IPO
An Initial Public Offering, or IPO, is the process by which a private company offers its shares to the public for the first time and gets listed on a stock exchange. For investors, an IPO is the chance to participate in a company’s growth at the listing stage. For the company, it is a way to raise capital, provide an exit to early investors, and gain market visibility. India sees one of the most active IPO markets in the world, with both mainboard and SME segments active.
Key takeaways:
- IPOs let a company raise capital by selling shares to the public.
- India has two IPO platforms: Main Board and SME.
- Retail investors apply via UPI-based ASBA mechanism.
- Lot size, price band, and grey market premium are key data points.
- Listing gains are popular but not guaranteed — long-term performance varies.
The IPO process step by step
- The company appoints merchant bankers and files a Draft Red Herring Prospectus (DRHP) with SEBI.
- SEBI reviews and issues observations; the company files a Red Herring Prospectus (RHP).
- A price band and lot size are announced.
- Subscription opens for a few days; investors apply via ASBA-UPI.
- Allotment happens within a week; shares are credited to demat accounts before listing.
- The stock lists on NSE and/or BSE.
Types of IPO investors in India
- Retail Individual Investors (RIIs): Up to ₹2 lakh application.
- Non-Institutional Investors (NIIs / HNIs): Above ₹2 lakh.
- Qualified Institutional Buyers (QIBs): Mutual funds, insurance companies, FPIs.
- Anchor investors: QIBs who subscribe a day before the public issue.
How to apply via UPI
- Log in to your broker’s IPO interface.
- Select the IPO and enter your UPI ID.
- Choose lots (one or more) and bid price.
- Approve the UPI mandate on your phone — funds are blocked, not debited.
- On allotment, shares are credited and balance funds released.
Key terms to know
| Term | Meaning |
|---|---|
| Price Band | Range within which bids are accepted |
| Cut-off price | Final allotment price chosen via book-building |
| Lot Size | Minimum number of shares per application |
| GMP | Grey market premium — unofficial pre-listing premium |
| Anchor Allotment | QIB subscription before public bidding |
Risks of IPO investing
- Pricing risk — IPOs may be overvalued; listing gains are not guaranteed.
- Lock-ins — anchor investors and promoters have lock-in periods that can flood supply on expiry.
- Short-term volatility — listing-day swings are common.
- Information asymmetry — first-time public companies have limited disclosure history.
How to evaluate an IPO
Read the RHP carefully. Pay attention to financials (revenue growth, margins, cash flow), peer valuations (PE, EV/EBITDA), management quality, and use of IPO proceeds. Compare with listed peers and the broader market context. Avoid relying purely on grey market premium — GMP is volatile and unregulated.
Frequently asked questions
Is there a minimum amount to invest?
Yes — typically ₹14,000–15,000 for one lot in mainboard IPOs.
Can I apply for multiple lots?
Retail investors can apply for up to ₹2 lakh worth of shares, subject to lot size and price band.
When do I see the IPO shares?
Allotted shares are credited to your demat account a day before listing.
Where can I apply for IPOs?
Through any SEBI-registered broker (including Lemonn) via the UPI-based ASBA process.
