Partner With Us

What is an Initial Public Offering?

Of late, the term IPO has been a buzzword in the business world. From popular fast-food chains like Burger King to trending dating apps like Bumble, companies across the board have jumped on the IPO bandwagon in the last few years. Wondering what an IPO is all about? Read on to find out.

What is an IPO?

An initial public offering (IPO) is a process by which a privately owned company goes public. According to the Securities and Exchange Board of India (SEBI), "when an unlisted company makes either a fresh issue of shares or convertible securities or offers its existing shares or convertible securities for sale or both for the first time to the public, it is called an IPO."

A company no longer remains a private entity after an IPO as it paves the way for its listing and trading on the bourses. It joins other companies on the exchanges whose shares are also publicly traded. Essentially, there is a change in the nature of ownership of the company, from private to public.

Why go for an IPO?

One of the most common reasons why a company may choose to file for an IPO is to raise fresh capital. There may be other reasons behind an IPO, such as giving existing or early investors an exit route, facilitating mergers or gaining attention and wider credibility.

However, with a wider pool of investors come the regulatory requirements. Once public, a company must adhere to market regulations as outlined by SEBI and ensure public disclosure of their financial statements.

Overview of an IPO filing process

There are a number of steps to be completed before a company can sell its shares to the general public for the first time. The company or the issuer first appoints a merchant banker in an advisory capacity. Next, the merchant banker conducts due diligence by checking all documentation of the company and its financials. The merchant banker and the company together prepare a Draft Red Herring Prospectus (DRHP). This is a key document that is submitted to SEBI as well as filed with the exchanges and contains all mandatory disclosures and financial information about the company. Once approved, the document can be accessed by retail investors at a later stage, who can use it to evaluate the IPO with the help of all the details provided in the prospectus.

Then comes the stage where the facts and information disclosed by the company is verified by SEBI. On completion of the same, the company's application is cleared, and it is given a go-ahead to set a date for the IPO. The next step is the 'roadshow' or the marketing phase where the aim is to create chatter around the upcoming IPO. It is done ahead of the IPO in order to allow investors to get a better idea of what is on offer.

A key part of the IPO process is the pricing. This can be done in either one of two ways- fixed price IPO or book-binding offering. On conclusion of the bidding process and finalising of the IPO price, the company and the merchant banker decide upon the number of shares to be allotted to each investor. Thereafter, the shares get listed on the exchanges.



ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. Please note, I-Sec is acting as a distributor to offer IPO distribution related services and distribution of IPOs are not Exchange traded products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

Most Popular

  • 27 Sep 2021
  • ICICI Securities

The Five Rules of Investing in Equities

Investment in equity should be made by following certain rules. There are five rules of equity investments. They arise from an understanding of the stock market and mitigate the chances of making mistakes and incurring losses.

  • 27 Sep 2021
  • ICICI Securities

Investment Rules: 5 Thumb Rules of Investing in Market

While you work for money, suitable investments make your money work for you. How you take control of your finances determines the growth of your wealth and additional income streams. Click here to read about the five golden rules you can follow while investing.

  • 15 Sep 2021
  • ICICI Securities

5 Most Popular Reasons for Switching Bank

In the beginning, you would hear from them quite often. But of late, you're noticing more and more signs that it's no longer working. We are referring to your relationship with your bank. Click here to read how to recognize the red flags in your banking relationship and why it might be a good time to end the bond.

  • 15 Sep 2021
  • ICICI Securities

How Intraday Trading Works? Detailed Ideas

Intraday trading in India has been gaining momentum of late. It is no longer the option of only trade pundits.

  • 15 Sep 2021
  • ICICI Securities

What is Intraday trading? A Beginner's Guide

With the advancement of technology and increased knowledge about the stock market, trading is no more a domain dominated by stock pundits.

  • 05 Sep 2021
  • ICICI Securities

Is it Good To Invest in Cyclical Stocks?

Akin to how the pedals of a cycle go up and down as it moves forward, the share price of certain stocks goes up and down in accordance with the economic cycles a country goes through. 

  • 05 Sep 2021
  • ICICI Securities

A primer on Fixed Maturity Plans

If you happen to have some surplus funds which you don’t need for a specific period, but you don’t want to take the risk of investing this money in the stock market, you can very well put this money in a Fixed Maturity Plan or FMP. 

  • 05 Sep 2021
  • ICICI Securities

How to Choose the Best Equity Mutual Fund

You must have heard a lot about investing in mutual funds. But before jumping on this trend you need to assess a mutual fund scheme according to your goals, investment horizon, risk profile, liquidity needs and many other factors to find a suitable match. 

  • 05 Sep 2021
  • ICICI Securities

A Beginner’s Guide to Monetary Policy Tools

The Reserve Bank of India has the incredibly crucial responsibility to formulate the monetary policy. The main objective of monetary policy is to control inflation and provide a conducive environment for the country's economic growth. 

  • 05 Sep 2021
  • ICICI Securities

Buying Penny Stocks and its Risks

There is a specific category of stocks whose prices are very low and they seem to yield exponential returns. But do you know that investment in such stocks could be risky? 

Open an Account

Sign Up for Free


Please use the mobile no registered with Aadhaar.

OTP sent to +91 1234567890

Didn’t received OTP? Resend



Get Research Backed Recommendations.

Download The app now

or Scan below QR Code To download app