Initial Public Offerings
You probably heard about (IPO) Initial Public Offerings when you tracked stock prices. But what exactly does it mean, and how does it impact the market and investors?
IPO stands for Initial Public Offering which means a private company lets the public buy its share for the first time. When companies make their shares available to public investors they secure substantial funding toward expansion. IPOs give investors a chance to participate in a company’s early growth as they watch the business develop through public investment.
Full Form of IPO
The full form of IPO is Initial Public Offering. When a private company sells their shares on the stock market for the first time they do so because they need money for growth and debt repayment while building their reputation.
Definition of IPO
An Initial Public Offering (IPO) is when a privately-held company decides to go public by selling shares to the general public for the first time. These shares are listed on the stock exchange, allowing the public to buy and sell the company’s stock. Essentially, an IPO marks the transition of a company from being privately owned to being publicly traded. For example, you can explore an initial public offering list to discover companies that are going public soon.
When a company undergoes an IPO, it offers a portion of its ownership to public investors in exchange for capital. The IPO process is crucial for the company because it provides an opportunity to raise the capital needed for expansion, research and development (R&D), debt repayment, or even to support other financial initiatives. Many investors also consider the upcoming IPO listing date when planning their investments.
Importance of IPO in Finance
IPOs play a pivotal role in the world of finance. They are one of the primary ways that companies can raise capital to fund their operations and growth. The capital generated from the IPO process can be used for various purposes, such as expanding business operations, investing in research and development, launching new products, or paying off existing debts. This is why it’s important to compare IPO vs FPO options when exploring investment avenues.
For the financial markets, IPOs bring in new companies, introduce new stocks to trade, and offer fresh investment opportunities to the general public. Investors benefit financially from early stock purchases in up-and-coming companies, such as those listed in the upcoming IPO list, when these companies reach future success. An Initial Public Offering enables a company that operated privately to make its stock available to public buyers through an initial share sale. This often happens when a company wants to raise funds for expansion, pay off debts, or even enhance its public profile. Learning how IPO works is crucial for new investors.
Types of IPOs
Two main types of IPOs let companies select what best serves their goals and preferences.
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Fixed Price Offering
Before an IPO happens, a company establishes a single share price that investors must pay. Prospective investors understand the precise cost to purchase each share through this offering. After closing the offering, we measure the market interest in buying shares. The IPO shares cannot be issued if investors fail to show enough interest. Some might compare this with the upcoming IPO gmp to gauge market sentiment.
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Book Building Offering
Through Book Building Offers, businesses provide prospective investors with a share price window instead of announcing a predetermined fixed price. Investors who want to buy shares submit purchase details about the number of shares plus their desired buying prices from the stated range. Market demand from institutions decides the final share cost during this process. This approach helps the company understand market demand and find the right share value for debut. It’s important to note that understanding what is IPO allotment helps investors prepare for this phase.
Why Companies Go Public?
Organizations pursue IPOs to handle multiple purposes for their financial needs. These include:
- Raising Capital:
An IPO exists primarily to obtain financial resources. Public companies sell stock shares to collect a large amount of money from investors. The raised money enables business development alongside debt payment and investment in future initiatives. Investors often look for which IPO is best to buy by reviewing different public offerings.
- Increased Publicity and Recognition:
A company achieves higher exposure and improves its market attractiveness through its public offering. Public companies earn trust and transparency, which helps build their reputation across all stakeholders. The upcoming IPOs in India often attract significant attention from the public.
- Monetizing Ownership:
Through the public offering process, investors and founders can convert their initial investments into money by trading their business shares on public exchanges. This path provides an appealing route to exit for private investors and venture capitalist organizations. Investors may compare different listings in the initial public offering in India to find suitable investment opportunities.
- Liquidity for Employees:
When companies hold IPOs, employees with stock options can exchange their holdings for cash by selling their shares once the firm becomes publicly traded. Startups benefit from providing employees with the chance to turn their stock options into actual money, a strategy seen in upcoming IPO sme listings as well.
3 Essential Things to Consider Before Investing in Any IPO
Investing in an IPO can be a lucrative opportunity, but it’s crucial to do your homework and consider several factors before committing your money. Here are three essential things you should never forget before investing in any IPO:
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Study the Entire Company
Before investing in an IPO, it’s critical to study everything about the company you’re looking to invest in. This goes beyond just looking at their financials; it’s about understanding their business model, competitive advantage, market positioning, and overall potential for growth.
- Read the Prospectus: The company’s Red Herring Prospectus (RHP) contains detailed information about its business, financials, risk factors, and the use of proceeds from the IPO. It’s your window into understanding the company’s intentions, strategy, and plans.
- Understand the Purpose of the IPO: Companies generally issue IPOs for specific reasons such as funding expansion, paying off debts, or enhancing operations. Reviewing upcoming IPO in India announcements is also helpful.
- Financial Health: Look at the company’s financials carefully—profit margins, revenue growth, and debt levels. High levels of debt or inconsistent growth can be red flags.
- Management Team: The leadership team and their vision for the company are just as important. A strong, experienced management team can drive the company toward success even in difficult times.
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Stay Aware of the Current Market Trends
The performance of an IPO is closely linked to the overall market trends. Investing in an IPO when the market is on an upward trend generally increases the likelihood of a successful listing. A good example is tracking upcoming IPOs in India during favorable market conditions.
- Rising Market Conditions: IPOs typically perform well when the market sentiment is positive, and stock indices are on the rise. A bullish market means there’s optimism about the economy, and investor confidence tends to be high. This increases the demand for newly listed shares, which often leads to strong performance post-IPO.
- Market Sentiment: Be cautious if the broader market is facing a downturn or uncertainty, as this can dampen the success of an IPO. For instance, during a market correction, IPOs may face subdued interest, and prices might not rise as expected.
- Industry Trends: Pay attention to the trends within the specific industry of the company. Is the sector growing? Are there technological advancements or other factors that could propel growth? A booming sector can lead to better IPO outcomes.
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Keep an Eye on the Volume of Applications
IPO subscriptions often determine the demand for shares, and oversubscription rates play a significant role in pricing and allotment. Learning what is IPO allotment can help prepare for this.
- Oversubscription: IPOs often receive more applications than the number of shares available, especially for highly anticipated listings. In such cases, only a fraction of the applicants will get the allotted shares. Understanding the oversubscription rate can give you an idea of the level of demand.
- More Applications, Fewer Shares: When the volume of applications is high, it means fewer shares for each applicant. This can reduce your chances of receiving the full allocation you applied for, especially in retail investors’ categories.
- Subscription Patterns: Watch for the rate of subscription in different categories (retail, HNI, QIB). A high number of applications from qualified institutional buyers (QIBs) can indicate strong institutional confidence in the company, which might boost investor sentiment.
Process of an IPO:
Decision and Planning: A public listing helps organizations obtain necessary money for their development or business targets. A company makes an IPO decision once it reaches a developed level that satisfies tough stock exchange conditions.
Engaging Underwriters: A firm chooses investment banks to guide them through their initial public offering requirements. Underwriters set the initial share value and manage all necessary legal procedures for a new public offering.
Filing Documents: The company delivers a prospectus filled with company documentation and financial data to the securities regulatory institution before seeking funds.
Pricing and Launch: As part of their due diligence, underwriters determine how much the public can buy company shares for. Once completed the traded shares enter the stock exchange system for investors to purchase during the initial public offering launch.
How to Invest in IPOs
To succeed in IPO investing you must study the market and master the IPO investing process. Here’s a step-by-step guide to getting started:
- Open a Demat Account:
If you want to invest in IPOs set up a Demat account first. The Demat account handles your stock holdings digitally by storing them electronically to simplify your stock trading activities. You can start your Demat account by working with a registered stockbroker or financial institution.
- Check Eligibility:
Potential IPO buyers should check if they qualify for investment in these stocks. Average retail buyers like you can make IPO application requests as a single person. But various IPOs set special rules about who can invest and how much money they need to spend.
- Monitor the IPO Calendar:
Review the IPO calendar to stay updated on future new offerings. The IPO timeline helps you know which offerings become available to invest in.
- Decide the Amount to Invest:
After researching the company you plan to invest in you must choose the amount of money you want to invest. Do not put more capital into IPOs than you can lose completely in unpredictable market movements.
- Apply for the IPO:
You have two options to apply for an IPO: you can do it online with your stockbroker or choose to use physical forms at certified financial institutions. Tell your stockbroker how many shares you want to purchase plus your preferred price level when buying book-building IPOs.
Benefits of Investing in IPOs
Evaluation of IPO advantages becomes crucial when deciding whether to invest in initial public offerings. Here are some key benefits:
- High Potential for Profits:
Investors choose IPOs because they offer big profit opportunities. When an IPO company shows strong performance following its launch shareholders can earn significant profits on their investments.
- Diversification of Portfolio:
Investing your money in IPOs helps you build a well-balanced portfolio by adding new businesses to your investments. Your risk profile improves when you balance investments across new companies instead of keeping all your money in established businesses.
- First-Mover Advantage:
An IPO investment lets you purchase shares at the lowest price when a company first goes public which creates a strong start for your investment portfolio. Those who bought shares in an IPO at the beginning of its public life earn the greatest profit during price increases.
- Being Part of a Growth Story:
You acquire a stake in a company when you purchase IPO shares to experience its success journey. You can watch a company grow from small beginnings until it becomes a large public company.
Risks of Investing in IPOs
The potentual earnings from IPOs require careful study because these investments involve substantial risks. Some of the risks include:
- Volatility:
Companies which debut their stock on the market face rapid price fluctuations right after their public offering. Purchase of IPOs bring high risk for investors who aim for quick profits.
- Overvaluation:
Companies often increase their share values beyond market standards to gather additional funds. Right after the IPO shareholders can experience stock price drops that generate investment losses.
- Limited Financial History:
Investors find it hard to evaluate new public companies because these businesses often lack a detailed history of financial results. Past financial data shortages increase doubt about how well an IPO will perform.
10 Most Popular IPOs and Their Performance
Laxmi Dental IPO (2025)
- Issue Price: ₹428
- Listing Price: ₹542
- Gain: 27%
Laxmi Dental’s IPO, which took place in January 2025, focused on raising capital to expand its dental services. The stock saw a strong debut, listing at ₹542, a 27% premium over its issue price. This reflects strong investor sentiment in healthcare services.
Quadrant Future Tek IPO (2025)
- Issue Price: ₹290
- Listing Price: ₹370
- Gain: 29%
Quadrant Future Tek, which specializes in providing IT solutions, closed its IPO in January 2025. The stock listed at ₹370, gaining 29% from the issue price, showcasing market confidence in technology-driven businesses.
Standard Glass Lining IPO (2025)
- Issue Price: ₹140
- Listing Price: ₹176
- Gain: 26%
Standard Glass Lining, which operates in the manufacturing sector, saw its IPO performance in January 2025. The stock listed at ₹176, representing a 26% increase, reflecting a positive market reception to industrial investments.
Indo Farm Equipment IPO (2025)
- Issue Price: ₹215
- Listing Price: ₹256
- Gain: 19%
Indo Farm Equipment, a company involved in manufacturing agricultural machinery, launched its IPO in January 2025. The stock listed at ₹256, a 19% gain over the issue price, signaling investor optimism in the agritech space.
Unimech Aerospace IPO (2025)
- Issue Price: ₹785
- Listing Price: ₹1,460
- Gain: 86%
Unimech Aerospace, specializing in aerospace components, saw an extraordinary IPO performance in December 2024. The stock surged to ₹1,460, marking an 86% gain, driven by strong investor demand in the aerospace and defense sector.
Ventive Hospitality IPO (2025)
- Issue Price: ₹643
- Listing Price: ₹716
- Gain: 11%
Ventive Hospitality, a key player in the hospitality industry, closed its IPO in December 2024. The stock listed at ₹716, an 11% premium, reflecting the resilience of the hospitality sector even amid challenging economic conditions.
Senores Pharmaceuticals IPO (2025)
- Issue Price: ₹391
- Listing Price: ₹594
- Gain: 52%
Senores Pharmaceuticals, a pharmaceutical company, launched its IPO in December 2024. The stock debuted at ₹594, a 52% gain over the issue price, indicating strong market confidence in the healthcare and pharmaceutical sectors.
Carraro India IPO (2025)
- Issue Price: ₹704
- Listing Price: ₹660
- Loss: -8%
Carraro India, a manufacturer in the automotive and agricultural machinery sector, faced a weaker IPO performance. The stock listed at ₹660, an 8% loss from the issue price, which suggests cautious investor sentiment towards the industry during the offering period.
Concord Enviro Systems IPO (2025)
- Issue Price: ₹701
- Listing Price: ₹826
- Gain: 18%
Concord Enviro Systems, a company focused on environmental solutions, closed its IPO in December 2024. The stock made a positive debut at ₹826, gaining 18%, driven by growing interest in sustainable technologies and green solutions.
DAM Capital Advisors IPO (2024)
- Issue Price: ₹283
- Listing Price: ₹393
- Gain: 39%
DAM Capital Advisors, a financial services firm, closed its IPO in December 2024. The stock opened at ₹393, a 39% gain from the issue price, reflecting market optimism towards financial advisory services and investment solutions.
IPO vs FPO
The first public release of shares by a company creates an IPO and lets these same public companies issue a follow-up FPO when they need more capital. An IPO launches a company onto the stock market while an FPO serves to collect more investment money from current owners through new stock sales.
Our upcoming discussion will compare how an IPO works versus how an FPO operates.
- IPO is the first time a company goes public, selling shares to the public for the first time. It allows the company to raise funds for expansion, growth, or to pay down debt. It also introduces the company to the stock market, allowing it to become a public entity with a broader shareholder base.
- FPO, on the other hand, occurs after a company has already gone public. It provides the company with another round of capital, either through issuing new shares (dilutive) or by selling existing shares from major shareholders (non-dilutive).
An IPO is an essential step for any private company that wants to expand and access larger pools of capital. After a company has proven itself on the stock market, an FPO becomes an important tool to help it achieve further growth or achieve specific financial goals.
Real-World Example: Imagine a company like Amazon that began with an IPO in 1997 to raise capital for expanding its e-commerce platform. After a few years, Amazon could decide to raise more money through an FPO to fund its acquisition of Whole Foods in 2017. The IPO would have laid the foundation for the company’s public journey, while the FPO provided Amazon with the necessary funds to further its strategic goals.
Differences Between IPO and FPO in India:
| Aspect | IPO (Initial Public Offering) | FPO (Follow-on Public Offering) |
|---|---|---|
| Definition | First time a company offers shares to the public | A subsequent offering of shares after an IPO |
| Purpose | To raise capital for growth, pay off debt, or expand | To raise additional funds or provide liquidity to existing shareholders |
| When it Happens | Happens when the company decides to go public | Happens after a company is already publicly listed |
| Types of Offering | Only primary shares are sold (new shares are issued) | Can be primary (new shares) or secondary (existing shares) |
| Impact on Shares | New shares are created and sold, diluting ownership | Dilutes ownership if new shares are issued |
| Example in India | Zomato IPO (2021): Raised ₹9,375 crore, offering shares at ₹72-76 | Tata Motors FPO (2008): Raised ₹4,000 crore to fund acquisition of Jaguar Land Rover |
| Market Timing | A company may opt for an IPO when it is ready to go public | Typically used when a company needs further funds or is looking to improve liquidity |
Why Do Indian Companies Opt for IPOs and FPOs?
- For IPOs: Indian companies opt for IPOs when they are looking to raise capital for expansion, research and development, or reducing debt. An IPO allows the company to access a larger pool of investors, especially institutional investors, and provides an opportunity to grow at a faster pace.
- For FPOs: FPOs are typically used when companies need additional funds after they have already gone public. This could be for purposes like acquisitions, debt reduction, or to fund new projects. FPOs are generally issued when the company is already well-established in the stock market and has proven its ability to generate growth.
Rules for IPO Cancellation and Modification
Here’s a quick overview of the rules:
- Retail Investors:
- Allowed to cancel IPO bids under the IPO Application Cancellation facility.
- Can modify their bids to increase or decrease the application size using the IPO Application Modification option.
- Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs):
- Cannot cancel bids once placed.
- Can only increase the bid size or price through the IPO Modification Form or online systems; reducing the bid is not allowed.
- Employees and Shareholders (for applications below ₹2 lakhs):
- Cancellation and bid modification (increase/decrease) are allowed.
- Timings:
- Modifications or cancellations are allowed anytime while the IPO is open for subscription (typically 10 AM on the open date to 5 PM on the close date).
- Note: Brokers or banks may have specific cutoff times, especially on the last day, so it’s best to confirm in advance.
How to Cancel an IPO Application
You can cancel your IPO application either online or offline. Here’s how:
Online Cancellation
- Log in to your broker platform or Net banking.
- Navigate to the IPO section and select the IPO you wish to cancel.
- Click on ‘Cancel/Delete/Withdraw Bid/Application’ under the IPO Application Cancellation option and confirm.
- If required, revoke the UPI mandate linked to your application.
Note: In some cases, banks automatically release the blocked amount after the UPI mandate expires. Always check with your bank for specific processes.
Offline Cancellation
- Draft a cancellation letter with the following details:
- IPO Application Number
- Applicant Name
- PAN
- Sign the letter and submit it to the intermediary through whom the application was made.
How to Modify an IPO Application
If you want to adjust your bid amount or quantity, here’s how you can do it:
Online Modification
- Log in to your broker platform or Net banking.
- Go to the IPO section and select the IPO you wish to modify.
- Click on ‘Modify Bid’ under the IPO Application Modification option.
- Update the bid amount or quantity and confirm.
- Approve the revised UPI mandate.
Note: For ASBA applications, additional funds are blocked for upward revisions, while excess funds are unblocked after allotment in case of downward revisions.
Offline Modification
- Get an IPO Modification Form from your broker/bank or download it from the exchange’s website.
- Fill in the form with your details and provide the updated bid information.
- Sign and submit it to the intermediary who handled your original application.
Common Reasons for IPO Application Rejection
IPO applications can be rejected due to errors or technical issues. Here are some common reasons:
- Incorrect details like PAN, UPI ID, or ASBA account number.
- Bid price outside the price band.
- Multiple applications under the same PAN in the same investor category.
- Insufficient funds in the bank account.
- Name mismatches across documents (PAN, bank, DP account).
If your application is rejected, the blocked amount is usually refunded. For UPI payments, some banks release the funds only after the mandate expires. You may need to follow up with your bank for clarification.
Glossary
- UPI Handle: The unique identifier for your UPI payments (e.g., @paytm, @upi).
- DP ID: A code assigned to your Depository Participant (like a bank or broker) by NSDL or CDSL. It’s part of your demat account number.
FAQs
Q1: What exactly is an IPO?
An Initial Public Offering (IPO) is the process by which a private company sells its shares to the public for the first time. This move enables the company to raise capital and become publicly traded on a stock exchange.
Q2: How does the IPO process work?
The company partners with underwriters and investment banks to determine the stock’s value, create a roadmap for the offering, and market the shares to potential investors. Once priced, the shares are listed on a public exchange, allowing the public to buy them.
Q3: Is investing in IPOs profitable?
IPOs can offer profitable opportunities, but they carry inherent risks. Early investors may benefit from price surges if the company performs well post-launch, but market volatility or underperformance can lead to significant losses.
Q4: Who can invest in an IPO?
While anyone can buy shares once an IPO is live on the exchange, early access is often reserved for institutional investors, high-net-worth individuals, or those with brokerages that participate in the offering process.
Q5: What are the risks associated with IPOs?
The main risks of IPOs include market instability, incomplete financial data, and a lack of a proven track record for the company. Even highly anticipated IPOs can struggle if they fail to meet expectations.
Q6: What factors affect the price of an IPO?
The price of an IPO is influenced by the company’s financial health, market conditions, demand from investors, and the overall performance of similar companies. Underwriters play a key role in determining this price.
Q7: How can I get involved in an IPO?
To invest in an IPO, you need to have an account with a brokerage that allows access to IPOs. Once the shares are publicly listed, you can purchase them like any other stock, though it’s often more competitive during the initial release.
