What is an IPO?
An IPO (Initial Public Offering) is the moment a private company offers its shares to the general public for the first time and gets listed on a stock exchange like the NSE or BSE. The company raises money to grow, and everyday investors get a chance to own a piece of it.
The IPO journey - from filing to listing
- DRHP - the company files a Draft Red Herring Prospectus with SEBI, disclosing its financials, risks and how it will use the money.
- Price band - a range is announced (e.g. ₹100–₹105 per share). You bid within this band.
- Subscription window - the IPO is open for applications, usually for 3 working days.
- Allotment - shares are allocated. If demand exceeds supply, a computerised lottery decides who gets them.
- Listing - the stock debuts on the exchange and starts trading freely.
Key terms you'll encounter
- Lot size - you can't buy a single share in an IPO; you apply in fixed lots (e.g. 1 lot = 100 shares).
- ASBA / UPI - the application method where your money is blocked in your bank account, not debited. It's only taken if you actually get shares.
- GMP (Grey Market Premium) - an unofficial, unregulated indicator of demand before listing. Useful as a sentiment gauge, never a promise.
- Cut-off price - retail investors can select this to automatically bid at the final decided price.
How to apply for an IPO (step by step)
- Ensure you have an active Demat + trading account (here's how to open one).
- Open the IPO in your broker's app or your bank's net-banking.
- Enter the number of lots and your UPI ID (or select ASBA).
- Approve the mandate on your UPI app - the amount is blocked.
- Wait for allotment. If allotted, shares appear in your Demat account before listing day.
Understanding allotment
When an IPO is oversubscribed (more applications than shares), retail investors are allotted through a lottery - you might get one lot, or none at all. Applying for more lots does not improve your odds in the retail category beyond a point, so bid sensibly.
Should you invest in every IPO?
No. A listing "pop" is never guaranteed - many IPOs list flat or below their issue price. Treat an IPO like any other investment: read the DRHP, understand the business, check the valuation (P/E ratio), and only apply if the company looks genuinely worth owning.
Parasram India helps you apply for IPOs seamlessly via UPI/ASBA. Open a free Demat account to get started, or see our services.
