Difference Between NFO And IPO

Investors must understand the difference between NFO and IPO, as the first attempts to provide direct access to business shares. At the same time, the latter seeks to provide various investment options.  The distinctness will provide portfolio diversification for the best possible investment returns.

NFOs and IPOs are two possibilities that hold essential positions further up the ladder when you explore the financial market for investment prospects! Each choice has unique characteristics that meet different investing goals.

Although both provide investment possibilities, knowing the difference between NFO and IPO may aid in making strategic financial decisions that align with specific risk tolerances.

Before discussing NFO vs IPO which is better, let's first explain what each investment alternative represents.

What is an initial public offering (IPO)?

The past year has seen an essential rise in initial public offerings (IPOs), as many don’t know. A business can raise money to expand through an initial public offering (IPO). At the time of their public offering, these IPOs were traded on the Indian stock market. An initial public offering (IPO) significantly alters a company's structure when it transitions from private to public control, affecting all upcoming significant choices.

A fantastic chance for investors to join businesses with tremendous future value exists through initial public offerings (IPOs). If your initial public offering (IPO) created a stir upon launch, you may sell it as soon as it begins trading in the market if you're looking for quick money and instant satisfaction. 

On the other hand, if you have true faith in a company's potential, you can hang onto your investment so that your stock increases in value along with the company's over time.

Do you think a business that enters the market will expand in a promising way right away? Then it would be best to submit an IPO application. Despite a slow start, do you believe that the firm will be a worthwhile choice in the long run? IPOs could be the way to go.

IPO's Advantages

The following are an IPO's benefits:

1. Increased Flexibility: Once a firm is publicly listed, investors can sell its shares on the stock market. This would help investors realise their advantages without waiting for a return on the share price. The ability to buy or sell the company's shares at any moment promotes investor liquidity.

2. Boost the Equity of Your Brand: A brand's foundation comprises credibility and trust. When you make a good or service accessible to anyone, you increase customer trust in your brand. Additionally, this results in increased revenue and profits.

3. Act of expansion:  A company trades shares with other investors when it goes public on an exchange. As no single investor will buy all of the company's shares, the number of potential investors is larger. Purchasing shares of publicly traded firms enables portfolio diversification.

4. Raise Funds: One of the reasons a corporation goes public is to raise capital. An IPO may help a business raise 20% of its shares on the market if it follows SEBI criteria. That benefits any firm hoping to grow and take on significant projects.

What is a New Fund Offering (NFO)? 

NFOs, or new fund offerings, are made by asset management businesses to introduce new schemes, whereas iPOs are introduced by private enterprises. This makes it easier to distinguish between the two.

These NFOs are essentially the introduction of brand-new mutual fund schemes, and bonds and equities are purchased using the proceeds from the NFO. Investors can buy fund units at the current Net Asset Value (NAV) once the original offer is finished. Additionally, those who choose NFOs benefit from potential profits when the mutual fund is listed on the market.

NFO Advantages

The NFO has particular benefits in the following areas.

  • If you believe that a particular industry or business will develop in the future and AMCs are launching this particular NFO, this presents an investment opportunity.
  • Instead of paying in one lump sum later or utilising systematic investment plans, you can buy more units through an NFO (SIP).
  • Current mutual fund unit prices are higher on specific themes, including tax savings or specific sectors, allowing for the potential of making a little investment.
  • If you wish to invest in a certain kind of mutual fund for several years, NFOs are great. For long-term investors, it is most suitable.

 What is the difference between NFO and IPO?

These are some critical distinctions between an IPO and an NFO. 

Initial Public Offering (IPO) New Fund Offer (NFO)
Summary An initial public organisation becomes public by issuing shares and becoming public on the stock exchange. The fund business launches a new mutual fund programme with a New Fund Offer.
Investors privately held businesses that are not listed Fund houses, or financial organisations
Goal To gain funds to raise money from the general public for financial securities investments
Fund Units Equity Shares Amount of Funding
Subscription Period IPOs are typically only open for a few days. While NFOs may be available for a few weeks
Risk IPOs are an option for investors that can tolerate medium to high levels of risk. One can select NFOs for investors with various risk profiles, from low to high.
It is the underlying assets that determine risk.
Costing Companies choose the price depending on their financial status and market capitalisation, with the assistance of investment banks. The actual assets are irrelevant; the offer price is ₹10 (or maybe less).
Evaluation  Price-to-book (P/BV) and price-to-earnings (P/E) are essential metrics for determining a company's worth. The appeal of the offer and the listing price are heavily influenced by these ratios. Values are meaningless to NFOs since they divide their funds into units and invest them in the marketplace.
Hosted by Companies  Asset Management Company, or AMC
Listing As initial public offerings (IPOs) are put on the stock market above or below their intended price range, investors can profit significantly if prices rise on the day of listing. When market share acquisitions are made with the money they have raised, NFOs are established. After deducting marketing and administrative expenses, a fund's initial net asset value (NAV) may be ₹ 10 or less.
Money Usage Businesses host fundraising events to raise money for goals like business expansion and brand promotion. AMCs purchase stocks and bonds with the assistance of the funds.
A Profitable Offering  The market participants' judgments on the firm's profitability and prospects decide which shares are traded on the stock exchange following the first public offering. The current value of the underlying securities in the portfolio after NFO is displayed in the mutual fund scheme's NAV. Nevertheless, the projected growth of the portfolio is not considered in the value.
DEMAT Account Need Yes No
Opportunities for Investments Invest directly in the stock of the firm. NFOs come in several forms, with the foundations being debt, hybrid, and equity fund alternatives.
Process of selection Concentrated  More options
How Do You Invest? For investors to participate in the IPO, they must have a DEMAT account. By going to the relevant financial institution's official website, investors can sign up for the NFO.

NFO VS IPO which is better for investors?

An Initial Public Offering is a company's request for investors to buy business shares. Conversely, NFO refers to the initial offer made by an asset management company to purchase units of the AUM of a mutual fund.

Purchasing shares exposes one directly to the company's future. Equity is therefore seen as a hazardous asset. Additionally, investing in equities requires some knowledge and investigation about the business.

Professional money managers make investment selections when it comes to mutual fund investments. They make financial investments according to the mutual fund's goals. As stated differently, retail investors do not engage in the decision-making process pertaining to investments.

Further, despite the effects may differ, market risks and outside variables (interest rates, regulatory environments, etc.) can affect IPOs and NFOs.


Understanding the differences between NFO vs IPO is essential for making informed long-term investing decisions, as each offering has distinct investment goals. By understanding their distinctive characteristics, investors may match their investment choices to their own risk tolerance and financial objectives. So, take a risk and learn more about this distinguishing factor for financial success in a changing market!

Frequently Asked Questions Expand All

While initial public offerings (IPOs) are businesses selling their shares to the general public for the first time, NFOs are mutual funds offering new units. The main difference between NFO and IPO is simple.

An IPO can be applied for by anyone who meets the requirements set out by the issuing firm and regulatory bodies and has a current Demat account. This covers both private and institutional investors, as well as frequent staff members.

Open a Demat account, then go into their trading platform, go to the IPO area, choose the desired IPO, complete the application, and submit it to apply for an IPO through them.

Investing in NFOs could be helpful if the fund's strategy matches your investing goals and tolerance for risk.  However, looking at the fund house, the fund manager's experience and the scheme's potential are essential.

The main difference is that a mutual fund is an investment tool that pools capital to invest in various assets, whereas an NFO is the first offering of a new mutual fund scheme to investors.

NFOs usually do not experience the listing gain that IPOs do since NFO units are priced at a set rate for the sale duration. The performance of the underlying assets determines their worth.

The minimum amount for a New Fund Offer (NFO) might alter based on the mutual fund and its strategy, although it often ranges from ₹500 to ₹5,000. It is essential to study specific NFO data for clarification.