IPO Process Explained In Simple Steps

Introduction

Thinking of Investing in an IPO? Here’s What You Need to Know

Feeling curious about IPOs but overwhelmed by the financial jargon? You’re not alone. Initial Public Offerings (IPOs) are exciting investment opportunities that let you get in early on a company’s growth journey—but only if you understand the process.

Let’s break it down in simple, clear steps so you can invest confidently.

What is an IPO?

An Initial Public Offering (IPO) is when a private company offers its shares to the public for the first time. This transition allows everyday investors to buy a stake in the business—and potentially benefit from its future growth.

Why Do Companies Launch an IPO?

Companies go public for several reasons:

1. To raise capital for expansion, R&D, or debt repayment

2. To increase market visibility and credibility

3. To allow early investors and founders to liquidate shares

Going public is a major milestone that can accelerate a company’s trajectory.

The IPO Process: Step by Step

Here’s how a company goes from private to public:

1. Appointing Advisors & Investment Bankers

The company brings in experts—investment bankers, legal advisors, and auditors—to plan and manage the IPO.

2. Due Diligence & Documentation

Extensive review of financials, business models, and legal compliance is done. This results in a document called the Draft Red Herring Prospectus (DRHP).

3. Filing with SEBI

The DRHP is filed with the Securities and Exchange Board of India (SEBI). SEBI ensures all disclosures are in place to protect investor interests.

4. Marketing the IPO (Roadshows)

The company promotes the IPO through roadshows and presentations, attracting interest from institutional and retail investors alike.

5. Price Band & Bidding Process

A price band is announced (e.g., ₹100–₹120 per share). Investors bid within this range. The final price depends on demand.

6. Allotment of Shares

After bidding closes, shares are allotted based on demand and investor category. In oversubscribed IPOs, not everyone may receive shares.

7. Listing on the Stock Exchange

The final step: the stock is listed on NSE or BSE, and public trading begins. You can now buy or sell shares in the open market.