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IPO Basics: Is Every Offer Worth Applying?
In recent times, IPO have become so popular among equity investors. — “This IPO could be a game-changer!” But before putting your money blindly, it’s smart to ask: What is an IPO about? What types are there? And is it worth to apply for every single one?
Let’s dive into it and simplify.
🚀 What is an IPO?
An Initial Public Offering (IPO) means a company when offering its shares for the first time to the public. A company which is not listed yet in the stock market opens offer to the public for investment. It allows investors to become a part – owner of the company.
In short, company raises capital while it’s an opportunity for investors to get in early – sometimes very early before the stock hits the open market.
Every IPO comes with issue size, price range, lot size, min investment, bidding dates and listing day. Once an IPO is open for subscription, it becomes visible on stock broker apps, websites, as well as on NSE and BSE platforms.
🗂️ Categories of IPO
When applying for IPOs, we typically come across two main types.
| Here’s a simple comparison between SME IPO and Mainboard (Normal) IPO: | ||
| Feature | SME IPO | Mainboard (Normal) IPO |
| Full Form | Small and Medium Enterprises IPO | Initial Public Offering for large companies |
| Target Companies | Small and medium-sized businesses | Established, large-scale companies |
| Exchange Platform | NSE Emerge / BSE SME | NSE / BSE mainboard |
| Minimum Post-Issue Capital | ₹1 crore to ₹25 crore | More than ₹25 crore |
| Investor Access | Often limited to HNIs and institutional investors (retail participation may be restricted) | Open to all categories of investors including retail |
| Listing Requirements | Relaxed norms (simplified disclosures, less track record) | Strict SEBI norms and disclosures |
| Lot Size | Generally higher (₹1–2 lakh minimum investment) | Lower lot sizes (₹10,000–₹15,000 possible) |
In short:
SME IPOs are designed to help small businesses, raise their capital with fewer regulations, while Mainboard IPOs are for larger, well-established companies and are more accessible to retail investors.
What is the maximum investment limit when applying for an IPO?
IPOs typically allow applications under two categories:
Regular investors, who can apply for up to ₹2 lakhs.
HNI (High Net Worth Individuals), who can apply between ₹2 lakhs to ₹5 lakhs.
Few IPO offers a specific category for employee – The IPO Employee Category refers to a special reservation of shares in an IPO exclusively for the employees of the company that is going public.
🤔 Is it Worth Applying for Every IPO?
Simple answer is NO…
Some IPOs get listed with solid gain and good for long term wealth creation while others disappoint both on listing day and long run.
Hence, what to consider before applying:à
- Company fundamentals – Be it IPO or any existing stock, the first thing must be company fundamental. It’s always worth checking company’s revenue and profit growth, debt levels, profit margins, return on equity (ROE), valuation ratios.
- Valuation – Is the share price reasonably compared to peers?
- Promoter quality – It’s likely the main engine who is driving the ship.
- Market sentiment – Whether the market is for new listings or not?
Pro tip: These days IPOs become so popular and creating hype to investors. While following social media, news – it’s like a lottery to become millionaire overnight. Avoid falling for hype instead always do your own research and invest at your own risk. Diversify your investment on different IPOs instead relying on one unless you do your own research and fully confident about the listing gain and long run,
📌 Final Word
IPOs can be golden opportunities — but only when chosen wisely. Don’t apply blindly. Invest informed.
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Disclaimer:
The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy/sell any security or financial products. Users must make their own investment/trading decisions based on their specific investment/ trading objective and financial position and using such independent advisors as they believe necessary.
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