Initial Public Offering (IPO) is a type of public offer in which the shares of a
company are sold to institutional investors as well as retail investors.Initial
Public Offerings or stock market launch are used by companies to raise new equity
capital for the company. An IPO is a great asset that helps in channelizing the
investments of all private shareholders such as company promoters or private equity
investors. It enables easy trading of existing holdings by allowing the company
to becomea publictraded enterprise.
An IPO allows a company to tap into a wide pool of potential investors to raise
capital for its future growth, expansion of business, and settlement of loans from
financial institutions. By issuing shares in the market, the company can maintain
a balanced Debt-Equity ratio. Unlike loans or other debt instruments, the company
is not required to make repayment to its equity shareholders.