of capital the company wants to raise.

2. Appointment of Underwriter – The company must appoint an underwriter or investment bank to handle all the regulatory procedures, which includes setting the price range and other due diligence.

3. Preparing DRHP – The next step would be preparing a Draft Red Herring Prospectus (DRHP), which contains all the company’s business details and financials.

4. Submission of DRHP– The DRHP is filed with the Securities and Exchange Board of India to get regulatory approval.

5. Investor Presentation – The company identifies potential investors to present their future plans for the company and tries to convince investors to invest.

6. Pricing of the Issue – The issue price is set in a fixed price IPO, and in a book-building IPO, a price range is determined, and the issue price is set based on market demand.

7. Subscription Period – Typically, an IPO opens for subscription for a period of 3 to 5 days, during which an investor can apply for the IPO.

8. Allotment – Once the subscription period is over, the shares are allotted to the successful bidders and are credited to their demat account.

9. Listing – The shares are listed on the exchange and become available for trading for the investors.

How to Check IPO Subscription Status?

The steps to check the IPO subscription status are as follows-

1. Through Exchange – One can visit the websites of Indian stock exchanges, i.e. the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Select the Initial Public Offering (IPO) and review the subscription data for different investor categories.

2. Registrar – Another choice is to go to the registrar’s website, which manages the IPO allocation procedure and offers real-time subscription information. An investor can check the allocation status on the website as soon as the shares are allocated.

How to Check IPO Allotment Status?

The process to check the IPO allotment status on the registrar’s website by following the steps mentioned below –

1. Registrar Website – Investors can visit the website of the relevant registrar and click on the IPO allotment status tab.

2. Select IPO – An investor must select the IPO from the drop-down menu.

3. Enter the Details – Enter the details such as PAN number, application number, or Demat account number.

4. Status – Click on the submit button, and you can review the status of the IPO application, whether the shares are allotted to you or not.

Conclusion

To sum up, as an investor, you need to understand what an initial public offering (IPO) is and the associated procedures. One must know how to track the IPO subscription status, and once the subscription period ends, monitoring application status is also essential. IPO does not ensure a guaranteed return because sometimes IPO shares get listed on the stock exchanges at a discount. Therefore, before making any investment decisions, you should assess your risk tolerance and speak with your financial advisor.

Frequently Asked Questions (FAQs)

What will happen if an IPO is oversubscribed?
If an IPO is oversubscribed, the allotment of shares will be based on a lottery system.
Is an oversubscribed IPO good?
Generally, investors view an oversubscribed IPO favorably since it shows positive market sentiment and faith in the company’s future growth strategy. Oversubscription, however, is not always a sign of a strong stock exchange listing.
What is the meaning of ASBA?
Application Supported by Blocked Amount, or ASBA, is a way to pay for IPO shares in which the amount required to apply for an IPO is blocked in the investor’s bank account.
How long will it take to get the refund if shares are not allotted in an IPO?
If shares are not allotted to the investor, the blocked amount is unblocked within three to seven days.
Where can I check the IPO allotment status?
You can check the IPO allotment status on the registrar’s website after entering the required details.

November 21, 2024

Blog

What are the High Dividend Penny Stocks?

List of Penny Stocks That Pay Highest Dividends in 2025

Highest Dividend Paying Penny Stocks – An Overview

1. Taparia Tools Limited

2. Gujarat Toolroom Limited

3. Gothi Plascon Limited

4. Ujjivan Small Finance Bank Limited

5. Saven Technologies Limited

6. Radiant Cash Management Limited

7. Vibrant Global Capital Limited

8. Yug Decor Limited

9. Advani Hotels & Resorts (India) Limited

10. Poojawestern Metaliks Limited

Key Performance Indicators (KPIs)

Benefits of Investing in High-Dividend Penny Stocks

Disadvantages of Penny Stocks That Pay Dividends

How to Invest in High-Dividend Penny Stocks?

Conclusion

Frequently Asked Questions (FAQs)

Which penny stock pays the highest dividend?

Which penny stocks are profitable?

Which stocks pay monthly dividends in India?

What are the risks associated with investing in penny stocks?

What are the benefits of investing in dividend-paying penny stocks?

Is Taparia Tools Limited a profitable company?

What is an IPO?

Why Do Companies Launch IPO?

Advantages to Investors

How to Apply for IPO Online & Offline

Online Application for IPO

Offline IPO Application

What is ASBA?

Key Features of ASBA

Eligibility to Apply for IPO Through ASBA

How to Apply for IPO through ASBA (Online and Offline)

Online Process

Offline Process

Advantages of Applying through ASBA

Conclusion

Frequently Asked Questions (FAQs)

What is ASBA in an IPO?

Can I apply for an IPO without a Demat account?

ASBA or UPI: Which is better for an IPO?

How would I know the status of my IPO application?

Can an IPO application form be canceled or modified?

What is Tata Group Penny Stock?

Tata Penny Stock List With Price

1. Tata Teleservices (Maharashtra) Limited

2. Tayo Rolls

What is the Difference Between Normal Penny Stock and Tata Group Penny Stock?

Benefits of Investing in Tata Group Penny Stock

Future of the Tata Group

How to Invest in the Tata Group Penny Stock

Conclusion

Frequently Asked Questions (FAQs)

In which company Tata Group has invested?

How many stocks are there in Tata Group?

Which company is a Tata Group penny stock?

Which is the most valuable Tata Group company listed on the stock market?

Who is the current chairman of Tata Group?

Which Tata share is under INR 100?

What is an IPO?

What is the IPO cycle?

Different Stages of IPO Cycle

Pre-IPO Stage or Preparation

Regulatory Filing and Review: Draft Red Herring Prospectus or DRHP

Roadshow and Marketing

Pricing and Allocation

Listing on the Stock Exchange

Benefits of an IPO to a Company

Drawbacks of Going Through an IPO Cycle

Conclusion

Frequently Asked Questions (FAQs)

What is an IPO cycle?

Why do companies go through the IPO cycle?

Is a Demat account required to invest in IPOs?

What are the main phases of the IPO cycle?

Are there any disadvantages of going through an IPO cycle?

What is an IPO?