What Is an IPO? How Initial Public Offerings Work in India

Definition

An initial public offering (IPO) is the first time a company offers its shares to the public and lists them on a stock exchange. It can be a fresh issue (new shares; money goes to the company), an offer for sale (existing shareholders sell; money goes to them), or both.

The process in brief

1. The company files a draft red herring prospectus (DRHP) with SEBI.
2. After SEBI's observations, it files the red herring prospectus (RHP) and announces the price band and lot size.
3. The issue is open for subscription, usually for three working days.
4. Allotment is finalised and shares are credited; the stock lists on the exchange. Under SEBI's rules, listing happens on T+3 (three working days after the issue closes), mandatory from 1 December 2023.

Investor categories

Price band and lot size

You bid within the price band in multiples of the lot size. Retail investors can bid at the cut-off price, meaning they accept whatever final price is decided.

How to apply

Through your broker's app using UPI (the mandate blocks the money in your bank account) or through your bank's ASBA net-banking facility. See how IPO allotment works.

Risks

• IPO pricing may already reflect optimistic expectations.
• Listing-day gains are not guaranteed; stocks can list below the issue price.
• Read the risk factors and financial statements in the RHP.