Understand the key differences between equity IPOs and debt IPOs, how they work, and what they mean for companies and investors.
Last updated on: January 30, 2026
Companies can raise capital through two primary public offering routes—equity IPOs and debt IPOs. While both are means to tap into the public markets, they differ significantly in terms of structure, investor role, and financial impact.
An Equity IPO involves issuing shares of ownership in a company to the public.
Investors become shareholders and gain rights like voting and dividends.
Proceeds are typically used for business expansion, acquisitions, or debt reduction.
Equity IPOs can be fixed price or book-built.
A Debt IPO involves issuing non-convertible debentures (NCDs) or similar instruments.
Investors become creditors, not owners.
They receive fixed interest and the principal on maturity.
Common among companies looking for predictable financing without diluting control.
Here’s how Equity IPOs stack up against Debt IPOs across key factors:
| Attribute | Equity IPO | Debt IPO |
|---|---|---|
Investor Role |
Shareholder (ownership) |
Creditor (lender) |
Returns |
Dividends + Capital Appreciation |
Fixed Interest |
Risk Level |
High (market volatility) |
Lower (fixed returns) |
Tenure |
Indefinite |
Fixed term (1–10 years typically) |
Voting Rights |
Yes |
No |
Dilution |
Yes (shares issued) |
No |
Listing Type |
Equity segment (stock exchanges) |
Debt segment (NSE/BSE Debt Market) |
Common Buyers |
Retail, HNIs, Institutions |
Mostly HNIs and Institutions |
Companies use equity and debt IPOs differently: equity issues involve ownership dilution and capital raising, while debt issues raise funds through borrowing without ownership change.
Equity IPOs are chosen when a company wants to raise large sums, expand operations, or invite shareholder participation.
Debt IPOs are used when companies need capital without diluting ownership, and can meet interest obligations.
Here’s how the risk–reward trade-off looks for investors:
Equity IPOs offer higher upside potential but come with market risks and no guaranteed returns.
Debt IPOs are often associated with investors seeking relatively stable income compared to equity IPOs.
Here’s what the process and regulations involve:
Both IPO types require disclosures and regulatory filings like Form S-1 (US) or SEBI DRHP (India).
Equity IPOs focus on ownership, dilution, and business plans, while debt IPOs emphasise interest rate, repayment terms, and covenants.
Here’s how the pros and cons stack up:
| Type | Advantages | Disadvantages |
|---|---|---|
Equity IPO |
Ownership sharing, capital without repayment |
Dilution of control, earnings pressure |
Debt IPO |
No ownership loss, fixed obligations |
Repayment burden, higher credit rating needed |
Equity and debt IPOs serve different roles in capital markets, each carrying unique structures and implications for both issuers and investors.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Reviewer
Equity IPOs provide returns based on market performance, which means the value of shares can rise or fall depending on the company’s growth and stock market conditions. Debt IPOs, on the other hand, offer fixed interest income that remains unaffected by share price movements.
Investors in a debt IPO do not receive company ownership or voting rights. Instead, they act as creditors to the company and earn returns through fixed interest payments.
Debt IPOs generally carry lower volatility than equity IPOs as they offer fixed interest payments, though repayment depends on the issuer’s creditworthiness. Equity IPO outcomes vary with market and company performance.
A company may opt for a debt IPO to raise funds without diluting equity or losing control over ownership. Debt IPOs also provide access to capital with clearly defined repayment and interest obligations.
Yes, regulatory requirements differ between equity and debt IPOs. Equity IPOs emphasise disclosures on ownership structure, growth prospects, and financial performance, while debt IPOs focus more on repayment terms, credit ratings, and interest obligations.