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What Is IPO Cycle?

What Is IPO Cycle?

What Is IPO Cycle?

The Initial Public Offering (IPO) cycle in India is a diverse process that facilitates private companies' transition into the realm of public ownership. The IPO journey has several stages, each vital for ensuring regulatory compliance, investor confidence, and successful fundraising. In this article, we delve into the IPO cycle in India, shedding light on its distinct phases and the considerations that both companies and investors must bear in mind.



Process Of IPO Cycle:


Stage 1: Pre-IPO Preparation

The IPO cycle in India commences with pre-IPO preparations. Companies seeking to go public undergo comprehensive due diligence, ensuring their financials are audited and compliant with regulatory standards. This stage involves internal assessment of the company's operations, governance structure, competitive landscape, and growth potential. By presenting a compelling narrative to potential investors, companies strive to build trust and attract long-term stakeholders.


Stage 2: Regulatory and Compliance Requirements

Navigating India's strict regulatory structure is critical during the IPO process. Companies must follow the rules and regulations established by the Securities and Exchange Board of India (SEBI), the regulatory body in charge of India's securities markets. The company submits to SEBI a Draft Red Herring Prospectus (DRHP) describing its financials, operations, risk factors, and proposed offering terms. SEBI examines the DRHP to ensure that the company follows disclosure standards and provides investors with accurate and complete information.


Stage 3: Pricing and Investor Outreach

Determining the IPO price is a critical step in the cycle. Companies collaborate with merchant bankers to assess market conditions, investor sentiment, and demand for their shares. The company undertakes an investor roadshow, during which management interacts with institutional investors to gauge interest and address queries. This roadshow aids in fine-tuning the IPO price and helps sets realistic expectations.


Stage 4: Allotment and Listing

Upon receiving SEBI's approval, the company finalizes the IPO price and the number of shares to be issued. These shares are allocated to retail investors, institutional investors, and non-institutional investors based on their subscription levels. Once the allotment is complete, the company's shares are listed on stock exchanges, marking its formal entry into the public market. This listing facilitates buying and selling of shares by a diverse range of investors.


Stage 5: Post-IPO Performance

After the IPO, the company's performance in the public market comes under inspection. The stock's trading debut and subsequent market activity impact the company's reputation and investor sentiment. Management's ability to deliver on promised growth, financial performance, and strategic initiatives becomes crucial for sustaining investor confidence.



What are the Objectives of IPO Cycle?


  • Capital Raise: The primary aim of an IPO is to raise capital for the company. By issuing shares to the public, the company can secure funds for various purposes like expanding operations, investing in research and development, or reducing debt. This influx of capital is crucial for fuelling growth and achieving strategic objectives.
  • Liquidity for Existing Shareholders: An IPO provides an exit strategy for early investors, founders, and employees who hold shares in the company. These existing shareholders can sell their holdings to the public, thereby realizing their investments. It incentivizes early supporters and rewards them for their contributions.
  • Enhanced Visibility and Credibility: Going public elevates the company's public profile and credibility. It signifies that the company has met regulatory requirements and undergone due diligence, instilling confidence in investors, customers, and partners. A publicly traded status can attract more stakeholders and opportunities.

What Are the Drawbacks of Going Through an IPO Cycle?

Before deciding to go through an IPO cycle in India, companies should be aware of some drawbacks.

The cost is one of the main drawbacks. In order to list their shares on a stock exchange, companies have to pay a lot of money as well as ongoing costs, such as compliance and audit fees.

Furthermore, public companies may have to hire additional staff to deal with the increased scrutiny they receive from the public.



The IPO cycle in India is a dynamic journey that bridges the gap between private and public ownership. It comprises crucial stages that contribute to regulatory compliance, investor confidence, and fundraising success. As companies embark on this transformative path, understanding the complexity of each phase becomes important. Likewise, investors must weigh the potential rewards against the associated risks.

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