Frequently Asked Questions about Initial Public Offerings
An IPO is the process through which a company offers its shares to the public for the first
time, enabling it to raise capital from investors. It marks the transition of a privately held
company into a publicly listed company.
In an IPO, the company appoints underwriters to facilitate the offering. The company files a
draft prospectus with the Securities and Exchange Board of India (SEBI), and once approved,
it sets a price range for the shares. The shares are then offered to the public through the
stock exchanges.
Companies go public through IPOs to raise capital for business expansion, debt repayment,
working capital, acquisitions, or to provide liquidity to existing shareholders.
Investors can participate in an IPO by applying for shares through the IPO application
process facilitated by banks, financial institutions, or online trading platforms. Retail
investors can apply through ASBA (Applications Supported by Blocked Amount).
Investing in IPOs carries risks such as market volatility, uncertainty regarding the company's
future performance, lack of historical data, and the possibility of the share price fluctuating
post-listing.
IPO shares are allocated through a process known as allotment, where shares are distributed
among various categories of investors, including retail investors, institutional investors, and
high net worth individuals, based on SEBI guidelines and the oversubscription ratio.
Investors should consider factors such as the company's business model, financial
performance, industry outlook, management quality, IPO valuation, and the purpose of
raising funds before investing in an IPO.
After the IPO, the company's shares are listed on stock exchanges such as the BSE (Bombay
Stock Exchange) and NSE (National Stock Exchange), where they can be bought and sold by
investors like any other publicly traded stock.
Yes, IPOs in India are regulated by SEBI, which sets guidelines and regulations governing the
issuance and listing of securities to ensure transparency, fairness, and investor protection.
Yes, NRIs can invest in IPOs in India, subject to certain conditions and compliance with the
Foreign Exchange Management Act (FEMA) regulations. They can apply for IPO shares
through the designated NRI category in the IPO application process.