IPOs: Going Public

1Private company vs listed company

A private company has a closed set of owners—founders, family, funds, or employees—and no exchange order book where any outsider can place a market order for its shares.

A listed company has completed the regulatory and exchange path that makes its listed shares tradeable in a public market, subject to the shares actually available for trading and any lock-ins. Ownership can then change between investors without money from every trade entering the company.

Going public changes the ownership market and brings ongoing public-disclosure obligations. It does not by itself change the company's products, offices, profitability, or business quality.

2What an IPO actually is

An Initial Public Offer (IPO) is the company's first public offer of shares that enables listing. It can contain new shares, existing shares sold by current owners, or both.

The offer and allotment belong to the primary market: applicants apply to the issue under its terms. After listing, investors buy and sell listed shares with one another in the secondary market; those later trades are not fresh company fundraising.

Do not call every capital raise an IPO. Private placements, rights issues to existing holders, and later public issues by an already listed company are different transactions.

The going-public path

1. PrivateOwnership sits with a closed set of holders.
2. OfferThe first public share offer opens in the primary market.
3. AllotSuccessful applicants receive shares under the issue process.
4. ListExchange trading opens in the secondary market.

3Fresh issue — new shares and company cash

In a fresh issue, also called a fresh offering of equity, the company creates new shares for the public. Total shares increase and the fresh portion of investor money is company proceeds.

Fresh issue describes the share route, not the final spend. Gross fresh proceeds are reduced by issue expenses to reach net proceeds; the separate Money Uses card follows those net proceeds through Objects of the Issue.

Because new shares enlarge the ownership denominator, existing holders can keep the same absolute shares while their percentage ownership falls. The Ownership Dilution card calculates that effect.

4Offer for Sale — existing shares, cash to sellers

In an Offer for Sale (OFS) inside an IPO, named existing shareholders sell shares they already own. No new shares are created for that portion and the total share count stays fixed.

The gross OFS consideration is attributable to the selling shareholders, not the company. A seller's eventual net cash can differ after allocated offer expenses, taxes and transaction terms, but OFS proceeds do not become company funding.

A seller's absolute shares and percentage ownership fall because shares move to the public, not because a fresh issue enlarged the denominator. Read each seller's pre-offer holding, shares offered and post-offer holding.

Seller identity, retention and sale size are evidence to interpret alongside the stated rationale and the rest of the filing. A large or small sale is not automatically a quality verdict.

Read an OFS ownership transfer

1. Fix totalNo new shares are created, so the total share count stays unchanged.
2. Name sellersRead who sells, how many existing shares move, and each seller's post-offer holding.
3. Move sharesSubtract sold shares from sellers and add the same shares to public ownership.
4. Trace cashPublic cash for the OFS shares goes to sellers; company OFS proceeds are zero.

5Hybrid offers — fresh plus OFS

A hybrid IPO combines a fresh issue and an OFS in one offer. Split the total before describing what it funds: fresh creates shares and company proceeds; OFS transfers existing shares and seller proceeds.

Keep cash and ownership as separate maps. Fresh expenses reduce gross fresh proceeds to net company proceeds; they do not turn the OFS portion into company cash.

For the cap table, add only newly issued fresh shares to the total. Move OFS shares from sellers to the public inside that total; adding them to the denominator again double-counts existing shares.

The Ownership Dilution card carries the full percentage formula and fresh/OFS/hybrid cap-table practice.

Two ledgers, one final offer

1. Split cashFresh gross goes to company before costs; OFS gross is attributable to sellers.
2. Build totalPost-offer shares = pre-offer shares + new fresh shares only.
3. Move OFSTransfer sold existing shares to public ownership without increasing total.
4. ReconcileCheck cash destinations, final share counts and ownership percentages separately.

6Offer documents — the disclosure gateway

The DRHP, RHP and final Prospectus form the structured offer-document path for an Indian IPO. They are sources for the business, offer structure, Objects of the Issue, selling shareholders, risks, financial information and price context—not tip screenshots.

Use this core card as a gateway. The Deep dives separately explain where fresh money goes, how new shares dilute ownership, how DRHP/RHP/Prospectus stages differ, and how to connect risks, financials, seller retention and valuation context.

Read the latest filed document available for the stage in front of you and compare changes. SEBI review is part of the disclosure and regulatory process, not an endorsement or a promise of future performance.

Open the right evidence

1. MoneyOffer structure and Objects of the Issue.
2. OwnershipNew shares, transferred shares and selling-shareholder retention.
3. EvidenceBusiness, risks, litigation, financial trends and price context.

7Apply, allotment, listing — no promises

ASBA means Application Supported by Blocked Amount: the bank blocks the bid amount instead of transferring it to a promoter or tipster. For eligible retail applications made through intermediaries, UPI is a mechanism used to authorize that ASBA block; it is not an alternative to ASBA.

Before authorizing the block, verify the issue, category, bid quantity, minimum bid lot and any permitted multiples, price, PAN identity, bank account and demat details. A blocked amount is not an allotment and is not money already paid to the company.

For a successful retail individual investor allotment, SEBI's basis provides at least the minimum bid lot, subject to availability. Any remaining shares are allotted proportionately as applicable; some valid applicants may receive no allotment. Allotted shares are credited to demat, only their value is debited, and excess or no-allotment blocks are released through the official process.

After listing, shares enter secondary-market trading and the exchange price can open above or below the issue price. Neither application nor allotment creates a contractual listing-gain promise.

From document to listing

1. ReadConfirm issue terms and the fresh/OFS structure.
2. ApplyUse ASBA; where eligible through an intermediary, authorize the ASBA block with UPI after checking PAN, demat, lot, quantity and price.
3. AllotA successful retail allotment is at least the minimum bid lot subject to availability; remaining shares are proportionate as applicable, while some valid bids receive none.
4. ListOnly then does exchange trading begin, with no guaranteed opening price.

8GMP prohibition and regulatory protection

Pre-listing grey-market trades in IPO applications or shares are unauthorized and illegal. They operate outside the regulated market and carry no regulatory protection.

Grey Market Premium (GMP) is an unofficial quote from that grey market. It is not a DRHP, RHP or Prospectus term, not SEBI-approved pricing, and can change or disappear.

GMP does not guarantee allotment, a listing gain, or the price available when public exchange trading begins. A screenshot cannot replace offer structure, Objects, risks, financial trends and price context.

Rent money, emergency savings and borrowed funds are not surplus cash. Funding capacity does not establish that an IPO is suitable or will produce a return.

9Deep dive — proceeds-use taxonomy

Objects of the Issue traces fresh-issue money from gross proceeds through issue expenses to net proceeds, then into disclosed company uses. OFS seller proceeds stay outside this allocation.

Working capital funds the repeating operating cycle: cash → inventory → sale → receivable → cash. Cash pays for inventory, suppliers and wages; a receivable is customer money still owed. Working capital is not profit and is not a long-lived asset.

Capital expenditure, or capex, buys or builds assets used beyond one operating cycle, such as factories, machinery, stores or technology infrastructure. Expansion capex adds capacity; maintenance capex replaces or sustains existing capacity.

Debt repayment or prepayment reduces loan principal. A smaller principal can reduce future interest burden and cash outflow, subject to loan terms, but does not by itself prove better sales, margins, execution, valuation or business quality.

An acquisition is inorganic growth through buying a business or selected assets. It may add customers, products, technology or capacity; price, approvals, execution and integration remain risks.

General corporate purposes (GCP) is a disclosed flexible bucket, but its limit depends on the IPO segment. In a main-board IPO, GCP may be up to 25% of the amount raised by the issuer. In an SME IPO, GCP is limited to 15% of the amount raised by the issuer or ₹10 crore, whichever is lower. Read the issue's segment, amount, basis, governance and exact wording.

Filings may separately name research and development, product or brand activity, investment in a subsidiary, and issue expenses. Classify each line by what the filing actually says, then inspect timing, estimates, approvals and later deployment evidence.

Reconcile the Objects allocation

1. GrossStart with the fresh amount before costs; do not include OFS seller proceeds.
2. NetSubtract issue expenses to find money available for stated company uses.
3. AllocateMatch every net-proceeds rupee to named uses and the disclosed flexible bucket.
4. VerifyCheck amount, horizon, estimates, approvals, risks and later deployment evidence.

10Deep dive — ownership dilution

Absolute shares and percentage ownership are different units. Ownership percentage = shares held ÷ total shares × 100.

Fresh-issue dilution is a denominator change. If a promoter owns 60 of 100 shares, the stake is 60%. After 25 new public shares, the promoter can still own the same 60 shares while the total becomes 125 and the stake becomes 48%.

An OFS is different: total shares stay fixed while a seller's existing shares move to the public. In a hybrid, first add fresh shares to the denominator, then transfer OFS shares inside that enlarged total.

Always name the unit: share count, ownership percentage or cash. A fall from 60% to 48% is 12 percentage points; relative to the old 60% stake, it is 12 ÷ 60 = 20% relative dilution.

Build any post-offer cap table

1. FreezeRecord each holder's absolute shares before any sale.
2. EnlargePost total = pre total + new fresh shares; OFS shares add zero.
3. TransferSubtract OFS shares from sellers and add those same shares to public.
4. DivideFinal stake = final shares ÷ post total × 100; percentages must sum to 100%.

11Deep dive — filing-stage anatomy

The Draft Red Herring Prospectus (DRHP) is the detailed draft offer document filed during SEBI's disclosure process. It starts the structured public record, but issue terms can still change.

The Red Herring Prospectus (RHP) is filed before the issue opens. It still omits the final issue price and final issue size. The price band may be disclosed in the RHP or separately announced, as applicable.

After book building determines the final issue price and final issue size, the issuer files the final Prospectus containing those particulars with the Registrar of Companies (RoC). Read the latest document available for the stage in front of you and compare material changes.

Use contents and search instead of reading hundreds of pages like a novel. Navigate through Business, Objects of the Issue, Offer and selling shareholders, Risks and litigation, Financial information, Basis for Issue Price, and document changes.

SEBI oversees the disclosure and regulatory process and may issue observations on a DRHP. That is not an endorsement of the business, investment merit, forecasts, valuation or future market outcome. The filing is a structured source, not a quality badge.

Seven-stop filing route

1. StageIdentify DRHP, RHP or final Prospectus and note the filing date.
2. NavigateSearch Business, Objects, Offer and sellers, Risks, Financials and Issue Price.
3. CompareTrack changed disclosures, applicable price-band information, dates and offer terms.
4. QualifyRHP lacks final price and size; final Prospectus carries them after book building.

12Deep dive — specificity and trend divergence

Risk Factors is management's disclosed map of what can go wrong, not a ceremonial warning page. Group risks by business dependence, regulation, customers or suppliers, operations, finance and the offer itself.

Rank a risk by possible severity and company-specific detail rather than page count. Read outstanding litigation beside it: parties, exposure where stated, current stage and possible business consequence. A long list is not automatically worse than a short one.

Write the business model in one sentence—who pays, for what, and why revenue repeats or fluctuates—then compare several years of revenue, profit, operating cash flow and debt together.

Rising revenue with falling profit can signal margin pressure; reported profit with weak operating cash flow deserves investigation; rising debt changes financing resilience. Direction, consistency and the filing's explanation matter more than one isolated number.

Separate recurring performance from one-time items. A one-off gain can lift profit without improving ordinary operations, while a one-off expense can depress one period without necessarily repeating. Read the notes before treating either as the ongoing run rate.

Customer or supplier concentration can make one relationship disproportionately important. Read the percentage, contract or dependency detail, alternatives and disclosed consequence instead of treating the number alone as a verdict.

After completing this evidence read, use the Selling Shareholders and Valuation deep dive for retained holdings and issue-price comparability.

Turn disclosures into follow-up questions

1. SpecifyName the company-specific event, dependency or litigation rather than counting generic risk pages.
2. TrendCompare revenue, profit, operating cash flow and debt over several periods.
3. NormalizeSeparate recurring operations from disclosed one-time gains or expenses.
4. ConnectLink concentration, litigation and trend divergences to notes, severity and possible business effects.

13Deep dive — retention and metric alignment

The selling-shareholder table names each holder selling through the OFS, the number of shares offered, and pre-offer versus post-offer holdings. A fresh issue creates company shares and company proceeds; an OFS transfers named holders' existing shares and gross consideration belongs to those sellers.

Always distinguish the fraction of the seller's own holding sold from the seller's share of the total offer. Selling one quarter of a holding is not a full exit: calculate the retained post-offer holding before describing the transaction.

Seller identity, retained stake, lock-ins where disclosed, sale size and stated rationale provide ownership context. They do not by themselves prove confidence, distress, fair value or future performance.

Basis for Issue Price explains how the issuer presents price context. Common measures include earnings per share (EPS), return on net worth (RONW), net asset value (NAV), and price-to-earnings ratio (P/E), which compares price per share with EPS.

Align periods and definitions before comparing metrics. Check whether EPS is basic or diluted, whether a return measure uses comparable equity figures, and whether NAV and P/E use consistent dates and share counts.

A listed peer is useful only when its business model, scale, growth profile, leverage, profitability and accounting period are genuinely comparable. The section explains the issuer's price case; it does not certify that the price is cheap, fair or expensive.

Read seller retention and price context

1. Name sellersExtract each seller's pre-offer holding and the existing shares offered through OFS.
2. Calculate retentionPost-offer holding = pre-offer holding − shares sold; state both the fraction sold and retained.
3. Align metricsExpand EPS, RONW, NAV and P/E, then match periods, definitions and share-count bases.
4. Test peersCompare business, scale, growth, leverage and profitability before treating a listed company as a peer.