In the past decade numerous Indian companies have tried to tap the immense potential of the stock market by coming out with an IPO that helps small investors to earn higher returns on their savings by participating in the wealth creation process. The stupendous success of IPO’s has prompted even public sector undertakings to leverage the capital market and one PSU named Coal India Limited has rewritten economic history in by issuing the largest IPO ever.

As governments across the globe try to bring down their fiscal deficit to manageable levels by using innovative methods, IPO or Initial Public Offers have proved to be a valuable tool to shore up their cash reserves. The Indian Government has used the capital markets effectively to reduce its fiscal deficit that is spiralling at very high levels due to the subsidies being doled in various sectors. Fiscal Deficit as we all know is the difference government revenue and expenditure. By declaring its intention to issue IPO’s of Indian Oil, Hindustan Copper,Manganese Ore, Power Grid Corporation, Shipping Corporation & SAIL the government is doing its best to leverage the potential of the Stock Market in India and simultaneously reduce its fiscal deficit.

With such an impressive IPO, it is expected that the government might meet its revenue obligations of `40,000 crore through such measures. The year 2010 has proved to be very good for the stock market as there were as many as 13 IPO of over `1000 crore each while we saw only 5 IPO’s in the preceding year 2009.

The stupendous success of Coal India’s Initial Public Offers can be credited partly to savvy marketing and also to the rising confidence of domestic and international investors in the robustness of Indian Public Sector institutions. No other private or public sector institution has been able to generate so much interest in the Stock Market as this IPO did. It was oversubscribed more than 15 times before its closure and the stock price soared to `342.35 on debut.

In all, the company raised nearly 15, 200 crore from the sale of 63.16 crore shares at `245 a piece with retail investors being sold shares at a discount of 5%. Leading fund houses like Janus Capital, Fidelity, Franklin Templeton and Capital International participated in the process. With this IPO , Coal India emerged as the fourth largest company on the Stock Market with a market capitalization of ` 2,16,241 crore .Only Reliance Industries, ONGC and State Bank of India are ahead of Coal India in the stock market.

With such an impressive debut, Coal India’s is all set to acquire a global footprint as the FTSE may include the company in its FTSE All –World Index & FTSE All Emerging Index. Coal India also made an entry into the MSCI Index owing to its impressive show in the Indian stock markets.

By illustrating Coal India Limited example , the point I am trying to make is that IPO is a very useful tool for wealth maximization and investors should now pay serious attention to it. Moreover, to get the best returns, you should study a company background thoroughly and decide on the asset allocation by consulting your financial planner.

Author Bio: The author is an expert on financial matters and tracks the IPO of various publicly-traded companies quite closely. The views expressed by the author in this article are his own. Visit us : http://www.moneysukh.com/