The funds raised through IPOs have surged in 2025, with companies in India collectively raising around ₹2.18 lakh crore. Launching an IPO is a major milestone for any company and its investors, marking the start of a new chapter. The capital raised provides fresh opportunities — helping businesses enhance efficiency, expand into new markets, and strengthen their financial position.
Let’s look at the advantages an IPO brings for the company and its investors.
Advantages of IPOs
Launching an IPO is a significant milestone in any company’s journey. An Initial Public Offering (IPO) allows a company to sell its shares to the public for the first time, turning private ownership into public ownership. By raising capital from investors, an IPO unlocks new growth opportunities and paves the way for the company’s long-term expansion.
Some of the key advantages of IPOs are:
Raising Capital Through IPOs
One of the most obvious benefits of an IPO is its ability to raise capital for the company. The newly acquired funds can be used to enhance operations, introduce new products or services, and expand into emerging markets.
Additionally, since the capital raised is not debt-based, the management is free from the burden of interest payments and can utilise the funds to build a sustainable competitive edge.
Example: Tata Capital raised ₹15,511.87 Cr in its IPO which will be used for the augmentation of its Tier-1 capital base in order to meet future capital requirements.
Enhancing Company Visibility
IPOs also play a vital role in boosting a company’s visibility and reputation. Publicly listed companies attract greater attention from investors, analysts, and researchers. Once listed, the company gains enhanced credibility in the market, which can pave the way for new business opportunities, strategic partnerships, and collaborations.
For many companies, IPOs are the pathway to changing their status from an emerging company to an established player in the market.
Providing Liquidity For Shareholders
Before an IPO, a company’s shares are typically held by its founders, early employees, and venture capitalists. Their investments remain locked until a liquidity event occurs.
An IPO provides these stakeholders with an exit opportunity, allowing them to realise the rewards of their early contributions. By selling their shares to the public, they can exit their positions and benefit from the company’s growth.
Example: During PayTM’s IPO, Antfin( a unit of the Alibaba group) sold its shareholding worth ₹ 4,704 crore through the Offer for Sale (OFS) route.
Attracting And Retaining Talent
By offering Employee Stock Ownership Plans (ESOPs), public companies can attract talent whose vision is aligned with the company’s long-term success. When employees hold a portion of the company, they develop a sense of ownership, which fosters a culture of motivation and loyalty.
On top of that, the publicly listed companies can go against the big players in the job market. Apart from salary, talented personnel are looking for wealth created through equity ownership. The visibility enhanced by the IPO pulls more employees who want to work in a well-established company with transparent practices.
Example: Zomato granted around 12 million ESOPs worth ₹ 330 crores which have helped in employee retention.
Facilitating Mergers And Acquisitions
Being listed not only attracts the investors, but it also helps in catching the attention of other companies, too. With a good presence in the market, the company can get into M&A deals for expansion and future growth.
Market reputation can also pull potential partners who are looking for transparency and strict governance in the company.
Strengthening Corporate Governance
One of the key advantages of going public is the improvement in corporate governance. In India, publicly listed companies operate under the watch of SEBI, the market regulator, which enforces compliance and accountability.
Stronger governance practices not only ensure transparency but also build greater trust among investors. People are more likely to invest in companies that show ethical conduct, integrity, and a commitment to transparency.
Long-Term Investment
For investors, IPOs are a good option for their long-term investment strategy. When you invest in a company’s IPO, you are betting on the future growth of the company. As the company scales with time, the value of your investments will also increase. IPOs are a great investment option for investors as they not only benefit from the capital appreciation but also from the dividends they might receive over time.
Steady Profits
Once a company goes public, it immediately comes into the eyes of the public . Along with that, under strict regulations and scrutiny by the government bodies, the company is under pressure to meet shareholder expectations and deliver consistent performance.
This consistency leads to steady profits that the company can sustain for the long term. The steady profits can be given out as the dividend or reinvested in the company for R&D, expansion, or improving financial health.
Earn Profit
IPOs are a great way that help investors make a profit. They can benefit in two ways: short-term and long-term. With listing gains, they can sell off their holdings and make a quick profit that is short-term.
On the other hand, they can stay invested and watch their capital appreciate over time with the company’s growth. Along with capital appreciation, there is a possibility of income when the company declares dividends.
Company Growth Is Your Growth
When you invest in a company’s IPO, you are committing to the company’s journey. Every milestone the company achieves is also a new phase in your investment. Basically, a bond of mutual growth is formed.
The company gets capital and loyalty, while the investors get returns and satisfaction from being a part of a successful entity. We can say that investors and the company are the two faces of the same coin, both incomplete without each other.
Earn Dividends
As companies grow with time and reach financial stability, they start giving a part of their profits in the form of dividends. Dividends help strengthen the public image and signal the company’s strong financial standing.
The investors get double benefits- capital appreciation and income(dividends). Companies that regularly give out dividends attract long-term investors rather than speculators.
No Repayment Period
Unlike debt instruments, the funds raised in an IPO do not carry any fixed payment obligations. The capital raised becomes a part of the owners’ equity. Without any pressure for periodic payments, the management has flexibility in the usage of funds.
It also improves the company’s financials as money is not flowing out, as well as a better debt-equity ratio due to an increased equity component.
No Need To Pay Interest
The capital raised through IPO is also free from any interest. The investors aren’t seeking regular income, and the company can use the funds for its long-term operations, such as expansion, research and development, or improving the overall profitability.
Without any interest payments, more cash is held with the company, which can be used for other purposes.
Bound By A Regulatory Framework
The listed companies have to follow the regulatory framework laid by the government and other market regulators. It involves releasing financial statements, conducting board meetings, and giving out regular updates to the investors. It makes the company more accountable for its actions, improves its transparency, and builds trust in the market.
The regulatory framework ultimately works for the protection of both the company and its investors, ensuring fair market practices.
Conclusion
IPOs are a significant step for a company’s growth as well as an investor’s journey. They not only help in raising capital and improving the company’s governance, but also help in enhancing the visibility and attracting potential investors.
They also provide room for new business opportunities, partnership deals, and expansion projects. In a crux, an IPO is another phase that contributes to a company’s long-term success and sustainability.
