What is an IPO?

When a company wants to raise money, one of the ways it can do so is
by selling its equity shares to the public। If it happens to be the first
public offer of the company, it is known as the initial public offer (IPO).
In an IPO, the promoters share in the company's equity comes down,
as the number of shares issued by the company (paid-up capital)
increases. After the IPO, the shares get listed on the stock exchange
and shareholders can trade their shareholdings on the bourses.

How to make an IPO?

To make an IPO, a company has to file a prospectus with the Securities
and Exchange Board of India (SEBI) stating the purpose of raising the
money and disclosing other details of the company and its directors.
Once it is approved by SEBI, the company files the prospectus with the
registrar of the company to initiate the process of IPO. According to
SEBI norms, a minimum of 30% of any IPO is reserved for retail
investors — those who are applying for shares worth less than
Rs 1,00,000. The shares are allotted on a pro-rata basis among
applicants. That means, if the retail investor portion of the IPO is oversubscribed by two times, every applicant will get half of the
number of shares he applied for.For large investors, whose application
size is more than Rs 1,00,000 each, there is a minimum reservation
of 10%. In this category too, shares are allotted on a pro-rata basis.