What is an IPO?

An IPO (Initial Public Offering) is when a private company offers its shares to the public for the first time. By investing in an IPO, you become a part-owner of the company and can potentially profit when the shares list on the stock exchange.

India has become one of the most active IPO markets in the world. In 2025 alone, over 90 companies raised more than ₹1.5 lakh crore through IPOs on NSE and BSE.

💡 Did you know? You need a Demat account and a UPI-linked bank account to apply for IPOs in India. No Demat account = no IPO application.

How Does an IPO Work?

Here's the basic lifecycle of an IPO in India:

  1. Company files DRHP — Draft Red Herring Prospectus filed with SEBI with all financial details
  2. Price band announced — The company sets a price range (e.g., ₹400–420 per share)
  3. IPO opens for 3 days — Public can apply through their broker or UPI app
  4. Subscription closes — SEBI checks oversubscription; allotment is done by lottery
  5. Allotment announced — You find out if you got shares (T+6 days)
  6. Listing day — Shares list on NSE/BSE (T+6 days), price can go up or down

How to Apply for an IPO in India

Method 1: Via Your Broker App (Zerodha, Groww, Angel One)

  1. Open your broker app (Zerodha Kite / Groww / Angel One)
  2. Go to IPO section
  3. Select the IPO you want to apply for
  4. Enter the number of lots and bid price
  5. Authorize via UPI — funds are blocked (not debited yet)
  6. Approve the mandate in your UPI app (Google Pay / PhonePe / Paytm)

Method 2: Via Net Banking (ASBA)

Log into your bank's net banking portal → go to IPO / ASBA section → select the IPO → enter details → submit. The bank blocks the money in your account until allotment.

💡 ASBA (Application Supported by Blocked Amount) means your money stays in your account and earns interest. It's only debited if you get an allotment.

What is a Lot in an IPO?

You cannot apply for any random number of shares in an IPO. Companies define a minimum lot size — typically ₹14,000 to ₹15,000 worth of shares. You must apply in multiples of this lot.

Example: If the IPO price is ₹500 and lot size is 30 shares, you must apply for 30, 60, 90 shares etc. The minimum investment is ₹15,000.

You can apply for a maximum of 13 lots (worth ~₹2 lakh) per application as a retail investor.

What is GMP (Grey Market Premium)?

Before an IPO lists on the exchange, shares are traded informally in the grey market. The GMP (Grey Market Premium) is the extra price buyers are willing to pay above the IPO issue price.

Example: If an IPO is priced at ₹500 and GMP is ₹100, the expected listing price is around ₹600 (a 20% gain).

⚠️ Important: GMP is unofficial and unregulated. It's not always accurate and can change daily. Do not make investment decisions based solely on GMP. The actual listing price can be very different.

IPO Categories — Who Gets Priority?

SEBI divides IPO applications into three categories:

  • Retail Individual Investors (RII) — investing up to ₹2 lakh. Get 35% of total IPO shares reserved.
  • Non-Institutional Investors (NII / HNI) — investing above ₹2 lakh. Get 15% of shares.
  • Qualified Institutional Buyers (QIB) — mutual funds, FIIs, insurance companies. Get 50% of shares.

For heavily oversubscribed IPOs in the retail category, allotment is done by computerised lottery — so applying for more lots does not improve your chances of getting allotted.

Strategy: How to Maximise Your IPO Chances

  • Apply through multiple family members — each person can apply once, improving combined odds
  • Always apply at cut-off price — this ensures your bid is valid for any price within the band
  • Apply early — avoid last-minute UPI approval failures
  • Check the financials — don't apply to every IPO blindly. Look at revenue growth, profit margins, and valuation

Don't have a Demat account yet?

Open a free account to start applying for IPOs in minutes.

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IPO vs Secondary Market: Which is Better?

Many investors wonder whether to buy a company in the IPO or wait for it to list and buy from the open market. The honest answer depends on the company:

  • If the IPO is high-quality with reasonable valuation → apply in the IPO (listing gains possible)
  • If the IPO is overvalued but the company is good → wait for a post-listing correction to buy cheaper
  • If the IPO is poor quality → avoid entirely

Most retail investors use IPOs as a short-term listing gain trade. For long-term investing, buying after listing (when there's more price history) is often safer.