What is an IPO? A simple guide for Indian investors

An initial public offering (IPO) is the first time a company offers its shares to the general public. Before an IPO the company is owned by its founders, private investors and sometimes employees. After the IPO its shares are listed on a stock exchange such as the NSE or BSE and anyone can buy or sell them during market hours.

Why do companies launch an IPO?

  • To raise money for growth, new projects or to repay debt.
  • To give early investors and promoters a way to sell part of their holding.
  • To gain visibility, credibility and a market price for the company.

Fresh issue and offer for sale

Most IPOs have two parts. A fresh issue creates new shares and the money goes to the company. An offer for sale (OFS) lets existing shareholders sell their shares and the money goes to them, not the company. The offer document tells you the split; read it, because an IPO that is mostly an OFS does not add money to the business.

Fixed price and book building

Almost all Indian IPOs use book building: the company announces a price band (for example ₹665 to ₹700) and investors bid within it. The final issue price is decided after bidding closes, based on demand.

Mainboard and SME

Larger companies list on the main boards of NSE and BSE. Smaller companies list on the SME platforms (NSE Emerge, BSE SME). SME IPOs carry extra risk; see our guide Mainboard vs SME IPO.

The journey in short

  1. The company files a draft offer document with SEBI and later the final one (RHP).
  2. The issue opens for 3 working days; you apply through your broker or bank using UPI.
  3. Shares are allotted by a registrar; if you do not get shares your money is released.
  4. The shares list on the exchange a few days later.

Next: how to apply for an IPO and how allotment works.

Frequently asked questions

Is an IPO safe?

No investment is risk-free. An IPO can list at a loss. Read the offer document, check the company’s financials and apply only with money you can afford to put at risk.

Can anyone apply for an IPO?

Yes. Any resident individual with a PAN, a demat account and a UPI-linked bank account can apply as a retail investor for up to ₹2 lakh.

Last updated 2026-10-20. Information only, not investment advice.