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From PL Capital, you can apply IPO online in 5 simple steps:
What is an Initial Public Offering (IPO)?
An IPO (Initial Public Offering) is the process through which a private company offers its shares to the public for the first time. After an IPO, the company’s shares become available for buying and selling on stock exchanges, and the company becomes a publicly listed entity.
The funds raised through an IPO can be used for investing in new projects, technology upgrades, business expansion, repaying debts, or allowing existing investors to sell their stakes.
How Does an IPO Work?
- The company appoints investment banks and signs an underwriting agreement.
- A Draft Red Herring Prospectus (DRHP) is prepared and submitted to SEBI.
- Applications are made to stock exchanges for listing approval.
- The IPO is marketed through roadshows and a price or price band is decided.
- The IPO opens for public bidding (usually for 3 days).
- Shares are allotted after issue closure and refunds are processed if not allotted.
- On listing day, shares start trading on the stock exchange.
History of IPOs
The world’s first IPO was launched by the Dutch East India Company in 1602. Over time, IPOs became a major tool for corporate fundraising globally.
In India, Reliance Industries launched one of the first major IPOs in 1977, even before SEBI was established. During economic liberalisation in the 1990s, India began allowing foreign investments in IPOs.
Types of IPOs in India
Fixed Price Issue
In a Fixed Price Issue, the share price is predetermined by the company and its merchant banker. Investors subscribe at this fixed price.
Book Building Issue
In a Book Building Issue, a price band is set and investors bid within this range. The final price is determined based on demand received.
IPO Application Process on PL Capital
Step 1
Visit website or mobile app
Step 2
Login and go to IPO section
Step 3
Select Open or Pre-Open IPO
Step 4
Enter lot size, bid price & category
Step 5
Enter UPI ID and approve autopay
Who is Eligible to Apply for an IPO?
To apply for an IPO in India, you must have:
- A valid Demat Account
- A PAN card
- Sufficient funds in your bank account
If you do not have a Demat Account, you can open one easily with zero account opening charges from PL Capital.
Advantages and Disadvantages of IPOs
Advantages
- Access to significant capital for growth and expansion
- Improved brand recognition and market credibility
Disadvantages
- High upfront legal, accounting, and marketing costs
- Increased regulatory compliance and reporting requirements
Why Do Companies Launch an IPO?
Companies launch IPOs primarily to raise capital for expansion, research, debt repayment, and operational growth.
It also allows promoters and early investors to partially exit their holdings while improving the company’s reputation and visibility.
IPO Timeline
Follow this table to understand the tentative timeline of the IPO process:
| Name of the Phase | Timeline |
|---|---|
| IPO Planning | 2 weeks |
| Due Diligence | 4 to 5 weeks |
| Preparation of DRHP | 1 week |
| Approval by SEBI | 4 to 8 weeks |
| Submission of RHP | 2 to 3 weeks |
| Launch of the IPO | Minimum 3 days |
| IPO Allotment | Within 1 day of issue closure |
| Listing | Within 3 days of issue closure |
| Post-Issue Process | 2 to 3 weeks |
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Read MoreFAQs on IPOs
IPO stands for Initial Public Offering, which is when a private company offers its shares to the public for the first time.
To apply IPO, you should review the company’s financials, business model, management background, growth prospects, risks, and how it plans to use the funds.
GMP means Grey Market Premium. It is the unofficial premium at which IPO shares are traded before listing that indicates market expectations about the listing price.
Inexperienced investors may follow only GMP to invest in an IPO, which can be risky. Before investing in shares, it is crucial to thoroughly analyse the company’s financial details, risks, objectives, etc.
New to IPOs?
Here's a handy beginner's guide to get you started and help you make the right moves.
An Initial Public Offer (IPO) is the process through which a private company sells a portion of its shares to the public for the first time and goes ‘public’.
It is the debut moment for a private company as it makes its shares available to the public. This process enables the company to gather equity capital from a wider range of investors. After the IPO, the company becomes publicly listed on stock exchanges, transforming it from a privately held entity with a limited number of investors to a publicly traded one, allowing anyone to buy or sell its shares on the stock market.
IPOs are introduced in the primary market, and once listed, the company’s shares are actively traded in the secondary market, facilitated by the stock exchanges.
Approval from the market regulator SEBI (Securities and Exchange Board of India) is mandatory before any company can launch its IPO.
Why do companies go public through an IPO?
- Access to capital
An IPO enables a company to gain access to capital for expansion, undertaking acquisitions, using the funds for research and development or for working capital needs - Reducing existing debt burden
By raising equity capital from the public, it can pay off existing loans and reduce its debts - Provide an exit for early investors and founders
An IPO offers existing shareholders, such as early investors, founders, and employees, the opportunity to monetize their investments. They get the opportunity to convert their ownership into cash. This liquidity is especially valuable if they have been holding onto their investments for an extended period. - Increase credibility and public awareness of the company
IPOs give a big boost in terms of visibility, reputation and prestige for a company. Since IPOs create a big buzz, being listed on a stock exchange can help improve brand reputation and credibility.
What are the types of IPOs
There are two types of IPOs:
-
- Fixed Price Offering
The company announces the price per share of the IPO is fixed in advance. All applications and allocations will be at this pre-determined price. - Book Building Offering
Here, the company relies on a price discovery mechanism by announcing a 20% price band or range – comprising an upper and lower limit – for the shares. Investors can bid for the number of shares and the price they are willing to pay. Based on these bids, the final price at which the shares will be issued to the investors is determined.
- Fixed Price Offering
How does an IPO process work in India?
Pre-IPO
Once a company decides to go in for an IPO, it must work with investment banks to chalk out all the details of the IPO. It also needs to file a Draft Red Herring Prospectus (DRHP) with the SEBI. This is also called an ‘offer document’ and comprises details about the company’s business, risks, why it is going in for an IPO, how the funds will be used, etc. The SEBI may ask for changes, if required, in this document.
After making these changes, and getting approval from the SEBI, the BSE and the NSE, and the Registrar of Companies (ROC), the Red Herring Prospectus (RHP), or the ‘final prospectus’ is filed by the company. This comprehensive document enables potential investors to make an informed decision about IPO investment.
Once approved by the SEBI, the company can launch its IPO in the primary market. The company will then announce details such as lot size, price band, and opening and closing date of the IPO.
During the IPO
Investors can apply for an IPO during the subscription period announced by the company. The allotment of shares depends on the demand for the IPO. If an IPO is oversubscribed, then the allotment happens through a computerised process, and if it’s undersubscribed, then the investors may get the shares they bid for.
On the listing date, the company gets listed on the stock exchanges. Whether it lists at a premium or discount to its issue price is again a result of demand for the shares. This concludes the IPO process. The company is now a publicly listed company, with its shares trading in the secondary market.
