What is an IPO Cycle? Its Process and Benefits | Share India
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A company first makes its particular stocks available through an initial public offering (IPO). Businesses transition from being "private" to "public" in this manner. In other words, a previously privately held business after the Initial Public Offer turns into a publicly traded business. A stock exchange gives you, as an investor, direct access to the company's shares. By purchasing these shares, you join the company's shareholder base. LIC, a major insurer, has released an IPO. TATA Technologies & Tata Play, which is now privately held, also intends to go public in the near future. A public listing increases the company's ability to raise cash and increases value for its current owners. Let's unravel what the IPO cycle is.

What do you understand about the IPO Cycle?

When a business initially offers its shares to the public, this is known as an initial public offering (IPO). Businesses transition from being "private" to "public" in this manner. In other words, a previously privately held business that makes an initial public offering turns into a publicly traded business. A stock exchange gives you, as an investor, direct access to the company's shares. By purchasing these shares, you join the company's shareholder base.

Describe the IPO Cycle Process:

  • Preparation

    After deciding to go public, the business starts gathering the essential financial and operational data to submit to India's Securities and Exchange Board (SEBI). SEBI must receive a registration statement as the first step. This declaration often details the company's financial situation and possible business strategies. SEBI examines it and then decides whether to approve or disapprove.

  • Extensive research

    Investment banks perform due diligence on the firm to establish an appropriate IPO price and gauge the prospective demand for its stock.

  • Authorisation

    In order to launch an IPO, the firm requests SEBI's approval. The SEBI then examines the company's financial and operational data to ensure compliance

  • Application form

    The business submits a draft red herring prospectus (DRHP) to SEBI that contains details about its operations, financial performance, management group, and risk considerations. The company is then expected to create the Draft Red Herring Prospectus (RHP). The DRHP is a thorough report that includes information on the company's business plans, financial performance and stability, office and plant locations, and anticipated IPO price range. Investment bankers can help in this situation. The DRHP is intended for prospective investors to review.

  • Presentation

    Every time a company decides to go public, it usually conducts a roadshow. Executives from the company will do this to visit different places and meet with potential investors. The objective is to increase interest in the business and its IPO. Executives may tout the company's prospects and try to pique interest in the IPO among prospective investors during the roadshow. They will also respond to any queries that potential investors may have. To promote the company and its stock to potential investors, the underwriters start a roadshow.

  • Pricing

    In the completed DRHP, the company provides a provisional pricing range. The announcement of the final price range follows SEBI's clearance of the offering. In the event of fixed-price IPOs, the corporation declares the issue's price. The price may also be decided later. The book building process is what is used in this. The size of the IPO and the price range are also decided upon by the company and the underwriters.

  • Allotment

    The corporation distributes shares to investors and receives the IPO proceeds.

  • Trading

    The company goes public, and the stock starts trading on the stock exchange.

  • Performance following the IPO

    Investors and analysts keep an eye on the company's stock performance, and it is anticipated that the business will continue to expand and perform well.

Explain the Benefits of the IPO Cycle:

One advantage of a company going through the IPO cycle is that the company can develop its brand and reputation by going public, which improves its visibility. An IPO gives a business access to funds that may be used for development and growth. When a firm goes public, its founders, early backers, and staff can sell their shares and get a return on their investment. Going public necessitates regular and thorough financial reporting, enhancing a company's financial accountability and discipline. A profitable IPO can considerably raise a company's valuation, giving it more authority and negotiating strength.

A company can more easily recruit and keep top personnel if it goes public because employees may be more drawn to a publicly traded company with a better profile. Being publicly traded can give a business and its goods more legitimacy and access to a larger network of clients, partners, and suppliers. By becoming publicly traded, a business can continue raising money by issuing more shares. These advantages may contribute to a company's development and success, as well as to a rising stock price and improved financial results over time. Companies should thoroughly examine the dangers and difficulties associated with going through an IPO before opting to go public. Checkout our comprehensive guide on the grey market premium of IPOs and everything you need to know about it. Read our guide to IPO listing gains and everything you need to know about them, including how to identify IPOs with high listing gain potential.


The IPO cycle covers the steps a business must take to complete an IPO. It is significant for the company and the underwriters. Investors should carefully review the DRHP and make informed bids. It's now as simple to subscribe to the IPO of a company as it is to purchase clothing online. For example, trading via the Share India mobile app is effortless and convenient.

Frequently Asked Questions (FAQs)

A company can gain from going through an IPO cycle by gaining knowledge, access to capital, liquidity, more accurate financial reporting, a higher valuation, increased credibility, and improved access to funds.

When investing in an IPO, an investor should take the following precautions to investigate the business and analyze the state of the market. Examine the dangers, consider the valuation, spend money wisely and increase portfolio diversity.

An issuer can avoid submitting a fresh registration document each time it sells shares in a primary offering by submitting a deemed prospectus. Unless another filing overrides it, a considered prospectus is valid for up to a year from its submission date.
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