Every investor’s goal is to make their idle money grow through different financial instruments. Markets present myriad choices to invest with varying timespans and expected returns. Two of the popular choices in this regard are IPO and NFO. Many investors presume that Initial Public Offering (IPO) and New Fund Offer (NFO) are primary market offerings and represent similar investment opportunities and confuse the two concepts. These are different investments with different concepts, and it is crucial to understand the difference between NFO and IPO clearly.
An initial Public Offering (IPO) is a process through which a company raises funds from the primary market to grow its business. Companies offer their shares for the first time to the public through IPO and get listed on the stock exchanges.
The company's status changes from a privately owned company to a publicly owned company after issuing its IPO.
Once the IPO shares are issued to the public, they get listed on the stock exchanges and are available for trading in the stock market, just like other listed shares.
A New Fund Offer (NFO) refers to how an asset management company (AMC) offers a new fund to the public. In other words, an NFO is a new fund offering where AMCs or fund houses announce new mutual fund schemes to accumulate capital from the public. AMCs use this money to buy financial securities, including equities, bonds , etc. based on the asset allocation scheme of the fund.
AMCs launch a new mutual fund during the NFO. They offer NFOs for a particular number of days, and investors can grab the opportunity during this period at a stipulated price called the offer price.
Here are the key points to understand the difference between IPO and NFO:
Parameters | IPO | NFO |
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The Issuer | IPOs are issued by companies aimed at raising funds. IPO is for issuing of new shares. | An AMC (Asset Management Company) or a fund house launches NFO to raise capital. NFO is for a new mutual fund scheme launch. |
Fund Usage | Companies use the raised funds for business growth or reduce the promotor's stake in the ownership. | AMCs simply use the funds to invest in various financial securities. |
Valuation |
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Listing Gains |
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How to Invest |
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Thus, investors can benefit from financial markets in multiple ways and explore new investments, like New Fund Offers (NFOs). IPOs and NFOs can help investors build wealth with different approaches. Get clarity on NFO and IPO differences and make an informed decision. Be clear with the fund objectives and risk levels before you plan to invest in either of the two.
Investments in the securities market are subject to market risk, read all the related documents carefully before investing
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