An IPO (Initial Public Offering) is the process through which a private company sells its shares to the general public for the first time and lists on a recognised stock exchange (NSE or BSE in India).
The IPO process in brief
- 1Company appoints investment bankers (book-running lead managers)
- 2Files a DRHP with SEBI for review
- 3SEBI issues observations; company files the RHP with price band
- 4Public bidding window opens (3 days) — retail investors apply via ASBA
- 5Allotment announced; shares list and trade on exchange
Why it matters to unlisted-share holders
For pre-IPO investors, the IPO is the primary exit event. You can sell your shares on the exchange (subject to any lock-in) at the market price, rather than finding a private buyer. The gap between your unlisted entry price and the IPO listing price determines your return.
Not every company that files a DRHP ultimately lists — SEBI may raise objections, or market conditions may lead the company to withdraw. This is a genuine risk in pre-IPO investing.
Example: A pre-IPO investor bought shares at ₹300, the RHP set the band at ₹420–₹440, and the stock listed at ₹510 — a ~70% return on the entry price.