Everything You Need To Know About IPOs: Benefits, Risks & Process

If you are an investor in India, you might already know that IPOs have always attracted a huge number of investors. They give you an opportunity to participate in a company’s growth story from the beginning of its public journey. But every IPO also comes with risk factors that require close scrutiny. 

This article covers how work along with their advantages, challenges and the best platforms to invest through.

What Is an IPO?

An IPO is the process where a private company offers its shares to the public for the first time. This evolution allows companies to raise capital from public investors which can be used for various purposes like expansion, debt repayment or funding new projects. When a company goes public through an IPO, it essentially invites you, the public to become part owners of the business.

How Does the IPO Process Work?

Here are the different stages involved in the IPO process which every company coming out with a public offer must follow:

Company Preparation: The company appoints underwriters which is an investment banks to determine valuation, prepare legal documents and file a draft prospectus or DRHP with SEBI.

SEBI Approval: SEBI reviews the DRHP to verify financial disclosures and compliance. Once approved, the IPO dates and price bands are announced.

Subscription Window: Investors apply through brokers during a 3 to 5 days window. Retail investors often get a reserved quota and oversubscribed IPOs use a lottery system.

Allotment & Listing: Shares are allotted based on demand and trading begins on exchanges like BSE or NSE within a week. Listing gains depend on market sentiment and company fundamentals.

Benefits of Investing in IPOs

Here are the key benefits of investing in IPOs for long-term wealth creation:

Access to Capital: Companies can raise significant amounts of capital for growth, expansion or debt repayment.

Increased Public Profile: Public IPOs often attract more media coverage as well as heightened brand awareness.

Liquidity for Existing Shareholders: Early investors and employees with stock options can more easily sell their shares.

Potential for High Returns: Investors who get in early on successful IPOs can see significant returns on their investment.

Enhanced Credibility: Public companies often enjoy increased credibility with customers, suppliers and partners.

Risks of IPO Investments

Here are some of the key challenges of IPO investments:

Market Volatility: Price fluctuations can be quite large for new listings, particularly during the first few trading days.

Lock-up Period: Insiders have restricted access to the selling of these shares for a specified period which has a direct impact on the prices of the stock when the lock up period expires.

Uncertain Valuation: Newly listed companies have limited trading history which makes it difficult to accurately assess the true value.

Regulatory Compliance: Public companies face higher scrutiny from regulators and are subject to more stringent reporting requirements. This can increase compliance costs and administrative burdens for the company.

Top 5 Apps for IPO Investments

Choosing the right platform ensures seamless applications and tracking. Here are India’s top brokers for IPOs:

1. Kotak Securities

Backed by Kotak Mahindra Bank, Kotak Securities streamlines IPO applications through its Trinity account which is a 3-in-1 banking, trading and Demat integration. 

Zero brokerage on IPO applications.

Real-time allotment updates via Kotak Stock Trader app.

Integrated 3-in-1 account (banking, trading, Demat).

Dedicated research reports for informed decisions

2. Zerodha

Zerodha’s Kite platform is a favourite among cost-conscious investors. The app allows free IPO applications with instant bid tracking and UPI payment support.

Free IPO applications through Kite platform.

Instant bid tracking and UPI payments.

User-friendly interface for beginners

3. Upstox

Upstox combines affordability with robust functionality. The app charges zero brokerage for IPO bids and sends timely alerts about upcoming issues. 

Zero brokerage and quick processing.

Advanced charting tools for analysis.

SMS/email alerts for upcoming IPOs

4. Angel One

Angel One caters to investors seeking data-driven decisions. The app offers custom IPO reports, including comparisons with similar companies and calculations of key financial ratios.

Free Demat account for IPO investments.

Curated IPO reports and recommendations.

Multi-language support for wider accessibility

5. ICICI Direct

ICICI Direct offers exclusive access to select IPOs and SME listings. The app’s integration with ICICI Bank accounts enables instant fund transfers for bids.

Access to exclusive IPOs and SME listings.

Real-time portfolio tracking.

Integration with ICICI Bank accounts

Conclusion

Success with IPO investments depends on choosing the right broker to open demat account with. Kotak Securities emerges as a preferred option with its excellent features and seamless 3-in-1 account integration making it suitable for new as well as experienced investors. You must undertake detailed research before applying for an IPO, to avoid any hassles later.

Published on: Tuesday, March 25, 2025, 12:47 PM IST