In recent years, IPOs (Initial Public Offerings) have become one of the most discussed investment opportunities among retail investors. Some investors participate in IPOs for quick listing gains, while others look at IPOs as long-term wealth creation opportunities.
Before investing, it is very important to understand how
IPOs work, their types, benefits, and risks.
In this article, you will learn:
- What
is an IPO?
- Why
companies launch IPOs
- Types
of IPOs – Mainboard IPO and SME IPO
- How to
invest in an IPO
- Important
IPO-related terms
- Benefits
and risks of IPO investing
What is an IPO (Initial Public Offering)?
An IPO (Initial Public Offering) is the process
through which a private company offers its shares to the public for the first
time and gets listed on a stock exchange such as NSE or BSE. After the IPO, the
company becomes a publicly listed company.
Example: If a company issues 10 lakh shares at ₹100
per share to the public, this offering is known as an IPO.
Why Do Companies Launch IPOs?
Companies bring IPOs for several reasons:
- To
raise capital – for expansion, new projects, or working capital
- Debt
reduction – to repay existing loans
- Brand
visibility and credibility – listed companies gain more trust
- Exit
opportunity for early investors and promoters
- Liquidity
for shares
Types of IPOs
IPOs in India are broadly classified into two categories:
1️⃣ Mainboard IPO
Mainboard IPOs are offered by relatively large companies and
are listed on the main platforms of NSE and BSE.
Key Features of Mainboard IPOs:
- Large
and established companies
- Issue
size generally above ₹100 crore
- Strict
SEBI regulations
- High
investor participation
- Better
liquidity after listing
- Suitable
for long-term investors
Minimum Investment: Usually around ₹14,000–₹15,000
(one lot)
2️⃣ SME IPO (Small and Medium
Enterprises IPO)
SME IPOs are designed for small and medium-sized companies
and are listed on BSE SME or NSE Emerge platforms.
Key Features of SME IPOs:
- Smaller
companies with high growth potential
- Lower
issue size (generally ₹5–50 crore)
- Larger
lot size compared to Mainboard IPOs
- Higher
risk but potential for higher returns
- Lower
liquidity after listing
Minimum Investment: Generally ranges from ₹1 lakh to
₹5 lakh, depending on the issue
Difference Between Mainboard IPO and SME IPO
|
Basis |
Mainboard
IPO |
SME IPO |
|
Company Size |
Large |
Small /
Medium |
|
Issue Size |
Large |
Small |
|
Risk Level |
Lower |
Higher |
|
Liquidity |
High |
Low |
|
Minimum
Investment |
Low |
High |
|
Investor Type |
Retail &
Institutional |
Mostly HNI /
Experienced |
How to Invest in an IPO?
To apply for an IPO, you need:
- Demat
Account
- Trading
Account
- Bank
Account with ASBA facility
Ways to Apply for IPO:
- Online
broker platforms like Zerodha, Groww, Angel One
- Net
banking through ASBA
Important IPO Terminology
- Price
Band: The minimum and maximum price at which you can bid
- Lot
Size: Minimum number of shares you must apply for
- Issue
Size: Total amount the company wants to raise
- GMP
(Grey Market Premium): Unofficial premium in the grey market
- Listing
Gain: Profit earned on the listing day
- Oversubscription:
Demand exceeding the number of shares offered
What to Check Before Investing in an IPO?
Before applying, investors should analyze:
- Company
business model
- Revenue
and profit growth
- Debt
and financial stability
- Promoter
holding and background
- Industry
outlook
- IPO
valuation compared to peers
Benefits of Investing in IPOs
- Opportunity
for listing gains
- Early
investment in growing companies
- Potential
for long-term wealth creation
- Portfolio
diversification
Risks of Investing in IPOs
- Possibility
of listing losses
- Overvaluation
risk
- Low
liquidity in SME IPOs
- Dependence
on market sentiment
Conclusion
IPOs can be an excellent investment opportunity if chosen carefully. Mainboard IPOs are generally suitable for beginners and conservative investors, while SME IPOs are more appropriate for experienced investors who can handle higher risk.
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👉 Dhan Shiksha
Investment Principle:
“Invest in IPOs with proper research, not just for hype or
quick gains.”
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⚠️ Disclaimer
The content on Dhan Shiksha is for educational purposes only. We are not SEBI-registered advisors and do not offer financial recommendations. Please consult a certified financial advisor before making investment decisions. We do not accept responsibility for any financial losses resulting from reliance on this information.
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