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2. How Do Companies Raise Money Through the Stock Market?

Companies raise capital through the stock market primarily via equity financing, where they sell shares to investors. The most common method is an Initial Public Offering (IPO), but there are other methods as well.

1. Initial Public Offering (IPO)

An IPO is when a private company offers its shares to the public for the first time. This allows it to raise funds for expansion, R&D, acquisitions, or debt repayment.

Example:
When Zomato launched its IPO in 2021, it raised ₹9,375 crores from investors.

2. Follow-On Public Offering (FPO)

If a company is already listed, it can issue additional shares through an FPO to raise more funds.

Example:
Tata Steel raised ₹12,800 crores via an FPO in 2022 to fund its expansion plans.

3. Rights Issue

Existing shareholders get the opportunity to buy additional shares at a discounted price, providing the company with more capital.

Example:
Reliance Industries raised ₹53,125 crores in 2020 through a rights issue.

4. Qualified Institutional Placement (QIP)

Companies sell shares exclusively to institutional investors like mutual funds and banks, avoiding retail investors.

Example:
HDFC Bank raised ₹15,500 crores in 2020 via QIP.

5. Private Placements

Shares are sold to selected investors, such as venture capitalists or private equity firms, without a public offering.

Example:
Swiggy raised $700 million in a private funding round in 2022.

Comparison of Fundraising Methods

Method	Who Can Invest?	Key Benefit
IPO	General Public	Raises large capital for expansion
FPO	General Public	Helps listed companies raise more funds
Rights Issue	Existing Shareholders	Provides capital at a lower cost
QIP	Institutional Investors	Quick fundraising with minimal regulations
Private Placement	Selected Investors	Fast access to capital without public scrutiny

Key Takeaways

Companies raise funds through various methods like IPOs, FPOs, rights issues, QIPs, and private placements.
IPOs help private companies go public and raise large capital.
FPOs allow already listed companies to raise additional funds.
Rights issues offer existing shareholders the opportunity to buy more shares at a discount.
QIPs enable companies to raise funds quickly from institutional investors.
Private placements allow selective investors to invest without a public offering.
Each method is chosen based on the company’s financial goals, investor interest, and regulatory requirements.