The IPO Full Form in English is Initial Public Offering (IPO) is announced by a company that is not yet listed on any financial markets. By conducting an IPO and listing on these markets, the company makes its shares available for trading by the general public. The “P” in IPO stands for “public,” highlighting that this allocation is intended for the public. Essentially, an IPO involves offering securities to the public through their listing on financial markets.

Types of IPOs
Many investors only know the basic meaning of IPOs, yet they often invest substantial amounts of their hard-earned money without fully understanding them, leading to potential losses and blame on the market. It’s crucial to grasp the fundamentals of IPOs before investing. Here’s a breakdown of the different types of IPOs:
- Fixed Price Offering: In a fixed price IPO, the company sets a specific price for its shares beforehand. Retail investors or anyone who finds the price appealing can purchase shares at this set price.
- Book Building Offering: Unlike a fixed price IPO, a book building IPO involves setting a price band. This band includes a floor price (minimum) and a cap price (maximum). The final price within this range is determined based on demand, influenced by underwriters and other key stakeholders through various surveys and assessments. Not all investors receive shares; only selected ones are allocated stock based on their bids.

Why Companies Launch IPOs
Companies pursue IPOs primarily to raise capital for business expansion. While IPOs are public offerings, they often serve the company’s interests more than those of individual investors. Additionally, IPOs provide liquidity for initial investors, allowing them to sell their shares and recover their investments by attracting new buyers.
Types of Investors in IPOs
Investors apply for IPOs for various reasons, including potential listing gains or long-term investment benefits. Here are the main types of IPO investors:
Institutional Investors:
This category includes mutual funds, proprietary trading desks, and banks. These major players have significant financial resources that can influence market movements and are heavily involved in the IPO process.
Non-Institutional Investors:
Also known as High Net Worth Individuals (HNIs) and corporate entities, these investors are allocated around 15% of the shares during an IPO.
Retail Investors:
This group consists of individual investors with smaller amounts of capital. Retail investors are typically allocated about 35% of the shares in an IPO.
Understanding these IPO types and investor categories can help you make more informed investment decisions.

Key Differences Between IPO and FPO
Understanding the distinctions between an Initial Public Offering (IPO) and a Follow-on Public Offering (FPO) can help clarify their roles and implications:
- Objective
IPO: The main goal of an IPO is to raise capital by selling shares to the public. This helps the company expand its business and fund growth initiatives.
FPO: After an IPO, if a company needs additional funds, it may issue an FPO. The primary purpose of an FPO is to increase the company’s equity base. Additionally, it can be used to reduce the shareholding of the company’s promoters.
- Performance
IPO: Investors in an IPO receive a preliminary document known as the red herring prospectus. This document provides limited information about the company, and investors often rely on management’s track record, market interest, and other indicators to make their investment decisions.
FPO: By the time a company issues an FPO, investors have access to comprehensive information, including the company’s performance post-IPO and market interest. This allows investors to evaluate whether the stock is a worthwhile investment based on the company’s established track record.
- Profitability
IPO: Investing in an IPO can potentially yield higher returns, as it involves investing during the company’s early growth phase. This early entry often presents greater opportunities for profit.
FPO: FPOs generally pose less risk because investors have access to more detailed information and can assess the company’s past performance. However, since the company is typically in a stabilization phase, the profitability of FPOs is usually lower compared to IPOs.
Understanding these differences can help investors make more informed decisions based on their investment goals and risk tolerance.

Fixed Price Offering
A fixed-price IPO refers to the initial offering of shares at a predetermined price set by the company. This price is disclosed to investors, who then have the opportunity to purchase shares at this fixed amount.
Book Building Offering
In a book building IPO, the company provides investors with a price range for the shares, typically within a 20% band. Investors submit bids specifying the number of shares they wish to buy and the price they are willing to pay. The final price is determined after assessing the bids received.
Is the IPO Full Form in Banking and Market the Same?
Yes, the full form of IPO is the same in both contexts—it stands for Initial Public Offering. Typically, you apply for an IPO through a banker, and after the IPO is listed, the shares are traded on the stock market.
What is the Primary Market and the Secondary Market?
The primary market refers to the phase when an IPO is open for subscription and the shares are initially offered to the public. Once the shares are listed and begin trading, they move to the secondary market.
Who is Eligible to Apply for an IPO?
Any adult who is legally capable of entering into a contract can apply for an IPO. A demat account is required for investing in IPOs, as allotments are done in dematerialized form.
Do I Also Require a Trading Account for Investing in IPOs?
Technically, a trading account is not required to apply for an IPO; a demat account is sufficient. However, a trading account is necessary if you want to sell shares after they are listed. Additionally, applying online through a trading account can simplify the process.
What is the Difference Between a Fixed Price and a Book Built IPO?
Fixed Price IPO: The issue price is predetermined and is typically set at the par value plus a premium.
Book Built IPO: The price is determined through bidding within a predefined range. The final price is set based on where demand is highest.
As an Investor, How Do I Know Which Price to Apply At?
You should bid within the price range specified for a book built IPO. Bids below this range will be rejected. An easier option is to bid at the cut-off price, which means you accept the final price discovered.
Who Decides the Size of the Issue and the Book Building Price Range?
The company determines the size of the issue based on its funding needs. The Book Running Lead Manager (BRLM) advises on the ideal price range based on company valuations and market appetite.
What Does the BRLM Do and Is It the Same as the Registrar?
The BRLM (Book Running Lead Manager) manages the IPO process, including setting the price, marketing, and handling formalities with exchanges and SEBI. The registrar, on the other hand, maintains shareholder records, allocates shares, and manages corporate actions. Examples of registrars include Karvy and In-Time.
For How Many Days is the IPO Kept Open?
An IPO is typically open for 3-4 days to allow investors to apply. All valid applications must be submitted before the market closes on the final day.
What is the Process After the IPO Closes?
After the IPO closes, the basis of allotment is finalized, shares are allotted within 10-12 days, and the company is listed on stock exchanges. The “Ringing the Bell” ceremony is often held to mark the company’s readiness for trading.
On What Basis Are Shares Allotted?
Retail Investors: Allocations aim to provide a minimum allotment to as many investors as possible.
HNI (High Net Worth Individuals): Allotments are made proportionally based on oversubscription.
Institutional Investors: Shares are allotted on a discretionary basis.
Will My Funds Be Locked In Once I Apply for Shares?
ASBA (Applications Supported by Blocked Amounts) allows funds to be blocked in your bank account while still earning interest. On the allotment date, your account is debited only for the allotted shares, and the block is removed if no shares are allotted.
How Do Shares List at a Premium or Discount to the Issue Price?
The listing price is influenced by various market factors, including company valuations, comparisons with peers, profitability, post-listing demand, and the quality of anchor investors.
Historical Returns of IPOs
It’s important to remember that a stock’s price may not always remain at or above its initial offering price once it begins trading on a public stock exchange. Investors typically look at IPOs as an opportunity to enter a company early in its lifecycle and potentially benefit from its future growth.
Historical data from 2014 onwards shows that annual returns on IPOs have fluctuated significantly from year to year.
Source: Bloomberg Finance LP, S&P Global (as of 02/20/2024)
Note: 2023 IPO performance data does not include IPOs priced after 02/20/2023.
While investing in newly public companies can offer substantial rewards, it also comes with risks, and profits are not guaranteed. If you’re new to IPOs, make sure to review all available educational materials on the topic before making any investment decisions.
Frequently Asked Questions
What does IPO Full Form?
The IPO Full Form in English is Initial Public Offering. It refers to the process through which a private company offers its shares to the public for the first time, allowing it to raise capital and become publicly traded.
Why do companies go public with an IPO?
Companies go public through an IPO to raise capital for expansion, pay off debt, or invest in new projects. Going public also provides liquidity for existing shareholders and can enhance the company’s visibility and credibility.
What are the main benefits of investing in an IPO?
Investing in an IPO can offer significant potential returns if the company’s stock performs well after going public. It also provides an opportunity to be an early investor in a potentially high-growth company.
What risks are associated with investing in an IPO?
IPO investments carry risks such as high volatility and uncertainty about the company’s future performance. Newly listed companies may face challenges in maintaining growth, and there can be limited historical data to evaluate their financial health.
How can I participate in an IPO?
To participate in an IPO, you need to have a DEMAT account with a SEBI-registered stockbroker. You can apply for shares either through an online platform provided by your broker or by filling out an application form during the IPO subscription period.
conclusion
The IPO Full Form in English is Initial Public Offering, is just the beginning of grasping how this significant financial event impacts both companies and investors. An IPO represents a company’s first foray into public trading, providing an opportunity for capital raising, growth, and increased visibility. For investors, it offers a chance to invest early in a company’s growth journey, but it also involves risks and uncertainties.
From distinguishing IPOs from Follow-on Public Offerings (FPOs) to recognizing the eligibility requirements and associated risks, a well-rounded understanding of IPOs is essential for making informed investment decisions. By thoroughly reviewing educational materials and market data, potential investors can better navigate the complexities of IPO investments and make strategic choices aligned with their financial goals.