An Initial Public Offering (IPO) is a company's first sale of equity shares to the general public, enabling the company to raise funds and list its shares on a stock exchange (NSE or BSE in India). Going public increases liquidity for shareholders, enhances corporate visibility, and creates a market-determined price for the company’s equity.

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1. Introduction to IPOs

What is an IPO? — An IPO is the transition of a private company to a public company by selling shares to outside investors for the first time. Those shares then trade publicly on stock exchanges, allowing wider ownership and price discovery.

Primary objectives for a company:

• Raise growth capital for expansion, R&D, acquisitions, or working capital.
• Provide an exit or liquidity event for early/backer investors, founders, or employees.
• Improve brand recognition and creditworthiness in the market.

Types of IPOs

• Book-built Issue: A price band is set and investors bid within that band. Final price is determined by demand. Most major IPOs use book-building.
• Fixed-price Issue: Price per share is specified beforehand in the prospectus — simpler but less flexible.
• Mainboard vs SME/Emerge: Mainboard (NSE/BSE) is for larger firms meeting strict eligibility; SME/Emerge exchanges allow smaller companies to list with relaxed criteria.

2. Eligibility & SEBI Requirements (India)

In India, IPOs are regulated by the Securities and Exchange Board of India (SEBI). SEBI ensures transparency, investor protection, and fair disclosure through its ICDR (Issue of Capital and Disclosure Requirements) Regulations.

• Company must meet minimum net worth, revenue, and profit track-record criteria (Mainboard).
• Promoters must retain a minimum stake after IPO (lock-in period applies).
• All financial statements must be audited and disclosed in the prospectus.
• SME IPOs have relaxed criteria but lower liquidity and higher risk.

3. IPO Process in India (Step-by-Step)

1. Board Approval: Company approves decision to go public.
2. Appointment of Intermediaries: Merchant bankers, registrars, underwriters, legal advisors.
3. DRHP Filing: Draft Red Herring Prospectus submitted to SEBI.
4. SEBI Review: SEBI reviews disclosures and issues observations.
5. Marketing & Roadshows: Company promotes IPO to investors.
6. IPO Opens: Investors place bids via ASBA/UPI.
7. IPO Closes: Subscription data is finalized.
8. Allotment: Shares allotted, refunds initiated.
9. Listing: Shares start trading on NSE/BSE.

4. How to Apply for an IPO (Retail Investors)

Retail investors in India can apply for IPOs using the ASBA (Application Supported by Blocked Amount) mechanism. Your money remains blocked in your bank account until allotment.

• Demat account + PAN card is mandatory
• Apply via broker app, bank netbanking, or UPI
• Minimum application = 1 lot
• UPI mandate approval is required for final submission

📌 Applying does NOT mean allotment is guaranteed. Oversubscribed IPOs use lottery/proportionate allotment.

5. IPO Allotment & Listing

• If IPO is undersubscribed → full allotment
• If oversubscribed → lottery (retail) / proportionate basis
• Allotment finalized within ~10 working days
• Shares credited to Demat before listing day
• Listing happens within 2–3 trading days after allotment

On listing day, stock price depends on market demand and supply. Listing gains are NOT guaranteed.

6. Risks & Benefits of IPO Investing

Benefits:

• Early access to growing companies
• Potential listing gains
• Diversification opportunity

Risks:

• High volatility
• Overvaluation risk
• Limited historical data
• Market sentiment dependency

7. Recent IPO Trends in India

From 2022 to 2025, India witnessed strong IPO activity across fintech, consumer internet, renewable energy, and manufacturing sectors. Both Mainboard and SME IPOs gained popularity.

• Increased participation from retail investors
• Strong demand for SME IPOs
• Mixed performance post-listing

8. IPO FAQs

Q. Is IPO investment safe?
IPOs carry higher risk compared to established stocks. Research is essential.

Q. Does GMP guarantee profit?
No. Grey Market Premium is unofficial and unreliable.

Q. Can I sell IPO shares on listing day?
Yes. Retail investors have no lock-in.

Q. What if I don’t get allotment?
Your blocked funds are automatically released.