👉 IPO stands for Initial Public Offering.
It is the process through which a private company sells its shares to the public for the first time and gets listed on a stock exchange (like NSE or BSE in India).
In simple words — an IPO is when a company invites common people (retail investors) to invest in it and become shareholders.
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💡 Why Do Companies Launch an IPO?
Companies launch an IPO mainly for two reasons:
1️⃣ To raise capital (money):
Companies need funds to grow their business, build new projects, expand operations, or pay debts.
By selling shares to the public, they get this money.
2️⃣ To get listed on a stock exchange:
Once a company goes public, its shares can be traded freely on the market by anyone.
Example:
When Zomato, LIC, or Paytm launched their IPOs, they raised thousands of crores to grow their business.
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📌 Who Can Apply for an IPO?
Anyone with a Demat Account can apply for an IPO in India — this includes:
✔ Retail investors (normal people)
✔ Institutional investors (big firms)
✔ High Net Worth Individuals (HNIs)
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🔑 How Does an IPO Work?
Here’s a simple step-by-step process:
✅ 1. Company Prepares:
Hires investment banks (underwriters).
Decides share price range (price band) and how many shares to sell.
✅ 2. Files Papers with SEBI:
SEBI checks all documents to protect investors.
✅ 3. Opens for Subscription:
Public can apply during IPO open dates (usually 3–5 days).
✅ 4. Allotment:
If demand is high, you may get fewer shares than you applied for.
Shares are allotted to investors and the company receives the funds.
✅ 5. Listing:
Shares are listed on NSE/BSE.
On listing day, price may go up or down based on demand.
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📌 What is GMP in IPO?
GMP = Grey Market Premium
It shows how much premium (extra price) people are willing to pay unofficially before listing.
Example: If IPO price is ₹200 and GMP is ₹50, people expect it to list around ₹250.
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✅ Advantages of IPO for Investors
✔ Chance to buy shares at issue price (sometimes cheaper than market price).
✔ Potential for listing gains on the first day.
✔ Long-term wealth creation if company grows well.
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⚠️ Risks in IPO Investment
❗ Not all IPOs guarantee profit.
❗ If the company doesn’t perform well, share price can drop after listing.
❗ Always read the company’s financials and expert reviews before applying.
✅ Conclusion
An IPO is an easy way for companies to raise money and for investors to invest in growing businesses at an early stage. If you plan wisely, IPO investments can give good returns — but always do your research!