Lesson 06 — IPO Basics (Primary vs Secondary Market)
Week 01 · Lesson 6 of 7 · Week 01 — Market Basics (India)
IPO (Initial Public Offer) is when a company offers its shares to the public for the first time — it's part of the primary market. "IPO = company pehli baar...
What is an IPO?
IPO (Initial Public Offer) is when a company offers its shares to the public for the first time — it's part of the primary market.
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"IPO = company pehli baar public se paisa raise karti hai."
Primary vs Secondary market
| Aspect | Primary market (IPO) | Secondary market (Exchange) |
|---|---|---|
| Money goes to | The company | Another investor |
| Price set by | Company + investment bankers | Supply & demand |
| Frequency | Once (per offering) | Every trading day |
| Example | Zomato IPO (2021) | Buying TCS on NSE today |
Real-world example: life of an IPO
When Zomato listed in July 2021:
- IPO Period: Company offered shares at ₹72–76/share
- Money flow: ₹9,375 Cr raised, went directly to Zomato's balance sheet
- Day 1 listing: Opened at ₹116 — 53% premium (secondary market begins)
- 6 months later: Dropped to ₹80 — IPO hype faded
- Today: Trading around ₹230+ as the business proved itself
What to look for in an IPO (as a beginner)
| Factor | What to check |
|---|---|
| Price vs fundamentals | Is the IPO price reasonable based on earnings/revenue? |
| Subscription ratio | Very high subscription = hype — doesn't guarantee returns |
| Promoter track record | Have they built profitable businesses before? |
| Use of proceeds | Growth capex = good; repaying old debt only = caution |
| Post-listing pattern | Most IPOs dip 10–30% within 6 months — patience helps |
Beginner advice
Skip the IPO rush. Buy established companies once they stabilize on the secondary market. IPO hype ≠ investment opportunity.
Key takeaway
IPOs are where companies raise capital; the secondary market is where investors trade. As a beginner, let the hype settle — buy quality businesses at fair prices on the exchange rather than chasing listing-day gains.