Learn how companies go public, what IPOs are, and how stock trading works — simplified for beginners.
"Want to understand how companies raise money, what IPOs are, and how trading actually works? This blog will take you from zero to stock market savvy in just one read."
🏢 From Promoter to Public: The Journey Begins
Every company starts as a dream — and behind that dream is a promoter, the founder. When the company is first set up, it is usually a private limited company. At this stage, the promoter holds full ownership, and the shares have a nominal value called the face value (e.g., ₹10).
💰 How Does a Promoter Raise Money?
To grow the company, the promoter needs capital. There are two major options:
- Debt (Loan) – Borrow money from banks or financial institutions. Needs to be repaid with interest, regardless of profit or loss.
- Equity (Ownership Sharing) – Sell part of the company via shares to investors. The promoter gives up some control, but no repayment obligation exists.
🔄 From Private to Public: Becoming a Limited Company
Initially, the promoter can raise funds privately from up to 200 people. But if they want larger capital, they must go public by offering shares to the general public via an IPO (Initial Public Offering).
🚀 What is an IPO?
An IPO is the first time a company offers its shares to the public through the primary market. Here's how it works:
🧩 The IPO Process (Simplified):
- Company appoints Merchant Bankers.
- They prepare a Draft Red Herring Prospectus (DRHP).
- The DRHP is presented to big investors like:
- DII (Domestic Institutional Investors)
- FII (Foreign Institutional Investors)
- FDI (Foreign Direct Investment)
- After feedback, a price band is fixed (e.g., ₹150–₹170).
- Final Red Herring Prospectus (RHP) is submitted to SEBI.
- If approved, IPO date is announced.
- Investors apply via ASBA (Application Supported by Blocked Amount) — no upfront payment, just a block on your bank funds.
🔄 Allotment and Listing
Shares are allotted via a lottery system to retail investors. Once listed, the stock trades on the secondary market at a listing price, which can vary from the IPO price.
🔁 Secondary Market: Where the Real Action Happens
After IPO, shares are traded investor to investor. You can’t buy directly from someone — instead, you need:
- Demat Account (with CDSL/NSDL)
- Trading Account (with a broker like Zerodha, Angel, Groww, etc.)
Your broker connects you to:
- Clearing Corporations (ICCL/NSCCL) which settle the trade.
- Exchanges like NSE (largest) and BSE (oldest).
🕒 Stock Market Timings (India)
| Session | Time | What Happens |
|---|---|---|
| Pre-Market | 9:00–9:15 AM | Order collection & price discovery |
| Market Hours | 9:15 AM–3:30 PM | Live trading |
| Post-Market Auction | 3:30–4:00 PM | Intraday square-off by brokers |
| After Market Order (AMO) | 4:00 PM–Next Day 9:00 AM | Next-day trade setup |
⏫ Gap-up/Gap-down openings usually happen due to AMO orders + overnight news.
📊 What are Circuits and Circuit Breakers?
To control volatility:
- Upper Circuit / Lower Circuit: Limits for individual stocks.
- Circuit Breakers: Triggered if NIFTY or Sensex moves drastically (e.g., ±10%).
🛑 Not applicable to:
- IPO listing day
- Derivative-traded stocks
📌 Types of Orders You Can Place
💵 Based on Price:
- Market Order: Immediate execution at current price.
- Limit Order: You specify the price.
- Stop Loss (SL):
- SL-Market: Sells once trigger price hits.
- SL-Limit: Sells only at your defined price (can fail in volatile markets).
🔢 Based on Quantity:
- All or None: Executes only if full quantity is available.
- Disclosed Quantity: Only part of order visible to market.
- Minimum Fill: Minimum shares must be traded for execution.
👥 Types of Investors
- RII – Retail Individual Investors (like you and me)
- HNI – High Net-worth Individuals
- DII – Domestic Institutions (e.g., LIC, Mutual Funds)
- FII/FDI – Foreign Investors
🎁 Corporate Actions: What Companies Give Back
- Stock Split: More shares, lower face value. Increases liquidity.
- Bonus Shares: Free shares from company profits.
- Rights Issue: Discounted shares for existing shareholders.
🗓️ Key Dates:
- Record Date: Share must be in your Demat.
- Ex-Date: Price adjusts to reflect corporate action.
🔁 Can Companies Raise More Money After IPO?
Yes, but not through another IPO. They use:
- FPO (Follow-on Public Offer): New shares issued.
- OFS (Offer for Sale): Promoter sells their own shares.
🧠 Final Thoughts
Stock markets are not gambling—they are a science of value and psychology. Understanding how companies raise capital, how IPOs work, and how trades are placed puts you way ahead of most beginners.
📌 Remember:
“Invest in what you understand. Start small. Stay consistent.”
📣 Ready to Dive Deeper?
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