An initial public offering, or IPO, is a company's first public offer of shares. Buying shares gives you an ownership interest; it does not give you a fixed return. A familiar company name and an attractive launch campaign are reasons to research, not enough information to make a decision.
Start with the offer, not the excitement
An offer can include newly issued shares, shares sold by existing shareholders, or both. Read the offer documents to understand who receives the money and what the company plans to do with any fresh proceeds. This distinction matters when you see a headline about the amount an IPO will raise.
What does the price band mean?
In a book-built issue, investors bid within a stated range. A price band is part of the offering process, not a forecast of the share's future value. Compare the proposed price with the company's earnings, debt and business risks, rather than assuming a lower rupee price means a cheaper business.
Work out the amount for one lot
A lot is the number of shares in a bid unit. In an illustrative IPO with a lot of 100 shares and an upper price of ₹150, one lot at that price is ₹15,000. Two lots would be ₹30,000. This calculation tells you the application amount; it does not tell you whether shares will be allotted or whether you will make a profit.
Five questions for your research notebook
- What does the company sell, and how does it earn money?
- Is cash generation consistent with reported profits?
- Does the business depend heavily on a customer, supplier or regulation?
- Who receives the issue proceeds, and what are they for?
- Could you tolerate a loss or keep the money invested longer than expected?
Read beyond the opening date
The red herring prospectus is an important starting point. Read the business description, risk factors, financial information and objects of the offer. Check for updates and amendments. A scheduled listing is not a promise of a positive opening price.
Use our IPO section to locate selected issue terms and official sources. Treat the date beside each entry as part of the information: a previously checked issue can later change.
Sources and further reading
Educational content; not a recommendation to buy an investment. Examples are illustrative. Read our editorial policy.
Explore IPO watch ↗