Lesson 1 of 7 · 5 min read
How IPOs work in India
From the draft prospectus to listing day: the steps, the timeline and who does what.
An Initial Public Offering (IPO) is when a company sells shares to the public for the first time and lists them on a stock exchange, usually NSE and/or BSE. After listing, anyone with a demat account can buy or sell those shares.
The main steps
- Draft filing: the company files a Draft Red Herring Prospectus (DRHP) with SEBI. It describes the business, financials, risks and the offer.
- Review: SEBI reviews the draft and may ask for changes. The DRHP is public, so you can read it on SEBI's website.
- RHP and price band: the company files a Red Herring Prospectus (RHP) and announces a price band a few days before opening.
- Bidding: the issue is open for at least three working days. Retail investors bid through their broker or bank using UPI or ASBA; the money is blocked, not debited.
- Allotment: if the issue is oversubscribed, retail shares are allotted by lottery, generally one lot per successful applicant.
- Listing: under SEBI's current T+3 timeline, shares are typically listed three working days after the issue closes.
Investor categories
Shares are split between qualified institutional buyers (QIBs), non-institutional investors (NIIs, larger individual bids) and retail individual investors (RIIs, bids up to ₹2 lakh). Each category has its own quota and its own subscription figure.
Key takeaways
- The RHP is the key document to read before applying.
- Your money is blocked, not spent, until allotment.
- Allotment in popular IPOs is a lottery: applying does not guarantee shares.
Terms in this lesson
Educational content only. Not investment advice.