What Is An IPO? How Can You Make Money With An IPO?

From the last couple of years, we have had a few companies who went on to become show-stoppers on their listing day. And we are talking strictly about IPO (Initial Public Offering) here.

Many people still can not forget the IPO of Ujjivan Small Finance Bank’s initial public offering that was subscribed 166 times on the last day of the share sale. A few months back we had an IPO from IRCTC (Indian Railway Catering And Tourism Corporation Ltd.) that was oversubscribed 112 times. 

2010’s: A bumper decade for IPO

In the last ten years, many companies have entered the Indian capital markets, from Jubilant FoodWorks and Coal India in 2010 to IRCTC and Ujjivan Small Finance Bank in 2019.

The IPOs (initial public offerings) of these companies drew massive investor interest, with subscriptions ranging from 5 to 243 times.

According to stock exchange records, at least eight businesses have received more than 100 subscriptions since July 2016, including Quess Corp, Avenue Supermarts, Dixon Technologies, Capacit’e Infraprojects, MAS Financial Services, Astron Paper & Board Mills, IRCTC, and Ujjivan Small Finance Bank.

What is an IPO?

On many occasions, you might have heard the phrase “a company went public” either online or through a newspaper advertisement.

What does it mean when we say a company went public? To put it simply, ‘going public’ is the process of a private company raising funds for the first time by issuing shares.

The number of stockholders in a private company is restricted by law. It does, however, have the option of obtaining capital from the public by converting to a public limited company and making people shares in the company. 

When a private company contacts investors to ask for money in exchange for a part of the company, it makes its initial public offering, known as an IPO.

Why do companies go public?

A company can use the IPO process to raise money to fund operations and new projects, accelerate growth, and pay down debt. 

An IPO also allows businesses to repay its investors, who have the option of selling their private shares in the IPO. 

A private company with huge growth potential will explore going public, mostly for the reasons stated earlier. 

Going public is the logical and expected next move for any successful startup.

How can I make money by an IPO?

Year after year, new companies are listed for trading on stock exchanges such as the NSE and BSE.

One of the ways to quickly gain money in the stock market is through an initial public offering (IPO). 

We see many people putting money into an IPO and then sell it on the day the company goes public, making a lot of money in a short period. 

Every year, the market sees a huge number of initial public offerings (IPOs). This provides a great opportunity for IPO investors to profit.

How can I apply for an IPO?

You may have heard on many occasions like “an IPO from XYZ Company is open and you can apply for it now”.

For most cases, you have a three-day window to apply for an IPO. If you have a DEMAT account, you can apply for an IPO with any major bank, including ICICI, HDFC, SBI, and others.

The application can also be completed online. You can purchase an IPO using your net-banking account. 

Is it worth it to invest in initial public offerings (IPOs)?

This question is quite tricky to answer here. Yes. Many people have benefited from investing in an IPO.

The catch is- You should not invest in just any IPO. Choosing the right IPO makes all the difference in how much money you can make. 

A wise IPO investment strategy

If an IPO is oversubscribed, the chances of you benefitting from the listing gain on the day of listing improve dramatically. 

If an IPO subscription is poor, it indicates that the investor’s interest is dull in that specific IPO. And if an IPO is poorly subscribed, this equates to a loss or a very small profit on listing day. 

So the IPO subscription status is a good parameter to gauge if you will be able to make money by an IPO on the first day of trading.

Smart tips for IPO investment

A quick recap- The investment window for an initial public offering (IPO) is three days.

Never invest on the first or second day of an IPO. Invest on the third day. This will allow you to gain a better understanding of your subscription status

Look for the subscription it has generated over the past 2-days. Invest only if the subscription is more than 4-times. 

If you just intend to invest for listing gains, sell it.

Keep your position if you have faith in the Company as a long-term investment.


Investing in initial public offerings (IPOs) is an approach to find new investment opportunities and make some money by betting on listing profits. 

It serves as both a trading and an investment strategy.

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