You’ve probably come across news headlines like “Company X raises ₹200 crore through IPO” or seen people rush to invest in the latest stock market listing. But what exactly does it mean when a company “goes public”? And why is there so much attention around IPOs in India?
Whether you’re just beginning to explore the world of business and finance, or you’re interested in how companies raise money and grow, this guide will help you understand the journey from a simple idea to a company listed on the stock exchange. No jargon. No finance degree required.
We’ll walk you through each stage in the life of a business—from its early funding days to launching an Initial Public Offering (IPO)—using relatable examples. If you’ve ever been curious about how companies go public in India, this guide is the perfect place to start.
The Starting Point — When an Idea Meets Seed Funding
Every company begins with an idea. Imagine someone has a unique vision—to launch a brand of organic cotton t-shirts that showcase traditional Indian prints. There’s a plan, passion, and potential—but not enough money to start production or open a store.
So, how does this idea get off the ground?
The founder pools personal savings and approaches two close acquaintances for support. These supporters invest ₹5 crore to help launch the business.
These early backers are known as angel investors, and the money raised is called seed funding or the friends and family round. The business is valued at the amount invested—₹5 crore—and this value is divided into shares with a face value (say, ₹10 per share).
Angel investors are not lenders. They don’t expect repayments or EMIs. Instead, they receive equity—a small ownership in the company. If the business grows, the value of their shares grows too.
Gaining Momentum — Enter the Venture Capitalist
After two years of steady progress, the business now has a retail store and a manufacturing unit.
Sales are promising, and expansion into new cities is the next step.
To open more stores, ₹7 crore is needed. This is where venture capital funding in India comes in.
A venture capitalist (VC) is a professional investor who provides funds to businesses that have proven potential but need more capital to grow.
In exchange for their investment, the VC receives shares (equity) in the company. As a result, the original owner and earlier investors now hold a smaller portion of the company—a process called equity dilution.
However, because the company’s valuation has increased, their shareholdings are worth more than before.
Expanding Further — Blending Profits, Loans, and Investment
Three years later, the business has developed into a well-recognized brand and is ready to expand nationally. This level of growth requires larger investments—for setting up new locations, increasing staff, and scaling logistics.
The total capital needed is ₹40 crore. Here’s how it’s raised:
- ₹15 crore from the company’s own profits (known as internal accruals)
- ₹10 crore through another VC investment
- ₹15 crore borrowed from a bank (a business loan)
This type of business funding mix in India—combining internal funds, equity, and debt—is quite common.
Using profits for expansion means no outside control and no interest payments. However, taking a loan adds repayment obligations and reduces future profits.
Maturity Stage — When Private Equity Joins
Now a household brand, the business plans to enter new markets such as cosmetics and fashion accessories. For this, ₹60 crore is needed.
At this stage, the business turns to private equity (PE)—which typically invests larger amounts in well-established companies. PE firms often take board seats to guide growth and ensure returns on their investment.
The company gives up a larger stake, but gains more capital and access to experienced business advisors.
Going Public — The IPO Stage
After 8 to 10 years of building, expanding, and raising funds privately, the company is ready for international expansion. This requires a much larger investment—₹200 crore.
The business decides to raise this through an Initial Public Offering (IPO)—allowing the general public to become shareholders.
An IPO is when a private company offers its shares to the public for the first time, usually via the stock exchanges (like NSE or BSE).
Why Do Indian Companies Go Public?
- To raise large-scale capital without adding more debt
- To repay earlier loans and strengthen profitability
- To allow early investors (angels, VCs, PEs) to exit
- To offer shares to employees through ESOPs
- To build public trust and brand visibility
The Step-by-Step IPO Process in India
- Appoint a Merchant Banker: These are professionals who handle the entire IPO—from legal filings to pricing and promotion.
- Submit an Application to SEBI: A detailed document called a registration statement is filed with India’s stock market regulator.
- Prepare the DRHP (Draft Red Herring Prospectus): This includes financial data, risk factors, business plans, and how the raised funds will be used.
- Promote the IPO (Roadshows): Much like a product launch, roadshows and advertisements help generate interest among investors.
- Fix the Price Band: A range is set for bidding—for example, ₹100 to ₹120 per share.
- Book Building Process: Investors place bids within the range. The price with the most demand becomes the cut-off price.
- Listing Day: The company’s shares are officially listed on the stock exchange and begin trading.
Life After an IPO
Once listed, the company’s shares are available to anyone in the open market. Shareholders may:
- Sell immediately if the stock is listed at a higher price
- Hold long-term if they believe in the business’s potential
- Track performance as the share price fluctuates with business results and market trends
Conclusion
The journey from a simple business idea to a public listing is long—but it’s also structured and achievable. Learning about how companies go public in India provides valuable insight into how businesses grow, scale, and create wealth—not just for founders, but for early investors and shareholders too.
Whether you’re interested in investing or simply trying to understand the Indian business landscape better, knowing how funding rounds work and how IPOs unfold equips you with the knowledge to make smarter financial decisions.
If you’re working on a business idea or simply observing from the sidelines, this understanding will help you recognize potential opportunities—either to build something or invest wisely in those who are.
