IPO (Initial Public Offering)

An Initial Public Offering is the process by which a privately held company sells shares to the general public for the first time and lists them on a recognised stock exchange. In India, this means listing on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE), under the regulatory oversight of the Securities and Exchange Board of India (SEBI).

Why it matters for founders and investors is primarily about liquidity. Venture capital funds and angel investors hold illiquid positions until an exit event; an IPO converts those positions into publicly tradeable shares, allowing exits over time subject to lock-in restrictions. Founders similarly see a portion of their personal holdings become liquid, though founder lock-in periods are typically longer than those applied to institutional investors.

How the process works in India involves filing a Draft Red Herring Prospectus (DRHP) with SEBI, a review and approval process, a price-discovery book-building exercise, and then listing. The full process from DRHP filing to listing typically takes six to twelve months. For smaller companies, SEBI's SME IPO platform (NSE Emerge or BSE SME) provides a lighter regulatory path with lower minimum requirements than the main board.

The IPO is rarely a complete exit. Most IPOs are a mix of a fresh issue (new shares sold to raise capital for the company) and an offer for sale (existing shareholders selling their holdings). Post-IPO, founders and early institutional investors are typically subject to a lock-in period — commonly six months for non-promoter pre-IPO shareholders and one to three years for promoters — before they can freely sell their shares in the open market.