Why Do Companies Launch an IPO in India? (2026 Guide)

What Is an IPO?

An Initial Public Offering (IPO) is the process through which a privately held Indian company offers its shares to the public for the first time, converting itself from a private company into a publicly listed company on a recognised stock exchange such as the NSE or BSE, under SEBI's regulatory oversight.

A company's founders and early backers build a business quietly for years before it ever touches the stock market. As that private company grows — adding customers, revenue, and profitability — it eventually reaches a point where its owners and early investors look for a way to raise larger amounts of capital, reward early risk-takers, and build a public track record. The mechanism for doing this in a regulated, transparent way is an Initial Public Offering, or IPO.

An IPO is the first sale of a private company's shares to the public. It converts the company from privately held to publicly listed, allows it to raise equity capital directly from retail and institutional investors, and gives its earliest shareholders — founders, employees holding ESOPs, and venture or angel investors — a formal route to realise the value of their holdings.

Before an IPO, a company is typically held by a small group: its founders, family and friends who invested early, and professional early-stage investors such as angel investors or venture capital firms. India's startup ecosystem has produced several prominent angel investors — for example, Anupam Mittal, founder of the People Group (Shaadi.com, Makaan.com, and Mauj Mobile), has backed a large number of startups over the past two decades, including well-known names such as Ola Cabs, BigBasket, Rapido, and Druva.

India remains one of the world's most active unicorn ecosystems. Depending on the tracker and methodology used, India is generally cited as the third- or fourth-largest home for unicorn startups globally (behind the US and China, and close to the UK), with figures in 2026 ranging from roughly 61 unicorns (Hurun Global Unicorn Index) to over 130 (Tracxn), reflecting differences in how each firm defines and counts unicorn status. The exact number moves as valuations and exits change, but the broader point holds: India has a deep pipeline of privately held companies that are potential future IPO candidates.

Importantly, not every IPO candidate needs to be a billion-dollar unicorn. A private company at a much smaller valuation can also go public, provided it meets the listing requirements laid down by SEBI and the exchange — either as a Mainboard IPO or, for smaller companies, an SME IPO on the NSE Emerge or BSE SME platforms.

The IPO Process in India — From DRHP to Listing

Unlike in the US, where the SEC oversees public offerings, IPOs in India are regulated by SEBI (the Securities and Exchange Board of India) under the SEBI (

Issue of Capital and Disclosure Requirements) Regulations, 2018. The process broadly follows these steps:

• Appointment of Book Running Lead Managers (BRLMs): The company appoints merchant bankers to structure and manage the offering.

• Filing the DRHP: The company files a Draft Red Herring Prospectus with SEBI, disclosing its business model, financials, risk factors, and use of proceeds.

• SEBI review and public comment: SEBI reviews the DRHP and opens it for public comments, typically for 21 days, before issuing its observations.

• Filing the RHP: After incorporating SEBI's observations, the company files the Red Herring Prospectus, which adds the price band and offer dates.

• Book-building and bidding: Investors bid within the price band via ASBA (Application Supported by Blocked Amount) through their bank accounts.

• Allotment and listing: Shares are allotted, and the stock lists on the NSE and/or BSE, at which point public trading begins.

Mainboard IPO vs SME IPO

5 Reasons Companies Go Public

1. Building a Public Track Record and Trust

Going public exposes a company to public scrutiny, but that scrutiny is also what builds trust. A listed company must meet SEBI's continuous disclosure norms, which signals financial discipline to customers, partners, and future investors. This visibility often makes mergers, acquisitions, and partnerships easier to execute.

2. Raising Growth Capital Without Taking on Debt

An IPO lets a company raise substantial capital without borrowing. Bank loans come with interest obligations and collateral requirements; equity capital raised via an IPO carries no repayment obligation, giving the company more flexibility to fund expansion, pay down existing debt, or invest in R&D.

3. Price Transparency and Market Discipline

Once listed, a company's shares are valued continuously by the market, and its quarterly results are publicly disclosed. This transparency lets investors compare the company against its peers and holds management accountable to the market on an ongoing basis.

4. Fair Value Discovery

A listed company's worth is no longer just a private estimate — it is whatever public investors are willing to pay for its shares through the book-building process. This market-driven value discovery is useful for the company's own strategic decisions, including future fundraising and M&A.

5. Enhanced Corporate Credibility

Completing a SEBI-regulated IPO process and meeting its disclosure standards adds credibility that a private company generally cannot replicate on its own. This can help with everything from attracting institutional investors to recruiting senior talent with listed-company ESOP structures.

Advantages and Disadvantages of an IPO

Risks Investors Should Know Before Applying

IMPORTANT — READ BEFORE INVESTING

SEBI's review of a DRHP/RHP confirms that a company has met its disclosure obligations — it is not an endorsement of the company's business prospects or share price. Grey Market Premium (GMP) figures circulating before listing are unofficial and not a reliable predictor of listing-day performance. Always read the "Risk Factors" section of the RHP before applying to any IPO.

Conclusion

An IPO remains one of the most powerful tools a growing Indian company has to raise capital, build credibility, and reward the investors who backed it early. Under SEBI's disclosure-driven framework, going public trades away some privacy and short-term flexibility for lasting benefits: access to low-cost equity capital, a public track record that eases future fundraising and M&A, and liquidity for founders, employees, and early investors.

For investors, the same coin has another side — an IPO is an opportunity, not a guarantee. Reading the RHP's risk factors, understanding the difference between a Mainboard and an SME IPO, and remembering that SEBI's clearance reflects disclosure compliance rather than investment merit are all essential steps before applying. Approached with that awareness, IPOs remain a valuable entry point into some of India's fastest-growing companies — for founders and investors alike.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is only for educational purposes. Always discuss with your SEBI-registered financial advisor for investment-related decisions.

Follow this WhatsApp Channel for the latest updates directly on WhatsApp.