What Is IPO in Stock Market? | India’s Most Practical Q&A Guide
Introduction
Are you curious about IPO’s but getting bogged down by finance jargon? In this beginner’s O&A one will make simply concepts such as what is IPO in stock market, what is IPO shares, the cycle of IPO and more with real life context and easy language.
What is IPO in Stock Market?
IPO refers to “Initial Public Offering.” In simple words, it is the process where a private company sells its shares to the public for the first ever time and becomes listed on the stock market. After an IPO, any investor will have the opportunity to buy and sell the shares of these companies
- The full form of IPO is: Initial Public Offering.
- If one buy’s shares after the IPO, one becomes a part-owner of the company.
What is IPO Shares?
IPO shares are the fresh pieces of company ownership (shares) that anyone can apply for during an IPO. If the IPO is successful, these shares get listed on the stock exchange, and their prices may go up or down based on demand.
- You apply for IPO shares through your trading account, often in a fixed minimum quantity called a “lot”.
What is IPO Cycle or IPO Process?
IPO cycle is the full journey a company follows to become public. The steps are:
- Company decides to go public and appoints managers (called lead managers or investment bankers).
- They prepare paperwork and submit it to stock exchange regulators like SEBI.
- A price band and timeline are announced, and people can apply for shares.
- Applications are evaluated, and shares are allotted to successful applicants (or refunded if not allotted).
- The shares are listed on the stock market, where anyone can buy or sell.
IPO Cycle—From Startup to Stock Market
Stage | What Happens |
Planning | Company aims to go public, hires advisors |
Documentation | Files documents with SEBI, drafts prospectus |
Announcement | Sets IPO date/price band, opens subscription |
Application Period | Public, mutual funds, and big investors apply |
Allotment | Shares assigned (or refunds processed) |
Listing | Shares begin trading on NSE/BSE |
What Is Cut Off Price in IPO?
The cut-off price is the final price decided within the IPO price band where shares are allotted.
- You can apply at any price within the band, or just choose “cut-off price”, which means you’ll pay whatever price is finally fixed.
- Choosing “cut-off” is smart for most retail investors, as it maximizes allotment chances.
What Is IPO Allotment?
IPO allotment is the step where the company distributes IPO shares to investors who applied. It’s like drawing lots or a lucky draw if there are too many applicants.
- Oversubscribed IPOs may use computerized lotteries.
- Results are published 3-5 days after the application ends.
- Successful bidders see shares in their demat account; unsuccessful ones get refunds.
IPO Allotment—How It Works
Situation | Allotment Logic |
Undersubscribed | All applicants get the shares asked for |
Oversubscribed | Random allotment or pro-rata (partial shares, by lottery) |
What is GMP in IPO?
GMP means “Grey Market Premium.” It’s the unofficial price at which IPO shares are traded before they get listed on the stock market.
- For example, if an IPO issue price is ₹100 and the GMP is ₹30, people are willing to pay ₹130 before official listing.
- GMP in IPO shows market excitement but is not regulated; prices after listing may be different.
How Are IPO Shares Actually Allotted? Step-by-Step
- You apply through your broker or UPI—choose quantity and price/cut-off.
- After closure, the registrar validates all applications.
- Allotment is done by SEBI rules:
- If underapplied, everyone gets what they want.
- If oversubscribed, lots are distributed randomly.
- Sometimes it’s completely by lottery, sometimes pro-rata.
- Results are published, and refunds/shares are processed.
What Happens on IPO Listing Day?
- IPO shares appear in your demat if allotted.
- Company’s shares become tradable on exchanges (NSE, BSE).
- The opening price may be above or below the issue price—volatility is common early on.
Who Should Apply in an IPO?
People comfortable with risk (IPO prices can jump or fall after listing).
Those wanting to become early shareholders in promising businesses.
Beginners, but only after research—IPO can be unpredictable.
Important Things to Remember About IPOs
- IPOs increase transparency; listed companies share more details.
- Some IPOs give instant listing gains; others may fall in value post-listing.
- Retail applicants often choose “cut-off price” to boost allotment chances.
- GMP is only an indicator, not a guarantee!
- All applications need accurate PAN, demat, and payment details—or risk rejection.
Common IPO Jargon Made Simple
Term | Simple Meaning |
IPO | Company’s grand opening to public investors |
IPO Cycle | Full process from prep to stock market launch |
Shares | Pieces of company ownership for sale |
Cut-off Price | Finalized issue price |
Allotment | How shares are distributed among many bidders |
GMP | Rumored premium before stock actually lists |
Conclusion
Knowing what is IPO in stock market is your first step toward participating in a company’s journey from private to public. IPOs allow common people to invest early, but always come with risks. Learn to spot terms like what is IPO shares, what is IPO cycle, and understand what is cut off price in IPO to make smart, informed decisions.
FAQ'S
What is IPO in stock market?
When a company’s shares are first sold to the public, letting anyone buy and own a stake.
What is IPO cycle?
The journey from company planning, through application/allotment, to shares listed on an exchange.
What is IPO shares?
Ownership portions you can buy during an IPO, eventually tradable on the stock market.
What is the full form of IPO?
Initial Public Offering.
What is cut off price in IPO?
The actual finalized price shares are sold at; applying at cut-off helps maximize your chances.
What is IPO allotment?
Process by which shares are distributed, using lottery or proportional means when over-applied.
What is GMP in IPO?
Grey Market Premium—hinting at expected listing gain but not an official guarantee.
What is IPO in Hindi?
आईपीओ (Initial Public Offering) का मतलब है जब कोई कंपनी पहली बार अपना शेयर सभी को बेचती है।
Is IPO risky?
Yes—listing price may differ dramatically from issue price based on market demand.
Can I sell IPO shares on listing day?
Yes, provided you’re allotted shares, you can sell them as soon as trading opens.
