Investments can help you grow your wealth and keep up with the inflation. Thankfully, there is a wide array of options, tailored to match your preferences and your profile. 


One investment option that you could look into is an IPO or Initial Public Offering. There are numerous types of IPO you can choose from and diversify your investment portfolio to minimise risk. Read on to learn what an IPO is, its types, and more.

What is an IPO?

An IPO, is the process by which shares of a previously privately held company are made available to the general public to invest in for the very first time. It is a win-win situation for both the issuing company as well as the investors. 


Opening up shares to the public aids the issuing company to generate capital that can be used towards its various business operations. This shift from a private entity to a public entity is a great opportunity for the stakeholders to realise their investment gains. 


Simultaneously, it also offers the public with a promising investment avenue that can offer great returns on investment and help them diversify. 

Types of Initial Public Offerings (IPO)

Check out the various types of IPOs that issuing companies offer -z

1. Fixed Price Offering

In a fixed price offering, the issuing company determines the value of the offerings with the assistance of underwriters. The evaluation of the price is done on the basis of both qualitative and quantitative factors, including the company's finances. 


In a fixed price offering, the price is mostly lower than the market value.

2. Book Building Offering

In a book building offer, there is no definitive price and a price range or band replaces it. The lowest value is called the floor price, and the highest value is called the 'cap price'. You can bid with your preferred prices. Here, the final stock price is determined by the issuing company after evaluating the applications and bids.

How to Invest in an Initial Public Offering (IPO)?

If you’re wondering about how to apply for an IPO, then check out the steps that you need to follow. Bear in mind, the procedure may differ depending on whether you own a Demat account

  • Step 1: Sign in to your account. In case you are not registered, you need to complete the signup process first
  • Step 2: Locate the IPO tab and navigate to the section displaying the available IPOs
  • Step 3: Select the issuing company that you intend to bid on
  • Step 4: Type in the desired quantity of the shares that you want to purchase along with the bidding price
  • Step 5: Enter your financial details to complete the trade


Alternatively, you also have the option of visiting the nearest branch of the broking firm or your bank to apply.


Now that you know what an Initial Public Offering is, make the best use of this information to optimise your decision-making process when it comes to making investments. Selecting the right IPO is vital, as these are very volatile instruments. 


Remember to understand the pattern of the market and choose the right time for your investment. If you do not prefer IPO investments, there are various other investment options available in the market that you can choose from.  


With Bajaj Markets, you get the opportunity to invest in a range of advantageous avenues, including IPOs. Start investing to amplify your potential returns, allowing you to embrace the chance to broaden your investment horizon!

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FAQs on What is an IPO

If a company decides to go public through IPO, it becomes necessary for the company to establish a price for its newly issued shares. This process is carried out by the underwriting banks responsible for promoting the offering. The valuation is determined by the potential for growth and other fundamental aspects of the issuing company.

Yes, you can apply for an IPO even if you are new to investing. It is a simple process, and you have the option of investing through online as well as offline modes. 

You are allowed to submit an application for a single lot of shares using an account and set of documents in accordance with the SEBI mandate.

Yes, you are allowed to sell your IPO shares. You can do so on the listing day, during the pre-market session. 

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