DaamMitra Markets

How to apply for an IPO in India: a step-by-step guide

What an IPO is, what price band and lot size mean, and how to apply using UPI or net banking – plus how allotment and listing work.

An IPO (initial public offering) is when a company sells its shares to the public for the first time and gets listed on the stock exchanges (NSE and/or BSE). Retail investors can apply for shares during the few days the IPO is open.

Words you will see in every IPO

  • Price band: the range within which you can bid, for example ₹270–₹285 per share. The final price is decided after bidding closes.
  • Lot size: the minimum number of shares you must apply for, and the multiple you must apply in. If the lot size is 52 shares, you can apply for 52, 104, 156 shares and so on.
  • Cut-off price: if you tick "cut-off", you agree to pay whatever final price is set within the band. Retail investors are allowed to bid at cut-off.
  • Retail individual investor (RII): an individual applying for shares worth up to ₹2 lakh. A part of every mainboard IPO is reserved for this category.
  • Red herring prospectus (RHP): the offer document filed with SEBI. It explains the business, finances, risks and how the money raised will be used.

What you need

  1. A demat account and trading account (with any SEBI-registered broker).
  2. A bank account that supports ASBA (most banks do), or a UPI ID linked to your bank account.
  3. Your PAN, which must be linked to your demat account.

How to apply, step by step

  1. Read the RHP or at least its summary. Look at what the company does, its profits or losses, the risks it lists and whether the IPO is a fresh issue (money goes to the company) or an offer for sale (existing shareholders sell their shares).
  2. Open the IPO section in your broker's app or your bank's net-banking (look for "ASBA" or "IPO").
  3. Choose the number of lots and enter your bid price, or tick cut-off.
  4. Approve the UPI mandate. If you applied through UPI, you'll get a request in your UPI app. Approve it before the IPO closes – otherwise your application is not valid. The UPI limit for IPO applications is ₹5 lakh.
  5. The money is blocked, not debited. The amount stays in your account but is blocked. It is only taken if you get shares; otherwise it is unblocked.

Allotment: why you may not get shares

Popular IPOs are often oversubscribed – people apply for many more shares than are on offer. In the retail category, when demand is very high, shares are allotted by a computerised lottery so that as many applicants as possible get at least one lot. Applying for more lots usually does not improve your chances in such cases.

You can check allotment status on the registrar's website or the exchange websites a few days after the IPO closes.

Listing

Under SEBI's current timeline, shares are listed on the exchanges three working days after the IPO closes (called T+3). On listing day the shares start trading, and the price can be higher or lower than the issue price.

Things to be careful about

  • "Grey market premium" (GMP) figures shared online are unofficial and unregulated. They are not a reliable guide to listing prices.
  • Oversubscription isn't a guarantee of gains. Heavily subscribed IPOs have listed below their issue price too.
  • Applying from multiple accounts with the same PAN is not allowed, and such applications can be rejected.

Key takeaways

  • You need a demat account, a PAN and an ASBA bank account or UPI ID.
  • Apply in multiples of the lot size, within the price band (or at cut-off).
  • Your money is only blocked until allotment; it is unblocked if you don't get shares.
  • Listing happens about three working days after the issue closes.