What is an IPO?
- Initial Public Offering (IPO) is when a private company offers its shares to the public for the first time and gets listed on a stock exchange (NSE, BSE).
- It allows the company to raise capital from retail, institutional, and foreign investors.
Types of IPO
- Fixed Price Issue – Price per share is pre-determined and announced.
- Book Building Issue – A price band is given (e.g., ₹100–₹120 per share). Investors bid within this range; final price is decided by demand.
Key Regulators & Rules
- Regulated by SEBI (Securities and Exchange Board of India) under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
- Companies must file a DRHP (Draft Red Herring Prospectus) with SEBI before IPO.
- Allocation is reserved:
- 35% for Retail Investors.
- 15% for Non-Institutional Investors (NIIs/HNIs).
- 50% for Qualified Institutional Buyers (QIBs).
Why Companies Launch IPOs?
- Raise funds for expansion, debt repayment, R&D, or acquisitions.
- Enhance brand visibility and credibility.
- Provide exit opportunity for early investors/promoters.
Risks & Criticism
- Market volatility may lead to under-subscription.
- Many IPOs are overpriced, causing post-listing losses for retail investors.
- Promoters sometimes dilute only small stakes while retaining control.
India’s IPO Market – Current Scenario
- India has seen strong IPO activity in recent years (e.g., LIC IPO in 2022 – India’s largest, raising ₹21,000+ crore).
- Sectors leading IPOs: tech startups, fintech, renewable energy, consumer goods.
- 2023–24 saw many midcap and SME IPOs oversubscribed due to high retail participation.
- India is now one of the top IPO markets globally, with strong investor appetite.