Definition of IPO (Initial Public Offering)
An IPO (Initial Public Offering) is the process by which a private company raises capital from the public by offering its shares on a stock exchange for the first time. After the IPO, the company becomes publicly listed and its shares can be bought and sold on exchanges like NSE or BSE.
In India, companies apply to SEBI for IPO approval, determine a price band (or fixed price), and open subscriptions for a 3-day period. Investors can apply through their broker's platform or net banking (ASBA process) within the price band. If the IPO is oversubscribed, shares are allotted via lottery. Listing happens typically 6–7 business days after the IPO closes.
IPO investing requires careful analysis of the prospectus (DRHP): understand the company's business, financials, purpose of raising funds, and valuation relative to listed peers. Not all IPOs are good investments — many are overpriced, and some list at significant discounts. Avoid applying to every IPO; be selective based on fundamentals and valuation.