What It Means
An IPO (Initial Public Offering) is the first time a private company sells its shares to the public on a stock exchange, raising capital and letting its shares trade freely afterward.
How It Works
A company files a prospectus with SEBI disclosing its financials, business, and how it plans to use the money raised, then sets a price band for the offering. Retail investors apply through their broker or UPI-linked application (ASBA) during the bidding window, and shares are allotted via a lottery-style process if the IPO is oversubscribed — applying for more shares doesn't guarantee a bigger allotment. Once listed, the stock starts trading on the exchange, and its first-day price move (the "listing gain" or "listing loss") gets a lot of attention but says little about how the company performs over the following years.
Warning
Applying for an IPO purely because it's "hot" or heavily oversubscribed, without reading the prospectus, is one of the most common ways retail investors end up holding a stock they didn't actually understand.