What an IPO actually is

An IPO is a company's first sale of shares to the public. That much everyone knows. The part that decides whether you are funding a business or buying someone out is in the next paragraph of the same document, and far fewer people read it.

Two different transactions wearing one name

SEBI's own description of an IPO lists three possibilities: a fresh issue of shares, an offer for sale of existing shares, or a combination of both.

They are not variations on a theme. They are opposite transactions.

In a fresh issue, the company creates new shares and sells them. The money goes to the company. There are more shares afterwards than before, so existing owners hold a smaller fraction of a company that now has more cash.

In an offer for sale, existing shareholders sell shares they already own. The money goes to them. The company receives nothing and the share count does not change — ownership simply moves from a promoter or an early investor to the public.

Most Indian IPOs are a combination, and the cover page of the offer document gives both figures. A ₹3,000 crore issue made up of ₹500 crore fresh and ₹2,500 crore offer for sale is mostly an exit. That is not automatically wrong — early investors are entitled to sell, and somebody has to — but it answers a question you should ask before the valuation question: what is this money for?

Chapter 5 is about the objects of the issue, which is where a fresh issue has to say what it will do with what it raises. An offer for sale has no objects to disclose, because the company is not receiving anything.

What "going public" changes for the company

Three things, all of them permanent.

The shares become tradable on an exchange, so an owner can sell without finding a buyer privately. That liquidity is most of the point.

The company acquires continuous disclosure obligations — quarterly results, shareholding patterns, material events — which is why a listed company is knowable in a way a private one is not.

And it acquires a price that moves every day, set by whoever traded most recently. Chapter 2 of the markets subject covers what that price is and is not.

What SEBI does, and what it does not

This is the most common misreading in the whole subject.

The process runs as SEBI describes it: the issuer files an offer document with SEBI, the exchanges and the Registrar of Companies, and then the issuer "receives observations from regulatory authorities". After complying with the observations, the issue can open.

Observations, not approval. SEBI checks that the disclosure is adequate — that the risks, the finances, the litigation and the uses of money are set out so a reader can judge them. It does not certify that the company is sound, that the business will work, or that the shares are worth the price.

On price it is explicit. From SEBI's own FAQ, read on 30 September 2026:

Indian primary market ushered in an era of free pricing in 1992. SEBI does not play any role in price fixation.

The issuer decides, with its merchant banker, on the basis of demand. Chapter 9 is about the disclosure that has to accompany that decision, which is a genuinely useful document and not the same thing as a regulator's opinion.

So "SEBI-approved IPO" is not a category that exists. Every IPO you can apply for has cleared the same disclosure process, including the ones that will lose you money.

Why a company does this

Worth being plain about the incentives, because they are not aligned with yours by default.

A company sells shares when it wants money it does not have to repay, or when its owners want to sell some of theirs. An IPO is also the one moment when the sellers control the timing, the disclosure and the price band, and they will pick a moment when the business looks good and buyers are willing.

That asymmetry is structural. It does not make IPOs a bad idea; it makes reading the document the whole job. The rest of this subject is how.

The point

An IPO is a fresh issue, an offer for sale, or both — and only the fresh issue part gives the company money. SEBI reviews the disclosure and issues observations; it does not approve the company or the price. The sellers chose the timing.