IPO Listing Gains

The company brings an IPO with the objective of raising funds for growth, setting up a new plant, clearing debt, etc, but when it comes to investors, what do Initial Public Offerings have to offer? Well! For them comes the IPO listing gains. 

What is Listing Gain in IPO?

It is common that as soon as a company announces its IPO in the market, investors often believe it to be profitable. However, there are certainly odd chances. 

Yet as we talk about it, listing gains are nothing but the profits investors make as soon as the IPO shares are listed on the secondary market or as we can say the share market. 

Mostly on a listing day, the share price on an IPO raises higher than the offer price due to high demand. And as we know the stock market rule, “BUY LOW AND SELL HIGH”;

Investors try to sell off their shares to make good profits, which are nothing but the listing gains.

Let’s move on to see how listing gain is calculated.

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IPO Listing Gains Calculation

Now let us try to understand this with the help of an example. 

Sumit was a long-term investor. While exploring more about the stock market he came across the term IPO.

He discovered that an IPO is another way of gaining profits apart from regular trading. 

So he subscribed for an ongoing IPO. Let’s say, one lot consists of 16 shares. He placed his bid at ₹250 per share. Sumit subscribed for 4 lots, which means his total investment will be worth ₹16000.

Let’s say, on listing day, the share price jumps up to ₹300 due to high demand, so Sumit is intrigued to sell the shares, worth ₹19200.

Hence his listing gain would be;

₹19200- ₹16000
= ₹3200

So here, Sumit earned a listing gain of ₹3200. 

Earlier we talked about listing losses, which happens when the listing price drops below the offer price of the company share. This is the result of under subscription, or in simpler terms when supply is higher than the demand, hence the price drops.

In the case of Sumit, let us suppose the price dropped to ₹200 then the listing loss that he would have to face will be,

₹16000- ₹12800

=₹3200

In this case, Sumit made a loss of ₹3200.

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Highest Listing Gain IPO in India

Talking about 2021, there is the rain of the IPO thus offering the opportunity to the investors to multiply their profits by availing high returns.

Among different IPOs of 2021 here is the list of the top IPO that offers potential high returns to their investors. 

 

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How IPO Listing Price is Decided?

How much you can earn from an IPO listing can be defined through several factors. First parameter can be the choice of IPO you invest in. 

Apart from this, 

Demand and Supply

Demand and supply play a major role in deciding the listing gains. Let’s say, demand for the company shares exceeds the supply, in that case, the listing price will certainly be higher than the IPO offer price and thus the investors can gain good profits.

However, if in reverse, the supply of the shares exceeds the demand, the listing price will dip below the offer price of the share of the company. And in that case, investors will have to face the listing losses.

Not just that, the next factor is the GMP.

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IPO Grey Market Premium 

Grey Market Premium is yet another interesting word we often hear in primary market space. This is the extra amount that the interested investors are ready to pay to get the allotment in an IPO. 

This price is usually higher than the predefined price band. GMP has proven to be  an important parameter in determining the listing gain of an investor, for this also helps in determining the listing price of the IPO on listing day.

Check out the details of Nykaa IPO GMP before you plan your investment and apply for Nykaa IPO.

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Internal and Global Factors

Global factors such as the investor sentiments also matter the most. Any national event may affect the supply and demand of the shares of tech IPO. 

For example, the bitter trade relation between India and other nations will negatively impact the country’s economy and hence the listing price of the IPO.

Other than this the national election or the economical condition of the nation is the defining factor of how the IPO is going to list and what gain the investor can expect from it.

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How To Get Listing Gains in an IPO?

Hence if you are an interested investor who desires to gain profits from an IPO, the strategy lies in choosing the right IPO.

There are certain pointers that you may consider.

• Always check the company’s background
• Never miss out on IPO details such as the issue size, Offer for sale (OFS), and fresh issue. For instance, when an OFS is in place, then the investor would want to know the reasons what the promoters are diluting their stake in the organization. You must know more about IPO Vs OFS for more details.
• This will help you in understanding the company’s reliability in terms of growth as well as its sustainability.

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IPO Listing Gains Tax

Well, according to the income tax department, IPO listing gains come under short-term capital gain. 

Hence as per the income tax act, 15% tax will be levied on short-term capital gains provided the investors have paid the concerned STT charges while selling the shares through the recognized stock exchange. 

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Conclusion

In short, the IPO listing gains is the immediate opportunity that the investor can grab when applying to the IPO.

Just by considering a few important aspects like the market condition, the company’s background, sector, and industry analysis one can multiply their return effectively.

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To reap the benefit of listing gains in IPO, open a demat account online for FREE!

 

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