From a few owners to many

Watch who can own the company.

Our company from the last lesson now wants to open shops abroad. It needs **₹200 crore**. This time, it decides to offer shares to the **public**.

Selling shares to the public for the first time is an **Initial Public Offer**, or **IPO**. Afterwards the company is **listed**: its shares trade on a stock exchange.

Why go public?

The **main** reason is money to grow. Going public brings a few other benefits along with it.

• Money to expand the main reason — Spending on new factories, shops or equipment is **capital expenditure (capex)**. An IPO can pay for it without a loan, so there's **no interest** to pay.
• Risk is shared many owners — Every shareholder carries part of the business's ups and downs. Selling to the public spreads that risk across many people.
• An exit for early investors angels, VCs, PE — Once listed, early owners can **sell** their shares on the exchange, all at once or a little at a time.
• Rewards and visibility employees and the public — Employees given shares can see them gain value. And a listed company is better known, which can help it grow.

**Remember:** an IPO is mostly about raising money to grow. The other benefits come with being listed.

Four ways to raise ₹200 crore

Tap each way.

The company can borrow, find another big investor, go public, or mix. You still hold the **5 lakh** shares from the last lesson.

**Remember:** an IPO is equity, like a PE round, but sold to many people, and it gives every owner a place to sell.

Example rate and prices; new shares sold at ₹600.

Who gains from going public?

Tap each one.

Example figures; the employee and VC numbers are made up for this story.

What changes once you're listed

Going public isn't free. A listed company takes on new duties.

• Private a few invited owners — Only invited investors can buy shares, in private deals. There's no exchange, so selling means finding a buyer yourself.
• Listed open to anyone — Anyone can buy or sell on the exchange. In return the company must **disclose its information publicly**, and the regulator, **SEBI**, has the final word on whether it can list.

**Remember:** going public opens the doors to new owners, and to everyone's scrutiny.

Check — Question 3 of 4

Put each one where it belongs.

What you now know

• An IPO is a company's first sale of shares to the public; afterwards it is listed on an exchange.
• The main reason is money for expansion (capex), without interest to pay.
• Going public also spreads risk, gives early investors an exit, rewards staff with shares and raises visibility.
• Using its own profits too means selling fewer shares and giving up a smaller slice.
• A listed company must disclose its information publicly, and SEBI regulates the IPO market.