What Is an IPO in India? Complete Guide to Initial Public Offerings (2025)

What Is an IPO in India? Complete Guide to Initial Public Offerings (2025)

An Initial Public Offering (IPO) is a pivotal financial event where a privately held company offers its shares to the public for the first time. In India, IPOs are often seen as high-potential investment opportunities by both institutional and retail investors looking to participate in a company’s early growth phase.

This guide explores everything Indian investors need to know about IPOs in 2025—from what they are, how they work, how to apply, associated risks, and strategies to evaluate a good IPO.

What Is an IPO?

An IPO is when a private company lists its shares on a stock exchange (like NSE or BSE) to raise capital from public investors. Once listed, the company becomes publicly traded, and its shares can be bought and sold in the open market.

This process is regulated by SEBI (Securities and Exchange Board of India) and involves the company filing a Draft Red Herring Prospectus (DRHP), selecting underwriters, setting the issue price, and offering shares to the public.

Why Do Companies Launch IPOs?

• Capital Raising: Companies raise funds to fuel expansion, R&D, or pay off debt.

• Brand Credibility: A listed company gains trust and wider market recognition.

• Liquidity for Promoters: Promoters and early investors can sell a portion of their stake.

• Market Valuation: An IPO helps establish the company’s market value through public trading.

Types of IPO Issues in India

• Book Building Issue:

Investors bid within a price band. The final issue price is determined based on demand.

• Fixed Price Issue:

The company sets a fixed price at which shares are offered to investors.

• Offer for Sale (OFS):

Promoters or existing shareholders sell their shares; no new shares are issued.

How to Apply for an IPO in India (2025)

1. Open a Demat and Trading Account:

You need an active Demat account with a SEBI-registered broker (e.g., Angel One, Zerodha).

2. Check IPO Dates and Price Band:

Monitor upcoming IPOs through the NSE/BSE or broker platforms.

3. Apply via ASBA (Application Supported by Blocked Amount):

Funds remain in your bank account until allotment is confirmed. Apply through your net banking or UPI-enabled broker.

4. IPO Allotment:

Shares are allotted based on demand and investor category (Retail, HNI, QIB).

5. Listing:

Once allotted, shares are credited to your Demat account and listed on the stock exchange.

IPO Investment Categories

• Retail Individual Investors (RIIs): Up to ₹2 lakhs

• High Net-worth Individuals (HNIs): Above ₹2 lakhs

• Qualified Institutional Buyers (QIBs): Financial institutions, banks, mutual funds

Risks Involved in IPO Investing

• Overvaluation Risk: Some IPOs are priced aggressively, leaving less room for growth.

• Listing Day Volatility: Share prices can spike or crash on the first day.

• Allotment Uncertainty: High demand can result in no allotment for retail investors.

• Lack of Historical Data: Limited public financial history can make company analysis difficult.

How to Evaluate an IPO in 2025

1. Read the DRHP Carefully:

Understand the company’s business model, revenue sources, and risks.

2. Analyze Financials:

Review revenue trends, profitability, debt levels, and operating margins.

3. Promoter Background:

Check the track record and credibility of the company’s management.

4. Valuation Metrics:

Compare P/E ratio, EPS, and peer benchmarking.

5. Use Broker Research Reports:

Leading brokers often provide professional IPO analysis and recommendations.

Should You Invest in Every IPO?

Not all IPOs deliver post-listing gains. As a rule:

• Be cautious with loss-making startups

• Prefer companies with strong fundamentals and positive cash flows

• Consider your investment horizon—short-term listing gains vs long-term value creation

Conclusion

In 2025, IPOs continue to dominate the Indian equity landscape, offering both opportunities and risks. Whether you’re a new investor or seasoned trader, understanding the IPO process, evaluating fundamentals, and timing your investment are essential to maximizing returns.

Invest wisely, always read the fine print, and align IPO investments with your financial goals.

Related Blogs:

• Demat vs. Trading Account – What’s the Difference?

• How to Apply for an IPO via UPI or Net Banking

• Top Upcoming IPOs in India to Watch in 2025

• What Are Primary vs Secondary Markets? Explained