Explained: New to IPOs? A beginner's guide to the primary market on Dalal Street

An initial public offering (IPO) marks a significant milestone for a company as it allows the company's transition from private to public ownership.

With IPOs worth Rs 30,518 crore launching this week, it is important to understand the key basics of the public offering in the primary market.

Here's the beginner's guide to the primary market on the Dalal Street:

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What is an IPO?

An initial public offering (IPO) is the process through which a private company becomes public by selling a portion of its shares for the first time to the public in the primary market.

The selling of shares allows companies to raise capital for expansion, pay off debt, finance new projects or for general corporate purposes.

Primary market, per se, is where the newly created securities, such as bonds and stocks, are sold directly to investors for the first time, to raise capital. It is sometimes also referred to as the new issue market.

Why do companies launch IPOs?

Companies launch IPOs to support their financial requirements, such as to:

1) Raise capital for business expansion, modernisation, or paying off debt.

2) Unlock value for existing shareholders, including founders and investors.

3) Gain visibility through listing on a stock exchange, which likely increases a company's reputation and credibility.

4) Diversify ownership by issuing shares to the public, which allows companies to reduce dependence on a few large investors.

How does an IPO work?

Before the launch of the IPO, the company remains private, having a small number of shareholders, like founders, family, friends (early investors), and venture capitalists or angel investors (professional investors).

An IPO allows a private company to convert into a public company and to raise large capital by selling off its shares for the first time to the public in the primary market to support the expansion plan, and/or for general corporate purposes.

What are the types of investors in an IPO?

The IPO has basically three types of investors during an IPO subscription period:

1) QIB (Qualified Institutional Buyer)

The QIB portion includes mutual funds, insurance companies, pension funds, and foreign institutional investors.

QIBs typically have a higher minimum investment than other categories and often receive a significant portion of the IPO shares.

2) NII (Non-Institutional Investor)

The NII category includes individuals investing more than Rs 2 lakhs in the IPO. However, it may include corporate bodies, trusts, and other entities.

3) RII (Retail Individual Investor)

The RII quota includes the general public who invest small amounts in the IPO. The retail investors apply for shares worth up to Rs 2 lakhs and typically have a smaller lot size than QIBs and NIIs.

How are IPOs priced?

An IPO is priced by investment banks based on certain factors such as the company's financial performance, growth prospects, investor demand and industry trends.

Generally, IPOs are priced in two ways:

1) Fixed price method: Through this method, the company sets a fixed price for shares.

2) Book building method: In this method, a price range, known as a price band, is established based on investor demand.

List of IPOs to watch this week:

1) Tata Capital IPO:

The Tata Capital's Rs 15,511.87 crore IPO is set to open on October 6, 2025, and will close on October 8, 2025. The IPO is a book-built issue comprising a fresh issue of Rs 6,846 crore and an offer-for-sale (OFS) of Rs 8,665.87 crore.

2) LG Electronics India IPO:

The LG Electronics India IPO is set to hit the primary market on October 7, 2025, for public bidding and will close on October 9, 2025. The Rs 11,607 crore IPO comprises an OFS of 10.18 crore shares.

3) WeWork India IPO:

WeWork India launched its IPO this week on October 3, 2025, and will close on October 7, 2025. The issue is worth Rs 3,000 crore and is entirely an OFS of 4.63 crore shares.

4) Anantam Highways InvIT IPO:

Anantam Highways InvIT's IPO, with an issue size of Rs 400 crore, is an entirely fresh issue of shares, with no OFS component. The issue will open for public bidding on October 7 and will close on October 9, 2025.