An initial public offering, or IPO, is when a private company offers its shares to the public for the first time and lists on a stock exchange. It can raise money for the company and give early investors a way to sell part of their holdings.

The basic steps

A company typically appoints merchant bankers, prepares a detailed offer document and files it with the market regulator, the Securities and Exchange Board of India. After review, the company announces the price band and the dates when investors can apply. Shares are then allotted and listed on exchanges such as the NSE and BSE.

What the offer document contains

  • The company’s business, products and customers.
  • Financial statements and key risks.
  • How the money raised will be used.
  • Details about promoters, management and any legal matters.

What investors should look at

Read the risk factors carefully, understand how the company earns money, and look at how it plans to use the funds. Compare the price with similar listed companies instead of relying on excitement or advice from social media.

Remember the risks

A new listing can be volatile, and not every IPO rises after it opens for trading. Only invest money you can afford to leave invested, and consider speaking to a registered adviser. This article is educational and not a recommendation to buy any share.