Difference between an IPO and an NFO

From mutual funds online and stocks to bonds, credit opportunity funds, exchange traded funds, etc., the world of investing is big and diverse, with various offerings for every type of investor. However, in order to fully gain from this diverse world, you must know and understand different types of investments.

IPO and NFO are two terms that are often misunderstood by investors. If you want to know the differences between each, you must keep reading!

Difference between an IPO and an NFO

Points of difference

IPO (Initial Public Offering)

NFO (New Fund Offer)

Meaning

When companies go public, they issue an IPO. In an IPO, the company offers its stocks and equities for sale to institutional, retail, or individual investors.

In the case of an NFO, a mutual funds house allows the public to subscribe to a new fund scheme for the first time.

Aim

An IPO can be released for two reasons. Companies usually use the fresh issue to raise funds for expansion, repayment of loans, diversification, etc. Companies issue another type of IPO, known as the Offer-for-Sale that allows promoters to reduce their holdings in the listed company.

An NFO is used mutual fund houses looking to launch new ideas or schemes in the market.

Issued by

An IPO is only issued by companies.

An NFO is only issued by fund houses.

Price

The price of the IPO can vary depending on a host of factors like the business fundamentals and the supposed value of the issuing company. It may be listed lower or higher than the issue price.

The price of the NFO is usually fixed at Rs.10.

Investor classification

Investors are classified as retail, individual, institutional, and high net individuals for IPOs. There are different quotas for each investor. For instance, retail investors are offered a discounted price.

There is no classification of investors in the case of an NFO, and all investors are treated the same.

Need for having a Demat account

You need a Demat account for an IPO.

You may or may not require a Demat account depending on how to plan to hold your units. For instance, if you want to hold your units in a dematerialized form, you will not require a Demat account.

Listed on

An IPO is available on recognized stock exchanges only.

An NFO is made available on the website of the concerned mutual fund’s house.

Risk

An IPO can offer high returns with medium to high risk.

An NFO can offer medium to low risk.  

To sum it up

Both an NFO and an IPO can present great investment opportunities for investors. However, it is important to understand what they can offer you and how much risk they hold, and then invest in them through SIPs. Regardless of what you choose, make sure to evaluate all factors and make an informed choice. Online investment apps like can help you invest easily in NFOs.

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