Most people know that famous companies like Reliance, TCS, Infosys, and HDFC Bank are listed on the stock market. But very few understand why a company decides to list itself on the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE), and what actually happens behind the scenes before an IPO opens to the public.
This guide explains the entire journey—from how companies raise money to how shares finally get listed on the stock exchange.
1. How Many Companies Are Listed in India?
As of now:
- BSE has 5,000+ listed companies
- NSE has 1,600+ listed companies
BSE (established in 1875, Mumbai) is the oldest stock exchange in Asia, and today it is one of the world’s largest by number of listings.
But companies don’t get listed overnight.
They go through a long and structured process called the IPO process—Initial Public Offering.
2. Why Do Companies Need Money?
Every company needs funds for growth. Typical reasons include:
- Launching new products
- Expanding manufacturing capacity
- Entering new markets
- Purchasing technology or machinery
- Reducing debt
In the early stages, companies raise money from:
- Founders
- Friends and family
- Angel investors
- High-net-worth individuals (HNIs)
But as the business grows, this money is not enough.
The company needs large-scale funding.
This is when it considers going public.
3. What Is an IPO (Initial Public Offering)?
An IPO is when a private company offers its shares to the general public for the first time.
After the IPO, anyone can buy shares through the stock market.
Companies choose IPOs because:
- They need large amounts of capital
- They want to expand without taking debt
- They want to improve brand visibility
- They want existing investors to exit or partially sell
Once listed, a company becomes a public company, regulated by SEBI.
4. Steps in the IPO Process
Let’s break down the full journey step-by-step.
Step 1: Hiring Lead Managers (Investment Bankers)
The company appoints investment banks such as:
- ICICI Securities
- Kotak Investment Banking
- JM Financial
Their role is to guide the company through the IPO process.
Step 2: Filing the DRHP (Draft Red Herring Prospectus)
The DRHP contains:
- Company history
- Financial performance
- Risks
- Management details
- Industry analysis
- Business model
SEBI scrutinizes this document thoroughly.
This is the investor’s most important document.
Step 3: Roadshows & Marketing
To build investor awareness, the company and bankers conduct:
- Roadshows
- Webinars
- Investor meetings
The goal:
Explain why the company is worth investing in.
Step 4: Price Band Announcement
For example:
₹500 – ₹520 per share
Investors can bid within this range.
This system is called book building, where price is discovered based on demand.
Step 5: Bidding by Investors
Different categories bid:
- Retail investors
- HNIs
- Qualified institutional buyers (QIBs)
- Mutual funds
- Foreign investors
Demand determines the final IPO price.
Step 6: Allotment of Shares
If demand is high, not everyone gets shares.
If demand is low, full allotment is given.
Step 7: Listing on the Exchange
Finally, shares get listed on:
- BSE
- NSE
The listing price depends completely on market demand & supply.
A stock may list at:
Premium (above issue price)
Discount (below issue price)From this moment onwards, the stock starts trading in the secondary market, where buying and selling happens every second.
5. Why Do Companies Choose to List?
Here are the biggest advantages:
✔ Access to Large Capital
Funds can be used for long-term expansion.
✔ Brand Recognition
Listed companies get more trust and visibility.
✔ Liquidity for Existing Investors
Founders and early investors can sell shares.
✔ Better Governance
Listed companies follow strict SEBI rules, improving credibility.
6. After Listing: What Happens Next?
- The stock price continuously moves based on demand and supply
- The company must follow strict regulations
- Quarterly results, disclosures, and transparency become mandatory
This creates a healthy ecosystem for long-term investors.
Final Takeaways
Here’s what you can remember:
- IPO is the first time a company sells shares to the public
- DRHP is the main document to study before investing
- Price is discovered through book building
- Listing price depends on market demand
- After listing, shares trade in the secondary market
Understanding the IPO process helps you invest wisely and evaluate whether a company is genuinely worth your money.
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