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Initial Public Offering (IPO) in India

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An Initial Public Offering (IPO) is the process by which a privately held company offers its shares to the public for the first time on a recognised stock exchange. In India, the IPO process is governed by the Securities and Exchange Board of India (SEBI) through the SEBI (ICDR) Regulations, 2018, with the actual subscription mechanics built around the Application Supported by Blocked Amount (ASBA) framework and the Unified Payments Interface (UPI) for retail applicants. As of mid-2026, the timeline from issue closure to listing has been compressed to three working days (T+3) under a SEBI circular mandatory from 1 December 2023, and the per-transaction cap on a UPI mandate for capital-market use has been raised to ₹5,00,000 under an NPCI notification of September 2025.

This article provides an encyclopedic reference on the Indian IPO. It covers the history of the application process, the regulatory framework, the operational mechanics of book building and allotment, the categories of investors and the rules that apply to each, the variations of public issues (mainboard, SME, fast-track, follow-on, REIT and InvIT) and the tax treatment of allotments. Readers looking for the practical workflow of placing a bid through a specific broker should consult the companion how-to guides — for Zerodha, the canonical path is the Bids → IPO tab on Kite, documented in dedicated step-by-step guides for the Kite web, the Kite mobile app and the legacy Console surface.

History and regulatory evolution

The Indian IPO application process has undergone four distinct generations, each shaped by a SEBI intervention aimed at compressing the timeline between issue closure and listing while reducing the burden on the investor’s working capital.

Pre-2008 physical application era

Before 2008, applying for an IPO in India was a paper-based exercise. Investors collected a physical application form from a syndicate bank or the book running lead manager, filled in bid details, attached a cheque or demand draft for the full application amount, and submitted the package to a designated collection bank. The cheque was cleared whether or not the applicant received an allotment, with refunds disbursed by cheque or demand draft after the basis of allotment was finalised. The mechanism was inefficient: the investor’s funds left the bank account immediately on submission, refunds took up to a fortnight, and the listing cycle from bid close to listing ran to about three weeks. Reconciliation errors and delayed refunds were common grievances, particularly in heavily oversubscribed issues such as the Reliance Power IPO of January 2008.

2008: introduction of ASBA

SEBI introduced the ASBA mechanism by a circular dated 30 July 2008, with effect from public issues opening on or after 1 September 2008. Under ASBA, an applicant authorised a Self Certified Syndicate Bank (SCSB) to block, rather than debit, the application amount in the applicant’s own bank savings account. The blocked amount continued to earn savings interest, and only the portion corresponding to the value of allotted shares was eventually debited. Refunds for unsuccessful bids became instantaneous because no debit had occurred. ASBA was made the sole route for retail investors in book-built issues from 1 January 2016 by SEBI circular CIR/CFD/POLICYCELL/11/2015 dated 10 November 2015. By that date the cheque-and-refund cycle had effectively been retired from the mainboard primary market.

2018 to 2019: UPI for retail applicants

The next major shift came when the National Payments Corporation of India (NPCI) operationalised the Unified Payments Interface to a level of stability suitable for capital-market use. SEBI, in circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated 1 November 2018, permitted UPI as an alternative payment mechanism within ASBA for retail individual investors applying through intermediaries such as stockbrokers and registered investment advisors. The transition was implemented in three phases. Phase I, originally scheduled for 1 January 2019 and later extended to 30 June 2019, allowed UPI alongside the older physical-form-with-SCSB route. Phase II, effective 1 July 2019 under circular SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated 28 June 2019, made UPI compulsory but retained the listing timeline at T+6 working days. Phase III, implemented after considerable testing, finally compressed the timeline to T+6 with UPI as the sole intermediary route for retail applicants. The result was that retail investors no longer needed to physically submit forms at a bank branch; the broker’s interface, combined with the investor’s UPI-enabled bank account, became the entire front end.

2023 onwards: the T+3 listing regime

By SEBI circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated 9 August 2023, the listing timeline was reduced from T+6 to T+3 working days, with effect from 1 December 2023 for all mainboard public issues. Under the T+3 regime, the registrar finalises the basis of allotment on T+1 (the working day after issue closure), the exchanges issue the listing approval on T+2, and the shares list and start trading on T+3. The reduction cut the working-capital burden on retail applicants from six days to three and brought the Indian primary market closer to the secondary-market settlement cycle, which itself moved to T+1 in early 2023.

Modern hybrid: bank ASBA versus UPI ASBA via broker

The current regime, in force as of mid-2026, retains two parallel ASBA routes. The first, bank ASBA, allows any investor category to apply through the NetBanking portal of an SCSB, with the bank itself blocking the amount; this route is the only one available to Qualified Institutional Buyers (QIBs) and to Non-Institutional Investors (NII) bidding above ₹5,00,000. The second, UPI ASBA via broker, is open to retail individual investors. With the September 2025 NPCI revision, a retail investor can today complete an IPO application in under five minutes and see allotted shares credited to demat within three working days of issue closure.

Regulatory framework

The IPO process operates at the intersection of three regulatory regimes: securities regulation administered by SEBI, payments regulation administered by NPCI and the Reserve Bank of India, and the contractual rules imposed by the recognised stock exchanges.

SEBI (ICDR) Regulations, 2018

The principal substantive law governing Indian IPOs is the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, commonly known as the SEBI ICDR Regulations or simply ICDR. Notified on 11 September 2018 in supersession of the 2009 regulations of the same name, the ICDR codifies eligibility for an issuer to make a public issue, disclosure standards for the Draft Red Herring Prospectus (DRHP) and the Red Herring Prospectus (RHP), the categories of investors permitted to apply, the minimum and maximum allocations to each category, and the procedure for finalising the basis of allotment. Regulation 2(vv) of the ICDR defines a retail individual investor as a natural person, including a Hindu Undivided Family applying through its karta, who applies or bids for specified securities for a value of not more than ₹2,00,000.

Role of NPCI in the UPI ASBA flow

The NPCI, an umbrella organisation owned by a consortium of Indian banks and licensed by RBI under the Payment and Settlement Systems Act, 2007, operates UPI as a real-time inter-bank payment rail. For IPO applications, NPCI’s AutoPay / mandate framework, sometimes called UPI 2.0, is used to create a one-time block on the applicant’s bank account against a specified amount and a specified expiry date. The standard UPI peer-to-peer transaction limit of ₹1,00,000 was, by NPCI circular dated 8 September 2025, raised to ₹5,00,000 per transaction for capital-market and insurance-premium use cases, with a daily cumulative cap of ₹10,00,000. This change took effect on 15 September 2025 and is the operative limit that governs how large a single retail IPO mandate can be. Earlier, NPCI had successively raised the IPO-specific cap from ₹1,00,000 to ₹2,00,000 (2019) and from ₹2,00,000 to ₹5,00,000 (December 2021), the latter being the change that aligned the UPI mandate ceiling with the SEBI retail upper bound for the first time.

Role of registrars

Every public issue in India appoints a Registrar to an Issue (RTI), a SEBI-registered Category I intermediary responsible for receiving the consolidated bid data from the exchanges, performing third-party verification of applicant PAN against demat and bank linkages, eliminating duplicate or invalid applications, finalising the basis of allotment, generating the allotment file, and instructing the depositories to credit shares to allottees. Two registrars dominate the Indian market: KFin Technologies Limited, formerly Karvy Fintech, and Link Intime India Private Limited. Smaller issues, particularly SME IPOs, are also serviced by Bigshare Services, Cameo Corporate Services, and Maashitla Securities. The registrar publishes the Basis of Allotment document on its own website and on the websites of the lead managers and the exchanges, and it is also the entity that operates the public allotment-status check facility at sites such as ipostatus.kfintech.com and linkintime.co.in.

Exchange role and listing requirements

The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) operate the electronic bidding platforms through which all UPI-ASBA and bank-ASBA bids are routed for matching. Both exchanges run the Issue Module in parallel with their secondary-market trading platforms; bids are time-stamped, validated against the issuer’s circular and the SEBI master parameters, and forwarded to the registrar at issue close. An issuer can elect to list on one exchange or both; the dual-listing route is the norm for mainboard issues because it widens the secondary-market liquidity pool. The exchanges also operate the SME platforms (NSE Emerge and BSE SME) on which SME IPO issuances list under a separate set of eligibility rules.

Investor categories

SEBI ICDR recognises four principal investor categories in a book-built mainboard IPO, and the book running lead manager allocates the issue size among them subject to minimum-allocation floors.

Retail individual investors (RII)

Defined as natural persons (including HUFs applying through the karta) bidding for shares of an aggregate value not exceeding ₹2,00,000. Retail investors are guaranteed an allocation of at least 35% of the net offer in a non-100%-book-built mainboard offering. Retail bids are accepted only through the UPI ASBA route via a stockbroker or through the bank ASBA NetBanking route. The retail category is the most demand-elastic; applications in popular issues routinely exceed the reserved tranche by ten to twenty times, in which case the allotment is decided by random lottery rather than by application size.

Non-institutional investors (NII / HNI)

Investors, including individuals, HUFs, partnership firms, trusts and bodies corporate, bidding for shares of value above ₹2,00,000. NIIs are entitled to at least 15% of the net offer. Under SEBI’s December 2021 reform, the NII bucket was split into a small NII sub-category (bids of ₹2,00,000 to ₹10,00,000) receiving one-third of the NII allocation and a big NII sub-category (bids above ₹10,00,000) receiving the remaining two-thirds, with allotment within each sub-category decided by proportionate distribution. NIIs apply through bank ASBA NetBanking because the UPI mandate cap of ₹5,00,000 does not cover the entirety of the NII band.

Qualified institutional buyers (QIB)

Defined under regulation 2(zd) of the ICDR to include scheduled commercial banks, public financial institutions, foreign portfolio investors, mutual funds, insurance companies, pension funds, alternative investment funds, and certain other regulated institutional pools. QIBs receive up to 50% of the issue and apply through their own custodians and the exchange bidding platform; the UPI ASBA route is not available to them.

Anchor investors

Within the QIB allocation, an anchor investor tranche of up to 60% of the QIB portion may be allotted to QIBs subscribing for a minimum of ₹10 crore (₹2 crore for SME IPOs) at a fixed price on the working day before public bid opening, with a 30-day lock-in on 50% of the allotted shares and a 90-day lock-in on the remainder. Anchor investors must bid at a specific price, not at the cut-off, and their participation is publicly disclosed before the issue opens. The anchor allocation is widely interpreted by retail investors as a signal of institutional appetite, although the academic evidence on whether anchor participation reliably predicts post-listing performance is mixed.

Special reservations

Beyond the four principal categories, an issuer may carve out reservations from the net offer for eligible employees (typically up to 5% of the post-issue paid-up capital, with the application discount and a separate allocation pool) and for existing shareholders of the issuer or its parent (commonly up to 10% of the net offer for shareholders of a listed parent or holding company spinning off a subsidiary). Eligible NRIs are permitted in the retail and NII categories under specific KYC rules, but as of 2026 the UPI ASBA route is not available to non-resident accounts; NRIs apply through bank ASBA against their NRO or NRE accounts.

Mechanics of a book-built IPO

Most Indian mainboard IPOs are book-built rather than fixed-price. The book-building process discovers the price within a band by aggregating demand across investor categories during the subscription window.

Price band and issue parameters

The issuer, in consultation with the book running lead manager, files a Draft Red Herring Prospectus with SEBI and the exchanges, addresses observations, and converts it into a Red Herring Prospectus on issue opening. The RHP specifies the price band (a floor and a ceiling within which bids will be entertained), the minimum lot size, the dates of the subscription window (typically three to five working days), the basis on which shares will be allotted to each category and the objects of the issue (the proposed use of proceeds). SEBI’s pricing rules require the cap of the price band to be no more than 20% above the floor; in practice most issuers narrow this to 5% or 10% to focus retail demand at the higher end.

Cut-off bidding and category-wise allocation

A retail bidder can place up to three bids per application, choosing either specific prices within the band or the cut-off price option. Bidding at cut-off instructs the registrar to accept whatever price the issue is finally priced at, eliminating the risk of being excluded if the issue is priced at the upper end of the band; the amount blocked through the UPI mandate is the maximum bid value (the issue ceiling times the bid quantity). The QIB and anchor categories must bid at specific prices; the retail category retains the cut-off option as a deliberate simplification for non-specialist investors.

Subscription, oversubscription and undersubscription

At issue close, the exchanges publish the consolidated subscription numbers, expressed as a multiple of the reserved tranche for each category. A retail tranche subscribed 10× indicates that retail demand was ten times the shares set aside for retail. If a category is undersubscribed, the unfilled portion is spilled into other categories at the issuer’s discretion subject to SEBI minimums; this is rare in practice but happens occasionally in unpopular issues. If the overall issue is subscribed below 90% of the issue size, the issue is mandatorily withdrawn and all blocks released — a failed issue. Conversely, an issue subscribed several hundred times in the retail tranche (such as the MapMyIndia IPO of December 2021 or the Mamaearth IPO of November 2023) is decided largely by random lottery.

Final pricing and basis of allotment

Within two working days of issue close, the lead manager and the issuer announce the issue price — the single price at which all allottees, regardless of bid price, will be allotted shares. The registrar then generates the basis-of-allotment file using the SEBI-prescribed methodology: retail-category bids at or above the issue price are eligible for allotment, with one lot to each successful applicant in the case of heavy oversubscription. NII bids are allotted on a proportionate basis within the small and big sub-categories. QIB and anchor allotments follow the lead manager’s category-wise discretion as disclosed in the prospectus. The completed basis of allotment is published on the registrar website and feeds the depositories’ credit instructions for T+2 demat credit.

Categories of public issues

The mainboard IPO is the most visible category but not the only one. Several SEBI-regulated variants exist for different issuer profiles and structures.

Mainboard IPO

The default category. Issuer must satisfy the ICDR profitability or net-tangible-asset eligibility tests (or fall back to the compulsory book-building with QIB allotment of 75% route), retain a minimum 25% post-issue public shareholding, list on NSE and/or BSE, and conform to the full prospectus disclosure standards. Most household-name IPOs are mainboard issues. For full coverage see mainboard IPO.

SME IPO

A streamlined regime for small and medium enterprises whose post-issue paid-up capital is below ₹25 crore. SME IPOs list on the NSE Emerge or BSE SME platform and follow lighter disclosure requirements. Minimum lot size is significantly higher than mainboard (often ₹1 lakh of investment versus ₹15,000 for mainboard), which keeps the retail base of an SME issue narrower and more sophisticated. SME issues migrate to the mainboard after meeting the size thresholds for a defined period. For full coverage see SME IPO and the comparison page mainboard versus SME IPO.

Fast-track issues

An ICDR provision allowing already-listed companies with a strong track record to file a shorter prospectus and complete a follow-on offering on a compressed timetable. Fast-track issues bypass the full DRHP-observation cycle; they are typically follow-on offerings (FPOs) rather than first-time IPOs, but the regulatory route is closely related.

REIT and InvIT IPOs

Real Estate Investment Trusts and Infrastructure Investment Trusts follow separate SEBI regulations but, in practice, market their units through public offerings that look almost identical to a mainboard IPO from the applicant’s perspective. The applicant uses the same broker UPI ASBA flow, the same registrar mechanism and the same exchange listing process. Lot sizes for REIT and InvIT issues are typically larger than mainboard equity IPOs, reflecting the SEBI policy of orienting these instruments toward more sophisticated retail investors.

Follow-on Public Offer (FPO)

A second or subsequent public issue by a company that is already listed. FPOs use the same book-building process as IPOs but the issuer has the benefit of an established market price for its shares as a reference point. The Adani Enterprises FPO of January 2023 (which was ultimately withdrawn following the Hindenburg short-report cycle) is a recent high-profile example.

Eligibility for retail applicants

To apply for an IPO through the UPI ASBA route as a retail individual investor, an Indian resident must satisfy four prerequisites:

  1. A demat account with a SEBI-registered depository participant linked to either CDSL or NSDL.
  2. A PAN registered against the demat account, with the same PAN linked to the bank account from which the UPI ID is mapped; the registrar’s third-party verification matches these and silently rejects mismatches.
  3. A UPI ID, sometimes called a Virtual Payment Address, mapped to a bank account in the applicant’s own name. UPI IDs of family members, businesses or merchant categories cannot be used.
  4. The bank that issues the UPI ID must be on NPCI’s list of Sponsor Banks and Issuer Banks eligible to handle UPI ASBA mandates. As of 2026 this covers nearly all major scheduled commercial banks and a growing list of small finance banks.

A Non-Resident Indian cannot apply for an IPO through the UPI channel; NRIs must use bank ASBA against an NRO or NRE NetBanking facility because UPI mandates are not yet supported for non-resident accounts. Hindu Undivided Families, partnership firms, trusts and bodies corporate cannot apply in the retail category and must use the NII bucket through bank ASBA.

Comparison with other capital-raising mechanisms

The IPO is one of several mechanisms a private company can use to raise public-market capital. Each has different regulatory burdens, timelines and audience profiles.

IPO versus Offer for Sale (OFS)

An OFS is a mechanism for existing shareholders of an already-listed company to sell their shares to the public through an exchange-mediated auction over a single trading day, without the company issuing new shares. OFS is a common route for government disinvestment of public-sector undertakings and for promoters reducing their stake. Unlike an IPO, an OFS does not raise new capital for the company; it only redistributes existing shares from sellers to buyers. The settlement is T+1 and the OFS is run on the exchange’s bidding terminal rather than through registrars.

IPO versus Rights Issue

A rights issue is an offering of new shares by an already-listed company to its existing shareholders, typically at a discount to the market price. Rights issues do not require a fresh DRHP observation cycle (a letter of offer is used instead) and are usually cheaper to execute than an IPO. Existing shareholders can apply, renounce their rights, or let them lapse; the unsubscribed rights are reallocated by the lead manager.

IPO versus Preferential Allotment

A preferential allotment is a private placement of new shares to a small set of named investors (typically institutional or strategic), at a price fixed by ICDR formula. Preferential allotment is faster and cheaper than an IPO but limited to small dilutions and a closed list of allottees; it is most often used by listed companies to bring in a strategic investor without a public offering.

Taxation of IPO allotments

IPO allotments are taxed under the Income from Capital Gains head of the Income Tax Act, 1961, as supplemented by the Finance (No. 2) Act, 2024 which revised the short-term and long-term capital gains rates with effect from 23 July 2024.

The cost of acquisition for an IPO allottee is the issue price paid, regardless of bid price or cut-off election. There is no grandfathering protection for IPO allotments after 1 February 2018 because grandfathering applies only to shares held on or before 31 January 2018. Sale of IPO-allotted shares is reported in ITR-2 for individual investors with capital gains only and ITR-3 for investors who also have F&O or business income. See taxation of listing-day gains for the specific case where shares are sold on the first trading day.

Common edge cases and notable scenarios

Oversubscription and lottery allotment

When a retail tranche is oversubscribed, the registrar runs a SEBI-prescribed lottery to identify which applicants receive a minimum-lot allotment. The lottery operates on the count of applications, not the value bid; applying for 13 lots versus 1 lot does not increase the probability of allotment beyond the chance attached to applying once. This produces the often-counter-intuitive result that applying for a single lot is the only strategy with a non-zero allotment chance when oversubscription is heavy.

Withdrawn or postponed issues

An issuer may withdraw an issue any time before allotment, either on regulatory direction or commercial discretion. The most-discussed case in recent memory is the Adani Enterprises FPO of January 2023, withdrawn the day after closing despite achieving full subscription. SEBI’s investor-protection guidelines require complete release of all UPI mandates and bank blocks within one working day of withdrawal.

Issues priced above the band

In rare cases, regulatory intervention or strong institutional demand pushes the final issue price above the originally announced upper band. SEBI rules require the issuer in such cases to extend the bidding window by at least three working days and to publish a revised RHP supplement. Retail bidders are entitled to revise or withdraw their bids during the extension.

Multiple applications from one family

The SEBI ICDR rules treat each PAN as eligible for one application per issue per category. Multiple applications from the same PAN are flagged by the registrar and rejected at the third-party-verification stage, with the underlying UPI mandate cancelled and the bank block released. Applications from different family members each using their own PAN, demat and bank account are entirely legitimate.

References

  1. Reliance Power IPO refund delay grievances, Business Standard, February 2008.
  2. SEBI Circular SEBI/CFD/DIL/DIP/31/2008/30/7 dated 30 July 2008, Application Supported by Blocked Amount (ASBA): Introduction.
  3. SEBI Circular CIR/CFD/POLICYCELL/11/2015 dated 10 November 2015, Streamlining the process of Public Issue under the ICDR Regulations.
  4. SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated 1 November 2018, Streamlining the Process of Public Issue of Equity Shares and Convertibles.
  5. SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated 28 June 2019, Phase II Implementation.
  6. SEBI Circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated 9 August 2023, Reduction of timeline for listing of shares in Public Issue from existing T+6 days to T+3 days.
  7. SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, notified 11 September 2018.
  8. NPCI Circular dated 8 September 2025, Enhancement of UPI Per-Transaction Limits for Capital Markets and Insurance Premium Categories.
  9. Regulation 6 of SEBI (ICDR) Regulations, 2018, Allocation in Net Offer to Public.
  10. Schedule XIII of SEBI (ICDR) Regulations, 2018, Anchor Investor Allocation and Lock-in.
  11. Finance (No. 2) Act, 2024, Section 50 (amending sections 111A and 112A of the Income-tax Act, 1961), effective 23 July 2024.
  12. IPOs to compulsorily have T+3 listing from today; funds to be unblocked earlier, Business Today, 1 December 2023.

See also

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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