IPO
Imagine a company is like a cake that only the founders and early investors have been eating. When they do an IPO, they decide to cut the cake into many small pieces (shares) and sell some of those pieces to the public.
This means anyone—like you or me can buy a piece of the company (by buying its shares on the stock market).
Why Do Companies Do IPOs?
To raise money for growing the business (e.g., opening more stores, developing new products).
To give early investors a chance to cash out.
To gain public attention and credibility.
Example-
Suppose a startup making T-Shirts is doing well but needs more money to expand. They go public with an IPO. Now, people can buy shares of the company through the stock exchange, and the company gets that money to grow.
How an IPO Works
- Company decides to go public
A private company (like a startup or growing business) decides it needs money to grow — for example, to open new branches or build new products. They choose to raise this money from the public. - Hire experts (Investment Banks)
The company hires an investment bank (like ICICI Securities, Kotak, or global ones like Goldman Sachs). These banks help:
Decide the value of the company
Decide how many shares to sell
Set an initial price per share
This process is called underwriting.
- Get SEBI approval (in India)
The company prepares a big document called the DRHP (Draft Red Herring Prospectus). This has all the company details: profits, risks, plans, etc.
They submit this to SEBI (Securities and Exchange Board of India) — the government body that checks if everything is fair and legal.
- IPO is announced
Once approved, the company announces its IPO date, price band (like ₹95–₹100 per share), and how many shares are available.
People can now apply for the IPO during a few-day period (usually 3-5 days).
- Public applies (bids)
Investors — big and small — apply for shares:
Retail investors (like common people)
Institutional investors (like mutual funds, banks)
High-net-worth individuals (HNIs)
If more people apply than the number of shares available, then shares are allotted through a lottery.
- Shares are allotted
Once the IPO closes:
If you’re lucky, you get the shares in your Demat account.
If not, your money is refunded.
- Shares start trading on stock market
The company’s shares are now listed on a stock exchange (like NSE or BSE). The share price may go up or down, depending on demand.
Now you can buy or sell those shares anytime, just like you buy and sell items online!
Disclaimer: ऊपर दिए गए विचार और सिफारिशें व्यक्तिगत विश्लेषकों या ब्रोकिंग कंपनियों की हैं, न किDr NiveshIt" की। हम निवेशकों को सलाह देते हैं कि किसी भी निवेश निर्णय लेने से पहले प्रमाणित विशेषज्ञों से परामर्श करें। निवेश में जोखिम होता है और सही जानकारी के बिना निर्णय लेना हानिकारक हो सकता है।
