IPO process in India

An Initial Public Offering (IPO) in India is the regulated mechanism under which an unlisted Indian company offers its equity shares to the public for the first time, raising capital through the issuance of new shares (fresh issue) and/or the sale of existing shares by promoters and other shareholders (offer for sale, OFS). The IPO process is governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 and the Companies Act 2013, with the Securities and Exchange Board of India as the statutory regulator and the National Stock Exchange and Bombay Stock Exchange as the listing venues.

The Indian IPO process is structurally a book-building exercise: the issuer publishes a price band (or fixed price for smaller issues), institutional and retail investors submit bids within the band during a 3-5 day subscription window, the final issue price is determined based on demand at each price level, and allotment is made through a SEBI-prescribed proportionate or lottery mechanism depending on the category. Settlement runs through the UPI ASBA framework for retail investors, where the application amount is blocked in the investor’s bank account during the subscription period and debited only on allotment. The typical timeline from board approval to listing day runs approximately 9 to 12 months for a mainboard IPO and 4 to 6 months for an SME IPO under the mainboard vs SME IPO framework.

This article covers the end-to-end IPO process in India, organised by the stages a serious primary-market participant needs to understand: the regulatory framework and prerequisites, the DRHP and RHP filing stages, the book-building mechanism, anchor investor allocation, retail subscription, allotment and listing, and the post-listing lock-in framework.

Regulatory framework

SEBI (ICDR) Regulations 2018

The SEBI (ICDR) Regulations 2018 , notified on 11 September 2018, are the comprehensive framework for public issues in India. The regulations replaced the older SEBI DIP Guidelines 2000 and consolidated the rules covering eligibility, pricing, disclosure, subscription, allotment, and post-issue obligations.

Key eligibility requirements for a mainboard IPO under ICDR:

• Profitability or alternative routes: net tangible assets of at least Rs 3 crore in each of the preceding three years; average operating profit of at least Rs 15 crore in any three of the preceding five years; net worth of at least Rs 1 crore in each of the preceding three years. Companies failing these thresholds can use the QIB-only book-building route under ICDR Regulation 6(2).
• Promoter contribution: minimum 20 per cent of post-issue capital, locked in for 18 months for promoters and 6 months for non-promoter pre-IPO shareholders. The promoter and lock-in mechanics are detailed separately.
• Minimum public shareholding: 25 per cent for companies with post-issue market capitalisation below Rs 1,600 crore; lower thresholds for larger issues with phased compliance over 3 years.
• Issue size minimum: Rs 10 crore for SME IPOs, with no statutory upper limit on mainboard IPOs (largest Indian IPO to date is LIC at Rs 21,008 crore in May 2022).

Companies Act 2013

The Companies Act 2013 provides the corporate-law framework for public issues, requiring board and shareholder approvals, prospectus disclosure under Section 26, and the issue of allotment under Section 39. The Act and ICDR Regulations operate in parallel: ICDR governs market-specific disclosures, while the Companies Act governs corporate-law specifics including the role of the registrar of companies (RoC) .

The pre-filing stage

Before filing the IPO documents with SEBI, the issuer completes a substantial preparatory phase typically lasting 6 to 9 months.

Board and shareholder approvals

The IPO process begins with a board resolution authorising the public issue, followed by a special resolution by shareholders under Section 62 of the Companies Act 2013 approving the increase in authorised capital and the fresh issuance to public investors.

Merchant banker appointment

The issuer appoints one or more SEBI-registered merchant bankers (book running lead managers, BRLMs) under the SEBI (Merchant Bankers) Regulations 1992. The lead manager’s responsibilities include due diligence on the issuer, preparation of the prospectus, marketing the issue, managing the book-building process, and coordinating with SEBI and the exchanges through the listing process. Major Indian merchant bankers include Kotak Mahindra Capital, ICICI Securities, Axis Capital, JM Financial, and SBI Capital Markets.

Other intermediaries

The merchant banker assembles a syndicate of intermediaries:

• Registrar to the issue: companies like Bigshare Services , Link Intime , KFin Technologies , and CAMS handle subscription processing, allotment, and refunds.
• Bankers to the issue: receive application monies (now mostly handled through the UPI ASBA framework).
• Underwriters: commit to absorb unsubscribed portions of the issue.
• Stock exchanges: NSE and BSE receive in-principle listing approvals.
• Depositories: CDSL and NSDL handle dematerialised allotment.

Due diligence and prospectus preparation

The merchant banker conducts comprehensive due diligence covering financial statements (audited by Big Four or equivalent firms), legal compliance, regulatory approvals, intellectual property, related-party transactions, and material litigation. The prospectus drafting reflects the diligence findings and follows the ICDR disclosure schedule.

The DRHP stage

Filing the DRHP

The Draft Red Herring Prospectus (DRHP), often called the “preliminary prospectus”, is filed with SEBI and the exchanges as the first formal public IPO document. The DRHP contains all disclosures required under ICDR except the final issue price and the issue size in monetary terms. The DRHP is made public on the SEBI website and the merchant banker’s website.

SEBI review

SEBI examines the DRHP through an examination process that typically runs 2 to 4 months. The regulator issues observations on the document covering disclosure gaps, accounting treatments, related-party transactions, and risk-factor presentation. The issuer addresses observations through an updated DRHP. SEBI does not approve or endorse the issue substantively; its role is to ensure disclosure adequacy.

Public comments

The 21-day public comment period during which any person can file comments on the DRHP through SEBI’s online portal. Comments are reviewed by SEBI as part of the observation process.

The RHP stage

Filing the RHP

After SEBI clearance, the issuer files the Red Herring Prospectus (RHP) with the registrar of companies (RoC) and the exchanges. The RHP is the legally operative prospectus for the issue under Section 32 of the Companies Act 2013. The RHP includes the price band (or fixed price), the issue size, the issue opening and closing dates, and the anchor investor allocation date.

Price band determination

The price band is determined by the issuer in consultation with the merchant banker, typically as a narrow range of 20 per cent or so. The range allows for price discovery during the book-building process while signalling the issuer’s expected valuation. Sample band: Rs 285 to Rs 300 per share, indicating that the final price will be set within this range based on demand.

Anchor investor day

The anchor investor allocation occurs one working day before the public subscription opens. Anchor investors are qualified institutional buyers (QIBs) who commit to subscribe at a fixed price (typically the upper end of the price band) for a portion of the QIB quota. Anchor allocation is at the discretion of the issuer and merchant banker subject to SEBI prescribed criteria; the anchor investors get a 30-day lock-in on 50 per cent of allocated shares and a 90-day lock-in on the remaining 50 per cent.

The anchor investor day allocation is a strong signal of institutional interest in the issue. Strong anchor demand often drives subsequent oversubscription in the public issue.

Book building and subscription

The book-building mechanism

Book building is the price-discovery mechanism prescribed under ICDR for IPOs above the small-issue threshold. During the 3-5 day subscription period, the merchant banker collects bids from investors at various price points within the price band. The bids are aggregated in the book-building system maintained by the exchanges (NSE and BSE).

At the end of the subscription period, the cut-off price is determined: the highest price at which the issue can be fully subscribed. All bids at or above the cut-off price are deemed accepted at the cut-off price; bids below are rejected.

Investor categories

The ICDR framework prescribes minimum allocations across three categories:

The qualified institutional buyer category includes mutual funds, foreign portfolio investors, banks, insurance companies, and provident funds. NIIs are HNI investors applying above Rs 2 lakh. RIIs are retail investors applying below Rs 2 lakh (the cap was raised from Rs 1 lakh through ICDR amendments).

Retail subscription via UPI ASBA

Retail investors subscribe to IPOs through the UPI ASBA (Application Supported by Blocked Amount) framework operationalised by NPCI and SEBI. The flow:

1. The investor places a bid through their broker’s IPO platform (Zerodha Kite app , Groww, or any major broker) or through a bank’s net-banking IPO interface.
2. The bid includes a UPI ID for fund blocking.
3. The application is forwarded to the investor’s bank, which blocks the application amount in the investor’s account.
4. On allotment, the bank debits the allotted amount and unblocks the rest.
5. On non-allotment, the bank lifts the block entirely.

UPI ASBA replaced the older cheque-based ASBA and the pre-ASBA process where retail investors physically paid the application amount upfront. The UPI ASBA framework operationalised from January 2019 and became mandatory for retail subscription in mainboard IPOs from July 2019. See How to apply for an IPO through Zerodha and How to apply for an IPO on the Zerodha Kite mobile app for the operational flow.

Grey market activity

Many Indian IPOs trade in unofficial grey markets between the price-band announcement and listing day. The grey market premium (GMP) reflects unofficial dealer expectations of the listing premium and is widely tracked by retail investors as a sentiment indicator. The grey market is not regulated by SEBI and trades on private informal networks; positions can fail to settle and prices can be manipulated. GMP is a signal, not an investable instrument.

Allotment and refunds

The basis of allotment

After the subscription closes, the registrar to the issue prepares the basis of allotment under SEBI-prescribed methodology:

• QIBs: proportionate allotment within the QIB book.
• NIIs: proportionate allotment within the NII book.
• RIIs: lot-by-lot allotment in oversubscribed cases. Each RII applicant gets at least one lot if the issue is oversubscribed; remaining lots are allotted by lottery.

The minimum RII lot value is Rs 14,000 to Rs 15,000 typically (adjusted to the price band).

Allotment intimation

Within 7 working days of subscription closure, the registrar finalises allotments and intimates investors. The registrar releases the basis of allotment publicly on its website and the exchange websites. Investors can check allotment status on the registrar website , on Zerodha , or on the BSE / NSE portals .

Refund processing

On non-allotment, the UPI ASBA block is lifted on the investor’s bank account. Pre-ASBA, refunds were issued via cheque or NEFT and could take 15-21 days; the UPI ASBA framework reduces refund processing to typically 1-2 days after allotment is finalised.

Listing and post-listing

Listing day

Listed equity shares trade on the exchanges from the first business day after allotment (T+6 working days from issue closure). The first day’s trading opens with a pre-open auction that discovers an opening price relative to the issue price; the difference is the “listing gain” or “listing loss”.

Indian IPO listing-day volatility has been a major retail-investor focus, with some IPOs listing at substantial premiums to the issue price (Zomato, Nykaa, Mamaearth) and others below the issue price (LIC, Paytm). The listing-day price is determined by collective bidding among all market participants, not by the issuer or merchant banker.

Listing compliance

Post-listing, the issuer falls under the continuing obligations of SEBI (LODR) Regulations 2015 covering periodic financial disclosures, material event reporting, corporate governance, insider trading restrictions, and minimum public shareholding maintenance.

Lock-in periods

Promoters and pre-IPO shareholders are subject to ICDR-prescribed lock-in periods:

• Promoter contribution (20 per cent of post-issue capital): 18-month lock-in.
• Excess promoter holding: 6-month lock-in.
• Non-promoter pre-IPO shareholders: 6-month lock-in.
• Anchor investor: 30-day lock-in on 50 per cent, 90-day lock-in on remaining 50 per cent.

The lock-in restricts these shareholders from selling during the prescribed period, preventing immediate post-listing exits that could destabilise the share price.

Follow-on Public Offers

A company that has already listed shares may issue additional shares through a Follow-on Public Offer (FPO) under the same ICDR framework. FPOs follow a similar process to IPOs (DRHP, RHP, book building, allotment) but with simplified disclosures because the company already has an established public trading history.

Major Indian FPOs include the Yes Bank FPO of July 2020 (Rs 15,000 crore) and the Vodafone Idea FPO of 2023. FPOs are less common than IPOs in India because most listed companies prefer the Qualified Institutional Placement (QIP) route under ICDR Chapter VI for incremental fundraising.

Rights issues

A rights issue is the offer of additional shares to existing shareholders, typically at a discount to the prevailing market price, in proportion to their current holding. Rights issues do not require the IPO-style book-building process; they follow a simpler offer-letter mechanism under ICDR Chapter III. Rights issues can be subscribed through the Zerodha rights issue application flow or directly via the registrar’s online portal.

SME IPOs

SME (Small and Medium Enterprise) IPOs operate under the SME exchange framework on NSE Emerge and BSE SME platforms. The framework provides:

• Lower minimum issue size (Rs 10 crore minimum on BSE SME).
• Simplified disclosure requirements.
• Reduced compliance overhead for the listed entity.
• 100 per cent underwriting requirement (mainboard IPOs are typically not fully underwritten).
• Migration path to mainboard listing after meeting eligibility thresholds.

SME IPOs have grown sharply in 2023-2024, with hundreds of issues raising tens of thousands of crore. The category has attracted both legitimate small-business capital raising and speculative listing-day-gain-focused retail interest.

Common participation routes

Retail investor

A retail investor applies through their broker’s IPO platform or net banking ASBA. Major routes:

• How to apply for an IPO through Zerodha
• How to apply for an IPO on the Zerodha Kite mobile app
• How to apply for an IPO on Zerodha Kite web
• How to apply at cut-off price in an IPO on Zerodha
• Bank ASBA via NetBanking
• How to apply under the shareholder category in an IPO

High-net-worth investor

HNI investors apply in the NII (Non-Institutional Investor) category through their broker or wealth manager. NII allotment is proportionate; large NII applications can produce material allotments but require funding the full bid amount (with UPI ASBA blocking it).

Institutional investor

Institutional investors apply directly through the merchant banker or their custodian. Anchor investor allocation requires pre-IPO coordination with the merchant banker.

See also

• SEBI (ICDR) Regulations 2018
• SEBI DIP Guidelines 2000
• SEBI (LODR) Regulations 2015
• Follow-on Public Offer (FPO)
• Rights issue
• Grey market premium (GMP)
• Promoter
• Mainboard vs SME IPO
• Book building
• Red herring prospectus
• Qualified Institutional Buyer
• Anchor investor
• ASBA
• UPI ASBA
• SEBI
• How SEBI regulates Indian capital markets
• National Stock Exchange
• Bombay Stock Exchange
• CDSL
• NSDL
• Bigshare Services
• Link Intime
• KFin Technologies
• How to apply for an IPO through Zerodha
• How to check IPO allotment status

External references

• SEBI ICDR Regulations 2018 full text
• SEBI Annual Report sections on primary market activity
• NSE primary market page
• BSE primary market page
• Companies Act 2013

References

1. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 and subsequent amendments, sebi.gov.in.
2. Companies Act 2013, Sections 23 to 42 covering public issue framework.
3. SEBI Master Circular on Issue of Capital, sebi.gov.in.
4. SEBI Annual Reports for primary-market statistics on IPO and FPO issuances, accessed May 2026.
5. NSE Emerge and BSE SME platform documentation for SME IPO framework, nseindia.com and bseindia.com.
6. SEBI circulars on UPI ASBA operationalisation from January 2019 onwards.
7. CDSL and NSDL documentation on dematerialised IPO allotment, cdslindia.com and nsdl.co.in.