Ask most first-time investors about an IPO and they can tell you how to tap "Apply" on their broker app — but not what actually happens to that company, or their money, in the weeks around it. The IPO process in India is a fixed, regulator-governed sequence: a company files a draft prospectus, SEBI reviews it, a price band is set, you bid with blocked funds, shares are allotted, and the stock lists — now within three working days of the issue closing. Understand the sequence and the jargon stops being intimidating. This is the cornerstone guide to that journey, stage by stage, built for the Indian retail investor.
The IPO journey in one view
An Initial Public Offering is how a private company sells shares to the public for the first time and gets listed on the NSE and BSE. But the "offering" is the visible tip of a months-long, tightly-regulated process overseen by the Securities and Exchange Board of India (SEBI). Every IPO you apply to has already cleared several gates before the bidding window opens.
The whole sequence exists to protect investors: disclosure first, pricing second, money last. A company must tell the market everything material about itself before it is allowed to ask for a rupee. Knowing where each stage sits turns a chaotic-looking event into a checklist you can follow. If you want this foundation built properly rather than pieced together from app notifications, a structured stock market course walks you through primary markets end to end.
One distinction underpins everything here: the primary market versus the secondary market. An IPO happens in the primary market — the company itself (or an existing owner) sells shares directly to investors for the first time. The moment the stock lists, all further buying and selling happens in the secondary market, between investors, on the exchange. The IPO process is simply the bridge that moves a company from private ownership onto that public exchange. Everything below describes crossing that bridge exactly once.
The six stages every Indian IPO passes through, in order
Source: SEBI ICDR framework and public-issue listing-timeline norms.
Stages 1–2: DRHP filing and SEBI review
It starts with paperwork. The company, helped by merchant bankers (the "lead managers"), files a Draft Red Herring Prospectus (DRHP) with SEBI. This document lays out the business, its financials, the promoters, how it plans to use the money, and — crucially — the risk factors. It is the single most important document a serious applicant reads.
The odd name is worth decoding: a prospectus is called "red herring" because it deliberately leaves out the final issue price and exact issue size until later. The draft version (DRHP) is the first public draft; the final RHP adds the price band. So the naming itself tells you where you are in the timeline — draft first, priced version later.
SEBI does not "approve" or endorse the IPO. It reviews the DRHP for disclosure adequacy and issues observations; the company must address them. This is a common misconception worth killing early: a SEBI-cleared IPO is not a SEBI-recommended IPO. The regulator checks that you have been told enough to decide, not that the decision is a good one.
Learning to read that draft prospectus is the highest-leverage skill in primary-market investing. We cover the checklist in depth in our guide on how to analyse an IPO before applying, so here we will stay on the process and move to pricing.
Stage 3: The RHP, book building and the price band
Once observations are cleared, the company files the Red Herring Prospectus (RHP) — the near-final version — and announces the offer dates and the price band. Most Indian mainboard IPOs use the book-building method: instead of one fixed price, the company offers a band (say ₹100–₹105) and lets demand discover the final "cut-off" price. Retail investors typically bid at cut-off, meaning they accept whatever final price is set within the band.
Two more terms matter at this stage. The lot size is the minimum number of shares you can bid for — you apply in whole lots, not single shares, and SEBI sizes the retail lot so a single-lot application lands near ₹14,000–₹15,000. Bidding at cut-off means you agree to pay the final price the book discovers, so your bid stays valid even if the price is fixed at the top of the band. This is why most retail applicants simply tick "cut-off" rather than naming a price.
The shares on offer come in two flavours, and the difference decides where your money goes. A fresh issue raises new capital for the company; an offer for sale (OFS) simply lets existing shareholders cash out, so none of that money reaches the business. We break down why that distinction matters in fresh issue vs offer for sale. A single IPO can be a mix of both, and the split is spelled out in the prospectus.
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When the issue opens, you apply through your bank or broker. India uses ASBA (Application Supported by Blocked Amount): your application money is not debited, it is simply blocked in your bank account. It keeps earning interest, and it is only debited if shares are actually allotted to you — otherwise the block is released automatically. Retail investors apply using a UPI mandate, with a per-transaction limit of ₹5 lakh, which comfortably covers the retail category.
The table below shows what actually happens to your funds at each step — the part beginners most often misunderstand.
| Step | What happens to your money | Who acts |
|---|---|---|
| You place the bid | Amount is blocked, not debited; still earns interest | You + your bank/broker |
| You approve the UPI mandate | Block is confirmed against your UPI app | You |
| Allotment finalised | ✓ Allotted: amount debited · ✗ Not allotted: block released | Registrar |
Stage 5: Subscription and the basis of allotment
Bids pour in across three categories — Qualified Institutional Buyers (QIB), Non-Institutional Investors (NII), and Retail Individual Investors (RII) — each with a reserved quota. When total demand exceeds shares on offer, the IPO is oversubscribed, and this is where many retail applicants get confused.
The quotas are set by SEBI and depend on the route the company takes. For a standard book-built issue, up to 50% is reserved for QIBs, at least 15% for NIIs, and at least 35% for retail. The NII bucket itself splits into small-NII (applications above ₹2 lakh up to ₹10 lakh) and big-NII (above ₹10 lakh), each allotted separately. Retail is capped at ₹2 lakh per application — the ceiling exists precisely so the small investor's quota is not swamped by large cheques. Knowing your category tells you which pool you are competing in.
For the retail category, an oversubscribed IPO does not allot shares proportionately down to fractions. Instead, allotment is done in lots by a computerised lottery: you either get one full lot or none. That is why applying for more lots does not linearly improve your odds once an issue is heavily oversubscribed. Heavy oversubscription is often driven by hype and grey-market chatter rather than fundamentals — a trap we unpack in our explainer on the IPO grey market premium. The registrar publishes the "basis of allotment," and refunds (block releases) for unsuccessful applicants happen at the same time.
One process, two tracks: mainboard vs SME IPOs
The six stages above describe a mainboard IPO — larger companies listing on the main NSE and BSE platforms. Smaller companies can instead list on the dedicated SME platforms (NSE Emerge, BSE SME), and while the spine of the process is the same, the details differ: smaller minimum issue sizes, a larger minimum lot value, lighter (but still real) disclosure, and often a fixed-price rather than book-built route. SME IPOs can also carry sharper risk and thinner liquidity after listing, which is why SEBI has been tightening their rules for retail applicants. Recognising which track an IPO is on tells you how much extra homework the offer deserves before you even open the prospectus.
Stage 6: Listing day — and what to do next
Within three working days of the issue closing (the SEBI-mandated T+3 timeline), the shares list on the exchanges. The opening price is not the issue price; it is discovered through a special pre-open call auction for new listings, the same mechanism we explain in our guide to the NSE pre-open call auction. The gap between the listing price and the issue price is the "listing gain" — and it can just as easily be a listing loss.
The move to T+3 was a genuine improvement for applicants. A shorter gap between issue close and listing means your funds are blocked for fewer days, refunds on unsuccessful bids arrive faster, and successful applicants can act on their shares sooner. Less capital sits idle and locked, which matters most when you are applying across several issues in a busy IPO season.
A listing pop is never guaranteed, and it is not the point of understanding the process. The investors who do well in primary markets are the ones who treated the DRHP, the pricing and the business as the decision — not the grey-market rumour. Start there: for the next few IPOs, read the process through, follow one issue end to end without applying, and watch how each stage plays out. The pattern recognition compounds fast.
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What are the stages of the IPO process in India?
There are six: the company files a Draft Red Herring Prospectus (DRHP) with SEBI; SEBI reviews it and issues observations; the company files the Red Herring Prospectus (RHP) with a price band; the bidding window opens (ASBA/UPI); shares are allotted based on subscription; and the stock lists on the exchanges within three working days (T+3) of the issue closing.
Does SEBI approve or recommend an IPO?
No. SEBI reviews the prospectus for disclosure adequacy and issues observations the company must address. It does not endorse the IPO or vouch for it as an investment. A SEBI-cleared IPO simply means you have been given enough information to decide for yourself — the decision, and its risk, are entirely yours.
What is ASBA and how does it protect my money?
ASBA (Application Supported by Blocked Amount) means your IPO application money is blocked in your bank account rather than debited. It keeps earning interest and is only debited if shares are allotted to you. If you get no allotment, the block is released automatically. Retail investors apply through a UPI mandate with a ₹5 lakh per-transaction limit.
Why did I not get an IPO allotment even though I applied?
When an IPO is oversubscribed, retail allotment is done by a computerised lottery in lots — you get one full lot or nothing. Applying for extra lots does not linearly raise your odds once demand is very high. Not receiving an allotment is common and simply means the lottery did not select your application; your blocked funds are released.
How soon does an IPO list after it closes?
Under SEBI's mandatory T+3 timeline, shares list within three working days of the issue closing. The listing price is discovered through a special pre-open call auction, not fixed at the issue price, so it can open above or below what you paid. A listing gain is never guaranteed.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Markets carry risk — please do your own research or consult a qualified financial professional before investing. NIFM provides training and exam preparation; certification exams conducted by regulatory or professional bodies are administered by those bodies independently.
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