What Is IPO? Meaning, Types & Key Information
Imagine you have a neighborhood friend who makes the best samosas in town. Currently, she runs a small shop with her own savings. Now, she wants to open 100 shops across India. To do this, she needs a lot of money more than any bank would easily lend. So, she decides to go public She divides her business into small pieces called shares and invites you and thousands of others to become partners by buying those shares.
This first-time invitation to the public is what we call an Initial Public Offering (IPO). In 2026, the Indian IPO market is booming with giant names like Reliance Jio and PhonePe. When you buy a share in an IPO, you aren't just a customer anymore; you are a part-owner of that company. If the company grows and makes a profit, the value of your share goes up, and you grow with it. This guide breaks down exactly what an IPO is, the different flavors it comes in, and the basic info you need to start your journey.
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What is the Meaning of IPO?
In simple words, an IPO is the process where a private company sells its shares to the general public for the very first time.
- Before the IPO: The company is Private It is owned by the founders, their family, or a few big investors.
- After the IPO: The company becomes Public Its shares are listed on a stock exchange (like the NSE or BSE), and anyone with a Demat account can buy or sell them.
The Two Major Platforms: Mainboard vs. SME
In India, not all IPOs are the same size. Depending on how big the company is, it will list on one of two platforms:
1. Mainboard IPO (The Big Players)
These are large, well-established companies (like Tata Motors or LIC).
- Minimum Investment: Usually around ₹14,000 to ₹15,000 for one lot.
- Requirements: The company must have a track record of profits for at least 3 years.
- Liquidity: Very high. You can sell your shares instantly at any time during market hours.
2. SME IPO (Small & Medium Enterprises)
These are smaller, emerging companies. In 2026, these have become very popular but are much riskier.
- Minimum Investment: Much higher, usually ₹2 Lakhs or more.
- Risk: High volatility. You cannot buy or sell single shares; you must trade in lots (e.g., 1,000 shares at a time).
- Liquidity: Low. It can sometimes be hard to find a buyer when you want to sell.
Types of IPO Issues
When a company decides to launch an IPO, they usually choose one of these two methods to set the price:
Feature
Book Building Issue (Most Common)
Fixed Price Issue
Price
A Price Band is given (e.g., ₹95–₹100).
A Fixed Price is told (e.g., ₹100).
How it's decided?
Investors bid within the range.
Company and Bankers decide it earlier.
Final Price
Discovered based on demand.
Known before the IPO opens.
Popularity
Used by almost all 2026 Mainboard IPOs.
Mostly seen in smaller SME IPOs.
The IPO Lifecycle: How it Works in 2026
The journey of an IPO follows a strict T+3 (Transaction + 3 Days) cycle to ensure you get your shares or money back quickly.
- Draft Filing (DRHP): The company submits a Draft plan to SEBI.
- Approval (RHP): SEBI checks everything and gives a Green Signal, the final document is called the Red Herring Prospectus (RHP).
- Bidding Period: The IPO opens for 3 working days for you to apply.
- Allotment: A lottery is held to decide who gets the shares.
- Refund/Credit: If you don't get shares, your money is unblocked. If you do, shares appear in your Demat.
- Listing Day: The shares start trading on the NSE/BSE at 10:00 AM.
Recommended read: Difference between RHP and DHRP explained