Securities Markets – Primary Market (IPO) Basics
The stock market involves two distinct stages: The Primary Market (where shares are born) and the Secondary Market (where they live and trade). This chapter focuses on the birth: The IPO.
Primary vs Secondary Market
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What is an IPO (Initial Public Offering)?
An IPO is when a private company decides to sell shares to the general public for the first time. It transforms from a "Private Ltd" to a "Public Ltd" company.
Why go Public?
- To raise capital for expansion.
- To pay off debts.
- To let early investors (Founders, VCs) exit with profit.
Real World Example
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The IPO Process (Step-by-Step)
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How to Apply? (ASBA Mechanism)
Note
Important: You don't send money to the company immediately. Under ASBA (Application Supported by Blocked Amount), the money is just "blocked" in your bank account. It is debited ONLY if you get an allotment. If not, it is unblocked.
- Log in to your Broker App (Zerodha, Groww).
- Enter Bid (Price and Lots).
- Approve UPI Mandate.
- Wait for Allotment day.
Summary
- Primary Market: The gateway for companies to raise public money.
- IPO: The event of "Going Public".
- Listing Gains: The profit made on Day 1 if listing price > issue price.
- Risk: Not all IPOs list at a profit. Some list at a discount (Loss).
Quiz Time! 🎯
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Next Chapter: Secondary Market & Stock Exchanges! 💹