An Initial Public Offering (IPO) is when an unlisted company sells shares to the public for the first time to raise capital. In India, IPOs typically use the book-building method with a price band, investor money is blocked via ASBA/UPI, and shares must list within T+3 working days from issue close. (investor.sebi.gov.in, NPCI, MSEI)
Why this matters
IPOs open the door to own early stakes in India’s next leaders—but the rules, timelines, and bidding nuances decide your allotment odds and post-listing experience. This guide breaks down the end-to-end IPO workflow, how to apply the right way, and the latest SEBI norms every Indian investor should know.
IPO meaning—two components you must read in the prospectus
An IPO can include:
- Fresh Issue: Company issues new shares to raise money (dilutes existing ownership).
- Offer for Sale (OFS): Existing shareholders sell; proceeds go to them, not the company. (ICICI Direct, StoxBox)
Simple check while scanning the RHP:
Issue Size (₹) = (Fresh Issue Shares × Issue Price) + (OFS Shares × Offer Price).
IPO pricing 101: Book-building, price band & “cut-off”
Most mainboard IPOs are book-built—you bid within a price band (floor–cap).
Key rules (India):
- Band must be at least 5% wide (cap ≥ 105% of floor).
- Band cannot exceed 20% width (cap ≤ 120% of floor).
- Retail can choose “Cut-off”—you agree to pay the discovered price within the band so your bid stays valid. (lexfamiliaindia.com, Ipo Platform, JPMorgan Chase)
Tip for RIIs: Bidding at Cut-off avoids pricing errors and is the simplest, SEBI-permitted choice for retail applications. (Upstox – Online Stock and Share Trading)
How to apply: ASBA + UPI (India)
- ASBA (Application Supported by Blocked Amount): Your bank blocks the application money; it stays in your account (continues to earn interest where applicable) and is debited only if allotted—so no refund cycles. (investor.sebi.gov.in)
- UPI for IPOs: UPI mandates are supported; the per-transaction UPI limit for IPOs is up to ₹5 lakh (bank/app support required). Note: The retail application cap remains ₹2 lakh per application as per SEBI’s RII definition. (NPCI, The Economic Times)
The IPO process in India—step-by-step (T+3 listing)
Pre-issue
- Appoint intermediaries: Book-running lead managers, registrar, legal, auditors.
- File DRHP with SEBI; receive observations; update to RHP with final details (dates, price band, financials). (GLI)
- Anchor investors (QIBs) participate one working day before public bidding; 50% of anchor allocation locked for 90 days, the rest for 30 days (post-allotment). (mripl.net, mint)
Bidding window (T to T+2 or as notified)
- Bids via ASBA/UPI through broker apps, banks or exchanges’ online ASBA forms. Stock exchanges must host IPO-specific ASBA forms at least one day before the issue opens. (MSEI)
- Price discovery happens after the window closes; offer price is fixed within the band. (indiaipo.jpmorgan.com)
Post-issue
- Basis of allotment finalized category-wise; ASBA unblocks funds for non-allottees.
- Credit to Demat and listing on T+3 working days from issue close (mandatory since Dec 1, 2023). (MSEI)
IPO timeline at a glance (featured snippet)
- T (Issue Close): Bidding ends, UPI mandates typically up to 5 pm on final day.
- T+1/T+2: Basis of allotment & fund movements via ASBA.
- T+3: Shares list and start trading on NSE/BSE. (MSEI)
Who gets how much? Investor categories & reservations
Mainboard book-built IPOs (default route):
| Category | Allocation norm |
|---|---|
| Retail (RII) | At least 35% |
| Non-Institutional (NII/HNI) | At least 15% (split 1/3 sNII: ₹2–10 lakh and 2/3 bNII: >₹10 lakh) |
| QIB | Not more than 50% (up to 60% of QIB bucket can be Anchors) |
Alternate “Reg 6(2)” route (no profit/track-record): QIBs ≥ 75%, Retail ≤ 10%, NII 15%. Check the prospectus to know which route applies. (Lawrbit)
Allotment method: Proportionate for QIB/NII; draw of lots for oversubscribed retail since 2012—so each valid RII application generally has an equal chance of receiving one lot. (Compfie)
Back-of-the-envelope odds (retail):
Approx. Allotment probability ≈ (No. of lots available for RII) ÷ (Total valid RII applications).
(Actual outcomes depend on cut-off bids, rejections, and regulatory rules.)
Reading the offer document quickly: the 7 pages that matter
- Risk Factors (business, regulatory, litigation).
- Objects of the Issue (how fresh proceeds will be used).
- Offer Structure (fresh vs OFS mix). (ICICI Direct)
- Price Band rationale (now stricter: wider disclosures vs past costs). (Trilegal)
- Financials & Key Ratios (EPS, RoE, debt metrics).
- Promoter/Anchor lock-ins (supply overhang post listing). (mint)
- Use of ASBA/UPI, timelines and cut-off (mechanics). (investor.sebi.gov.in, JPMorgan Chase)
Practical example (numbers simplified)
- Price band: ₹100–₹120; Lot size: 125 shares.
- You (RII) bid at Cut-off for 1 lot: your bank blocks ₹15,000 (=125×₹120) via ASBA/UPI.
- If final price is ₹118, debit is ₹14,750; balance is auto-unblocked. Shares credit by T+3. (investor.sebi.gov.in, MSEI)
2025 updates you should know
- SEBI consultation (Jul–Aug 2025): For large IPOs (≥₹5,000 crore), SEBI has proposed reducing retail allocation from 35% to 25% and increasing QIBs to 60% (graded). These are proposals—watch for final rules. (Caalley, Reuters)
- SME IPO process revamp (2025): New SME framework (NSE circular) sets minimum bid = 2 lots and removes cut-off bidding; check the specific SME issue for details. (NSE India Archives)
FAQs
1) Is “Cut-off” compulsory for retail?
No, but it’s the simplest path to a valid bid at the discovered price in book-built IPOs. (JPMorgan Chase)
2) My UPI shows ₹5 lakh limit; can I apply more than ₹2 lakh as Retail?
No. The UPI transaction limit for IPOs is ₹5 lakh, but Retail category applications are capped at ₹2 lakh. Apply above ₹2 lakh under NII. (NPCI, The Economic Times)
3) When do shares list?
By T+3 working days from issue close (mandatory since Dec 1, 2023). (MSEI)
4) How are anchors different from QIBs?
Anchors are a subset of QIBs allotted a day before opening; they have a 30/90-day staggered lock-in. (mripl.net, mint)
5) What changes if the issuer uses the “6(2) route”?
Allocation skews to institutions (QIBs ≥75%, Retail ≤10%). Read the “Issue Structure” section in the RHP. (Lawrbit)
Key takeaways for Indian investors
- Focus on the RHP sections that impact valuation, dilution (Fresh vs OFS), and supply (lock-ins). (ICICI Direct)
- Apply via ASBA/UPI and prefer Cut-off (retail). (investor.sebi.gov.in, JPMorgan Chase)
- Plan liquidity: Listing is T+3, but anchors and other lock-ins affect near-term supply and volatility. (MSEI, mint)
- Stay current: SEBI keeps refining IPO rules (price band width, timelines, SME framework, proposed category tweaks). Always check the latest circulars before applying. (lexfamiliaindia.com, MSEI, NSE India Archives, Reuters)
Sources: SEBI Master Circular (Issue of Capital & Disclosure Requirements), SEBI/ICDR & consultation papers; NPCI UPI FAQs; JP Morgan ASBA GID; NSE circulars; media/legal summaries as cited above. (MSEI, NPCI, investor.sebi.gov.in, NSE India Archives)
Disclaimer: This article is for education, not investment advice. Check each IPO’s RHP and consult your advisor before investing.