More Than ₹25,000 Crore Is Proposed to Be Raised Through IPOs This August. Let’s Understand IPOs Today.
India’s primary market is set for a busy month, with companies expected to raise more than ₹25,000 crore through Initial Public Offerings (IPOs) in August. The surge reflects growing business confidence, favorable market conditions, and strong investor interest in owning a stake in promising companies.
Whenever such headlines appear, terms like IPO, Underwriter, Fresh Issue, Offer for Sale (OFS), and FPO often dominate financial news. But what do they actually mean?
Let’s understand IPOs from the ground up.
What is an IPO?
An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time. After the IPO, the company’s shares are listed on a stock exchange, where investors can freely buy and sell them.
Buying a share means buying a small ownership stake in the company. As the company grows, shareholders may benefit through an increase in the share price or dividends declared by the company.
Why Do Private Companies Go Public?
Every successful business eventually reaches a stage where it needs substantial capital to grow. The company may want to build new factories, expand into new cities or countries, invest in technology, acquire another business, or reduce existing debt.
To raise this money, a company has two primary options:
- Borrow money from banks or financial institutions (Debt)
- Raise money by selling a part of its ownership (Equity)
An IPO allows the company to raise equity capital from thousands of investors instead of depending entirely on loans. Unlike a bank loan, this money generally does not have to be repaid with interest, making it an attractive source of long-term funding.
Benefits of Becoming a Public Company
Going public offers several advantages beyond raising money.
- It provides substantial capital for expansion.
- It enhances the company’s credibility and visibility.
- It allows founders, promoters, and early investors to partially monetize their investments.
If Going Public Is So Beneficial, Why Doesn’t Every Company Do It?
Being listed also brings significant responsibilities.
Public companies must regularly publish their financial results, comply with strict regulatory requirements, maintain high standards of corporate governance, and answer to shareholders.
When Does a Company Launch an IPO?
Companies generally launch an IPO when they believe they are ready for their next stage of growth.
Common reasons include:
- Expanding operations.
- Entering new markets.
- Reducing debt.
- Providing an exit opportunity for early investors.
It’s important to remember that an IPO happens only once because it is the Initial Public Offering.
If a listed company wants to raise more equity capital later, it may opt for a Follow-on Public Offer (FPO), a Rights Issue, or a Qualified Institutional Placement (QIP) instead of launching another IPO.
Who Helps a Company Launch an IPO?
Launching an IPO involves detailed financial, legal, and regulatory work.
To manage this process, companies appoint Merchant Bankers, also known as Underwriters or Book Running Lead Managers (BRLMs).
What Kind of Shares Are Offered?
Most IPOs involve the issue of equity shares, also known as ordinary shares(Different classes of shares have different voting rights like Berkshire Hathaway famously known through Warren Buffett have CLASS A and CLASS B types of shares )
How Are Shares Offered in an IPO?
An IPO usually consists of one or both of the following components.
Fresh Issue
In a Fresh Issue, the company creates new equity shares and sells them to investors. The money raised goes directly to the company and is typically used for expansion, debt repayment, working capital, or other business needs.
Offer for Sale (OFS)
In an Offer for Sale (OFS), no new shares are created. Instead, existing shareholders—such as promoters, founders, or early investors—sell part of their holdings to the public.
The proceeds go to the selling shareholders, not to the company.
Many IPOs contain a combination of both Fresh Issue and Offer for Sale.
How Does an IPO Work?
Although the process involves several regulatory steps, the overall journey is straightforward.
- The company decides to raise capital from the public.
- Merchant bankers (underwriters) are appointed.
- The DRHP is prepared and submitted for regulatory approval.
- The IPO opens for public subscription.
- Investors apply for shares.
- Shares are allotted to successful applicants.
- The company’s shares are listed on a stock exchange and begin trading.
From that point onward, the company is no longer owned only by its founders and private investors—it is owned by thousands of public shareholders.
Final Thoughts
An IPO is much more than a company’s stock market debut. It is a major milestone in a business’s evolution—from being privately owned to becoming publicly owned.
For companies, it unlocks access to long-term capital, greater visibility, and new opportunities for growth. For investors, it offers a chance to become shareholders in businesses they believe have long-term potential.
With more than ₹25,000 crore expected to be raised through IPOs this August, understanding how IPOs work has never been more relevant. Whether you’re an investor, a banking professional, or simply someone interested in financial markets, knowing the basics of IPOs will help you better understand one of the most important mechanisms through which businesses raise capital and economies grow.
