IPO stands for Initial Public Offering. It's the first time a private company sells its shares to the general public and gets listed on a stock exchange (NSE/BSE).
Before an IPO, a company's shares are held privately by its founders, early investors, and venture capitalists. An IPO lets the public buy in — and gives the company access to large amounts of capital.
IPO
What Happened
Zomato IPO (2021)
Raised ₹9,375 crore. Listed at ₹116 vs ₹76 issue price — a 52% listing gain.
LIC IPO (2022)
India's largest IPO ever — raised ₹20,557 crore. Listed at a discount.
Paytm IPO (2021)
Raised ₹18,300 crore. Listed at ₹1,560 vs ₹2,150 issue price — a notable disaster.
Why Do Companies Go Public?
Raise growth capital: IPO proceeds fund expansion — new products, acquisitions, debt repayment, geographic growth.
Early investors exit: Venture capitalists and angel investors who funded the company early cash out some or all of their holdings.
Employee stock option liquidity: ESOPs (Employee Stock Options) become valuable when the company lists — employees can sell their shares.
Brand credibility and visibility: Being listed adds prestige and public trust. Customers, partners, and banks take listed companies more seriously.
Acquisition currency: A listed company can use its own shares to acquire other companies instead of paying cash.
How an IPO Works, Step by Step
Company files a DRHP with SEBI — a Draft Red Herring Prospectus, a detailed document covering financials, risks, business model, and use of funds, which SEBI reviews and approves.
Investment banks set the price band — merchant bankers (like Kotak or Axis) run roadshows and set a price band, for example ₹390-₹410, and investors bid within this range.
IPO opens for subscription, typically for 3 days — retail investors, HNIs, and institutions bid for shares, with retail investors applying in lots via UPI on their broker app.
Allotment happens — if oversubscribed, allotment for retail investors is done by lottery; if undersubscribed, everyone gets their full allocation.
Listing day arrives, usually T+6 from the IPO close date — shares list on NSE/BSE, with the listing price determined by market demand, which can land above or below the issue price.
Regular trading begins — from listing day onward, you can buy or sell on the exchange just like any other stock.
How to Apply for an IPO in India
Open a demat and trading account with Zerodha, Groww, Upstox, or any SEBI-registered broker — this takes 10-15 minutes online with just Aadhaar and PAN.
Link your UPI ID, since IPO applications are made through ASBA (Application Supported by Blocked Amount) via UPI — your money is blocked, not debited, until allotment.
Apply through your broker app — go to the IPO section, choose the IPO, select the number of lots, bid at the cut-off price (recommended for most retail applicants), and submit via UPI.
Approve the UPI mandate in your UPI app (GPay, PhonePe, etc.) to block the funds.
Wait for allotment, checking status on the NSE/BSE website or your broker app on allotment day.
If allotted, shares appear in your demat on listing day — if not allotted, the blocked amount is simply released back to you.
Understanding GMP (Grey Market Premium)
Before listing, shares trade informally in the "grey market." GMP is the premium at which these unofficial trades happen — it gives a rough indication of expected listing price.
For example: an IPO priced at ₹400 with a GMP of ₹80 suggests an expected listing price near ₹480 — though this is only an unofficial signal, not a guarantee.
Warning: GMP is unofficial, unregulated, and often manipulated. Don't make IPO decisions purely based on GMP — the actual listing price can be very different from what GMP suggested.
Should You Invest in IPOs?
Not all IPOs are gold: Paytm, Nykaa, and many others listed at massive premiums and then fell 50-70%. IPO hype doesn't equal future performance.
Read the DRHP before applying: The DRHP has the real financials — revenue, profits, debt, risks. A company with no profits and high debt listing at 50x revenue is a red flag.
Check who is actually selling — company or promoters: If an IPO is an "Offer for Sale" (OFS), money goes to early investors, not the company. Promoters cashing out makes it a less exciting signal for the business's growth prospects.
Allotment is a lottery for retail: In oversubscribed IPOs, you may apply for ₹15,000 and have your money blocked for 6+ days just to not get allotment — factor in this opportunity cost before applying.
Listing price isn't always better than buying later: Many IPOs that list at a premium fall back after 3-6 months as hype fades — sometimes buying post-listing at a correction gives a better entry point.
Common Mistakes to Avoid
Applying purely based on GMP: Since GMP is unregulated and can be manipulated, relying on it alone rather than the company's actual fundamentals in the DRHP can lead to poor decisions.
Ignoring whether the IPO is a fresh issue or an OFS: A pure OFS means none of the proceeds go toward growing the business — worth checking before assuming an IPO is raising capital for expansion.
Chasing every IPO for listing gains: Not every IPO delivers a listing pop — some list flat or below issue price, and applying to every IPO regardless of fundamentals increases the odds of holding a loser.
Forgetting the opportunity cost of blocked funds: Money blocked via ASBA earns no interest during the application period — applying to multiple IPOs simultaneously ties up capital that could be used elsewhere.
Key Takeaway: An IPO is a company's first sale of shares to the public. It raises capital for the company and lets early investors exit. Apply via UPI through your broker, and always read the DRHP before applying — never invest purely based on hype or GMP. IPOs can generate big listing gains but can also list at a loss, so treat each one on its own fundamentals rather than assuming IPO participation is automatically profitable.
Frequently Asked Questions
What is the minimum amount to apply in an IPO?
SEBI mandates that the minimum lot size for retail investors keeps the minimum application amount between ₹10,000 and ₹15,000. So most IPOs have a minimum of around ₹14,000-₹15,000 for retail. You can apply for up to ₹2 lakh under the retail category.
What happens if I don't get allotment?
Your funds, which were blocked via UPI ASBA, are unblocked within 1-2 days of allotment date. No interest is paid on blocked funds — this is the opportunity cost of applying.
Can I sell on listing day itself?
Yes. If allotted, shares appear in your demat on listing day. You can sell at market open. Many investors apply only for listing day gains (this is called IPO flipping).
What is an SME IPO?
Small and Medium Enterprise IPOs are listed on BSE SME or NSE Emerge platforms. They have lower listing requirements, smaller lot sizes (often ₹1-2 lakh minimum), and are generally riskier and less liquid than mainboard IPOs.
Is IPO flipping (selling on listing day) a good strategy?
It can capture quick listing gains, but it's speculative — not every IPO lists at a premium, and flipping strategies depend heavily on grey market sentiment rather than a company's actual long-term prospects.
Disclaimer: This article is for general educational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Figures, rates, and rules mentioned may change over time — verify current details with an official source or a qualified professional before making financial decisions.
