The first half of 2025 has been extremely encouraging in terms of stock market. The Indian primary market has seen tremendous activism, where 25 mainboard IPOS has knocked on Dalal Street during this period. At the same time, the number of IPOs of SME sector has also reached above 100. In such a situation, there is a lot of enthusiasm and enthusiasm among investors to participate in the IPO. But before you invest in IPO, it is important to know what is IPO and how its entire process works.
What is IPO?
IPO ie Initial Public Offering is the process through which a private company offers its shares to the general public for the first time and listed on the stock exchange. This step gives the company the status of Public Limited Company and gives it an opportunity to raise capital. The company uses the amount raised from the IPO to expand its business, repay debt or give exit to initial investors. This not only strengthens the financial position of the company, but also increases its brand value and confidence in the market. In the IPO, retail investors can participate from large institutional investors, who are participating in the company’s growth and expect possible profits in return.
How does the game of IPO start?
The game of IPO begins very thoughtfully and with planning. First of all, the company itself decides whether it is ready to be public or not. For this, she takes into account the status of the market, its growth and the IPO timing of other companies so that there is no conflict. After this, the company hires underwormers ie financial experts, which conduct a complete financial check of the company. These underwriters decide how much shares and at what price the company will launch in the market. Also, they help the company to prepare and apply for the required documents for the IPO in front of SECURITES and Exchange Board of India. The IPO is launched only after this entire process, so that investors can be given a reliable and transparent offer.
IPO
SEBI investigates in detail
SEBI (Securities and Exchange Board of India) In this whole process, it strictly investigates every detail of the company. When the company applies for the IPO, it includes all its financial information, such as its net worth, property, debt and how the money collected from IPO will be used. SEBI’s expert team closely examines this application, testing the company’s legal and financial aspects deeply. If all documents and information are found to be satisfactory, SEBI approves the release of draft Red Herring Prospects (DRHP) to the company. DRHP is an important document, in which the company clarifies how many shares it will issue and what will be their price or price band. This document is an important part of the IPO process, as investors decide whether they invest in IPO or not.
IPO door opens to public
After the DRHP is released, the company sets the price of price band i.e. shares and then opens the IPO to the public. This means that now common investors can also participate in IPO and apply to buy their favorite shares. Investors can make this application online or through their broker, in which they tell how many shares they want to take. When the subscription period of the IPO is over, the company shares these investors. If the demand is higher than the availability of shares, then the allocation of shares is done on lottery system or Pro-Rata Base. This means that not every investor can get as many shares as he applied, but it depends on the average or luck.
IPO
Real game takes place after listing on stock exchange
The last and most interesting part of the IPO process is the listing of the company’s shares on the stock exchange. When the company allotted its share investors, these stocks come from the primary market to the secondary market, that is, these shares can now be purchased openly on stock exchange like BSE or NSE daily. On the day of listing, there is a lot of ups and downs in the share price. Sometimes the share price is listed above the band and gives good profits to investors, while sometimes due to the negative status of the market or the weak performance of the company, the share price can be listed.
Why is it necessary for investors to understand IPO?
The IPO is such an opportunity for the stock market where there are hidden benefits for both the company and the investor, but the risk is also attached to it. If you are thinking of investing in IPO, then it is necessary to understand the company’s background, its financial position and market mood well. Investing in the IPO of the wrong company without complete information can cause huge losses. Therefore, consciously, the right data and market analysis should be stepped into the IPO so that investment is safe and profitable.