{"id":2109,"date":"2026-07-22T11:15:46","date_gmt":"2026-07-22T11:15:46","guid":{"rendered":"https:\/\/www.incredmoney.com\/knowledge-center\/?p=2109"},"modified":"2026-07-22T11:15:46","modified_gmt":"2026-07-22T11:15:46","slug":"ipo-process-in-india-the-complete-step-by-step-master-guide","status":"publish","type":"post","link":"https:\/\/www.incredmoney.com\/knowledge-center\/uncategorized\/ipo-process-in-india-the-complete-step-by-step-master-guide\/","title":{"rendered":"IPO Process in India: The Complete Step-by-Step Master Guide"},"content":{"rendered":"
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The primary market is often seen as an opaque high risk environment in which institutional giants hold all the cards. The modern Indian Initial Public Offering (IPO) is, in fact, an intensely regulated, orderly process designed specifically to protect retail capital. Understanding this structural timeline turns an intimidating financial event into a transparent, accessible opportunity.<\/p>\n

What is an IPO and Why Do Companies Go Public?<\/h2>\n

An IPO is the procedure by which a private company goes public by offering its shares for the first time. It\u2019s a tightly controlled process that enables regular retail investors to buy equity directly from the company before the shares are traded on the open market.<\/p>\n

Before a company becomes publicly traded, it is privately owned by the founders, early employees, and institutional investors such as venture capitalists. As these companies grow to a certain size they often need huge amounts of capital to build new manufacturing plants, pay off old debt or expand into new global markets. They seek to raise this equity capital by inviting the wider public to become part-owners.<\/p>\n

The IPO is the entry point to wealth creation for retail investors with the institutional players. But money from the public purse means it can\u2019t be a quick transition. It needs a strict, tightly controlled set of actions overseen by financial regulators. The main objective of this regulatory expedition is to bridge the information gap. There is no obligation on private companies to disclose their financial health. When they do IPO, they have to open up their books completely. All retail investors have access to the exact same info as a billionaire hedge fund manager.<\/p>\n

Step by Step guide:<\/h3>\n

Step 1. Appointment of Merchant Bankers & Underwriters<\/h3>\n

A company can\u2019t just wake up one morning and decide to sell shares to the public. The first step in the IPO process is the appointment of registered Merchant Bankers or Lead Managers or Book Running Lead Managers (BRLMs) which is mandatory. These are specialized financial institutions who are responsible for designing the entire public issue.<\/p>\n

Merchant bankers conduct detailed due diligence of the company. They look at historical financial statements, assess business risks and make sure that all corporate claims are correct and can be supported. This institutional backing is the first layer of retail protection, it ensures that the company valuation and market claims are grounded in reality and not marketing hype.<\/p>\n

In addition to lead managers, companies also often appoint underwriters. Underwriters provide an important safety net. If the public doesn\u2019t purchase all of the shares offered in the IPO, the underwriters agree to buy whatever is not purchased. This guarantees the company gets the capital it needs, but also signals to retail investors that the big financial institutions have a stake in the company.<\/p>\n

It leaves the structural heavy lifting to these regulated entities, and in the process ensures accountability is in place long before a single share is offered to the public.<\/p>\n

Step 2: Submission of DRHP with SEBI for Approval<\/h3>\n

When the ground work is over, the company and its merchant bankers together prepare a comprehensive document which is the basis of truth for the entire IPO. It is filed with the top regulatory authority governing the markets in India, SEBI (Securities and Exchange Board of India).<\/p>\n

The document is known as DRHP (Draft Red Herring Prospectus). In layman’s terms, DRHP is a company’s detailed financial resume. It cuts through the marketing spin and shows you the cold hard facts. As per official guidelines by SEBI, this prospectus should mention exactly how the money raised will be used, full background of promoters, pending legal cases and all possible business risks.<\/p>\n

SEBI scrutinizes the DRHP in detail. They are not passing judgement on whether the company is a \u201cgood\u201d or \u201cbad\u201d investment. Their job is to give full transparency. In case SEBI finds any information missing or the claims misleading, they will send the draft back and ask for corrections before allowing the process to go through.<\/p>\n

DRHP is the most important tool for retail investors to evaluate an IPO. The \u201cObjects of the Issue\u201d section tells you whether your money is going towards future growth or simply used to pay off old debts. After the disclosures satisfy SEBI, they give their observations and the DRHP is finalized into a RHP (Red Herring Prospectus) i.e. the company is cleared to go to the public.<\/p>\n

Step 3 \u2013 Determining the Price Band \u2013 Book Building or Fixed Price<\/h3>\n

Once the company gets the regulatory nod, it has to decide the price at which a single share will be sold. In the Indian market, there are two main ways this pricing is done: either through a Fixed Price Issue or a Book Building Issue. Most of the big IPOs are using the Book Building process to find the fairest market value of the issue.<\/p>\n

In a Fixed Price Issue, the company just mentions the exact price per share in advance. You know what you are paying before the IPO opens. But in a Book Building Issue, the company gives a \u2018Price Band\u2019 \u2013 a range in which there is a lower limit (floor price) and an upper limit (cap price). The price of the cap cannot exceed the price of the floor by more than 20%.<\/p>\n

Prices for shares ranged from within this band for bids. The final price is determined mathematically by the highest concentration of demand. To get a feel for the structural differences, check out the mechanics below:<\/p>\n

Comparison Table<\/h3>\n\n\n\n\n\n\n\n
Feature<\/th>\nBook Built Issue<\/th>\nFixed Price Issue<\/th>\n<\/tr>\n<\/thead>\n
Pricing Mechanism<\/td>\nA price band (e.g., \u20b9100 – \u20b9120)<\/td>\nOne exact price (e.g., \u20b9110)<\/td>\n<\/tr>\n
Demand Discovery<\/td>\nReal-time daily updates during bidding<\/td>\nKnown only after the issue closes<\/td>\n<\/tr>\n
Retail Payment<\/td>\nUsually bid at the “Cut-off” (highest) price<\/td>\nPaid strictly at the fixed price<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

For retail investors applying for Book Built issues, select the option “Cut-off price”. This means that your bid will automatically become whatever the final settled price ends up being, so your application will not be rejected if the price settles at the upper cap.<\/p>\n

Step 4: Issue to the Public and Bidding by ASBA<\/h3>\n

Once the IPO is open for subscription (say for a window of 3 to 5 days), retail investors can place their bids. All historical concerns about the safety of capital are completely addressed by modern regulatory infrastructure at this stage.<\/p>\n

In the past, to apply for an IPO you would have to write a check and then wait, sometimes weeks, to get access to your money. The process is done today through ASBA (Application Supported by Blocked Amount). ASBA is a process mandated by SEBI to ensure that your application money remains in your bank account until you actually win shares.<\/p>\n

The bank doesn’t debit your account, it just “blocks” the amount of funds needed. And during the process of the IPO, you\u2019re still earning interest on that money. When you get an allotment, the exact amount is debited. If you do not get an allotment, the block is taken away immediately. Here is exactly how the modern-day bidding process works:<\/p>\n

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  1. Find Your Lot Size:<\/strong> Stocks are sold in fixed bundles called \u201clots.\u201d A retail investor can bid for a minimum of one lot (generally worth around \u20b914,000- \u20b915,000) to a maximum limit of \u20b92,00,000.<\/li>\n
  2. Apply for the IPO:<\/strong> On your broker\u2019s platform select the IPO, fill in the number of lots and tick the \u201cCut-off price\u201d box and enter your UPI ID linked to your bank account.<\/li>\n
  3. Mandate Authorisation:<\/strong> A mandate request will be sent to your banking app. Your secure bid is complete! Once approved with your PIN, the funds are securely blocked in your account.<\/li>\n<\/ol>\n

    Step 5: How the Allocation Process Works<\/h3>\n

    After the bid deadline, the registrar to the issue calculates the total demand. The registrar to the issue is a completely independent financial body. This stage can be a source of anxiety for retail investors, not least because of the common misconceptions regarding the allocation of shares.<\/p>\n

    The most frequent myth is that IPO allotment is a race on a first-come, first-served basis. That’s complete nonsense. Your application weighs just as much whether you apply at the first minute of day one, or the last hour of day three. Your result is not affected by your bid clock. If an IPO is undersubscribed (meaning the company has offered 100 shares but the public has bid for only 80 shares), the whole of the valid application is allotted. But good IPOs are often oversubscribed, sometimes receiving offers of 50 or 100 times the shares on offer.<\/p>\n

    SEBI rules envisage a computerized lottery system in case a retail category is oversubscribed. The registrar literally places all valid retail applications into a digital hat and randomly draws names from it. The goal is to distribute to as many unique investors as possible at least one minimum lot. Such structural fairness means large retail investors can\u2019t just bid maximum amounts to push out smaller players.<\/p>\n

    Step 6: Listing and Trading on the Stock Exchange<\/h3>\n

    The day of listing is the last stage of the IPO process. This is the time when the company moves from the primary market to the secondary market and gets listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the first time.<\/p>\n

    Previously, investors had to wait as long as six working days (T+6) after the closure of the issue to get the shares listed. SEBI has recently mandated a new T+3 timeline to drastically reduce retail anxiety and unlock capital faster. Currently, a company has to allot and list on the exchanges within three working days of the issue closing.<\/p>\n

    The listing morning will have a special pre-open session to determine the official opening price based on supply and demand in the market. If demand is very strong, the stock may \u201clist at a premium,\u201d or open at a price higher than the IPO issue price. In contrast, a weak demand can result in a \u201cdiscount listing\u201d.<\/p>\n

    At 10:00 AM, when normal secondary market trading starts, the IPO shares are simply ordinary stock. They change every second, and are driven completely by open market forces.\u201d The regulated IPO pipeline has worked.<\/p>\n

    IPO Shares: When Can You Sell Them After the Offering?<\/h2>\n

    One of the most serious problems for new market participants is capital lock-in. For the Retail Individual Investor (RII) one of the key advantages of investing in a Mainboard IPO is the complete freedom of instant liquidity.<\/p>\n

    For Mainboard listings, retail investors are not subject to any restriction, unlike anchor investors or company promoters who are subjected to stringent lock-in periods of 30 days to several years, depending on the regulations. If there are allotted shares, they are credited to your Demat account one day prior to listing. Listing day at 10:00 AM you are entitled by law to sell off your entire allocation right away.<\/p>\n

    But note that SME (Small and Medium Enterprise) IPOs have slightly different rules, where shares are often traded in specific lot sizes even in the secondary market. With standard Mainboard IPOs, the secondary market provides full, unrestricted liquidity from day one, allowing investors to exit their positions and realise their capital at will.<\/p>\n

    Are IPOs Safe for Retail Investors? Understanding the Risks<\/h2>\n

    The IPO mechanism itself is very regulated to avoid fraud, but the financial outcome of buying public shares is never guaranteed. The process being secure does not mean that your returns are secure. Investments in an IPO are subject to market risks and there is no assurance of any returns.<\/p>\n

    The main risk is listing volatility. Even a company with a stellar DRHP can list at a steep discount if the broader market conditions turn sour, geopolitical tensions flare up or sector-specific headwinds emerge during the bidding window. You are buying equity and that means you are taking in the realities of business performance and market sentiment.<\/p>\n

    \u201cRegulators such as SEBI only make sure that the company has not lied about its finances. They cannot ensure that the business will be successful.\u201d If you want to be a smart market participant, you want to read the prospectus, understand how much debt the company has, and see what exactly they plan to do with the money they raise. Relying solely on \u201cgrey market premiums\u201d or social media hype puts capital at unnecessary risk.<\/p>\n

    Conclusion<\/h2>\n

    The IPO process in India is designed to be transparent and fraud-proof, but that does not automatically make it a safe investment. SEBI and the ASBA system protect your application and ensure full disclosure, yet they cannot protect you from market volatility, poor business performance, or bad timing. As a retail investor, the real safety net is your own due diligence. Read the DRHP\/RHP, check the \u201cObjects of the Issue\u201d, analyze debt levels, and assess whether the company can actually use the capital to grow. Don\u2019t let grey market hype or social media buzz replace fundamental research. In short: the IPO mechanism protects the process. You are responsible for protecting your capital. Treat every IPO as a business decision, not a listing-day gamble, and you\u2019ll be far better positioned to separate real wealth-creating opportunities from risky bets.<\/p>\n

    Frequently Asked Questions (FAQs)<\/h2>\n