Glossary
IPO
Initial Public Offering — a company's first sale of shares to the public on a stock exchange, enabling all investors to buy and sell shares.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
An IPO (Initial Public Offering) is a company's first offering of shares to the general public through a stock exchange. It converts a private company into a public one, creating liquidity for all shareholders and enabling capital raising from a broad investor base.
The IPO process involves: appointing investment banks as "book-running lead managers," preparing a DRHP (Draft Red Herring Prospectus) filed with SEBI, roadshow to institutional investors, price discovery, allotment, and listing. The entire process typically takes 12–18 months from decision to listing.
IPO requirements on BSE/NSE for tech companies: 3 years of audited financials, positive net worth (or profitability in at least one of the last 3 years), and meeting SEBI's ICDR (Issue of Capital and Disclosure Requirements) regulations.
India Context
India's IPO market has become one of the world's most active. BSE SME and NSE Emerge provide listing paths for companies with as little as ₹25 crore post-issue capital. The Main Board requires ₹100 crore post-issue capital. Tech company IPOs (Nykaa, Zomato, Paytm, Delhivery) have proven that Indian consumer internet companies can list at significant scale.
Post the 2021–2022 tech IPO period, Indian public market investors now demand: positive EBITDA trajectory, clear path to profitability, and sustainable unit economics. The "growth at all costs" narrative that justified 2021 IPOs at loss-making companies is no longer accepted by retail Indian investors who lost money on Paytm and Zomato.
Example
A B2B SaaS company reaches ₹200 crore ARR, first profitable year, and decides to IPO. They hire 2 investment banks as BRLMs, file a DRHP with SEBI (₹800 crore IPO at 15x ARR = ₹3,000 crore valuation), complete a 3-week institutional roadshow, and list on NSE. Founders' shares are locked for 12 months post-listing. The IPO provides: ₹800 crore capital + liquidity for existing investors.
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