What are the Key Differences Between NFO vs IPO?

Initial Public Offering (IPO) and New Fund Offers (NFO) are two familiar terms in the securities market. Both of them raise money from the public to fund their operations.

However, investors often wonder, “NFO vs IPO, which is better?” Understanding the difference between NFO and IPO can help inventors make appropriate decisions about which to invest in. This blog removes this confusion from investors and guides them to the best option for them.

Understanding Initial Public Offering

An IPO is a process in which a company first makes its shares available to the public. The company’s shares are traded in the stock market after the IPO. Businesses can use a fixed price issue or a book-building issue to start this public offering. 

As an investor, you must bid within a certain price range in a book-building issue. A business uses this IPO for multiple reasons, like introducing a new product line, paying off debts and business growth.

Understanding New Fund Offering

If a new mutual fund launches, it is called an NFO. This procedure of raising funds was introduced by asset management companies (AMC) when they wanted to establish a new investment scheme to analyse the industry. NFO allows investors to join a fund before its opening for public subscription, just like an IPO does for company shares.

The NAV of the mutual fund units drops based on the change in the asset price in the fund’s portfolio. The Net Asset Value (NAV) of an NFO is typically valued at ₹10.

Top Upcoming IPOs to Watch (23rd–27th June 2025)

1. Kalpataru Ltd IPO
2. HDB Financial Services Ltd IPO
3. Globe Civil Projects Ltd IPO
4. Ellenbarrie Industrial Gases Ltd IPO
5. Suntech Infra Solutions Ltd IPO

IPO vs NFO: Key Differences

Both the NFO and IPO act similarly while raising funds from the public, but with some distinction. The table below highlights the key difference between IPO and NFO:

The Risks of NFO and IPO

Both the NFO and IPO come with numerous risks which you must become aware of:

• NFOs are vulnerable to market volatility, which is influenced by economic conditions. In terms of IPOs, sharp movements in price can occur on the listing day.
• The lack of historical data on NFOs makes it challenging to predict.
• IPOs can generate lower returns since they are sometimes overpriced.
• The performance of NFOs can be negative if fund managers make poor decisions.
• Legal challenges can affect the profitability of an IPO.
• Higher expenses in the initial phase may result in increased expense ratios.
• If an IPO fails, a company can close down or file for bankruptcy.

You should invest in NFO or IPO according to your risk appetite while analysing other factors.

Final Thoughts

Understanding the difference between NFO vs IPO can help you decide the better option. However, you should become aware of the risks associated with NFOs and IPO. Exposure to the stock market can pose risks for investors while investing in an IPO. Nevertheless, investors with a medium to low-risk appetite can benefit from NFO.

Do you want to apply for an IPO or NFO? Download the Torus Digital application and open a Demat account without any fees. You can invest in IPOs and NFOs using the Torus Digital application.