How to apply for an IPO in India: a beginner's guide

What is an IPO?

An initial public offering (IPO) is when a company sells shares to the public for the first time and lists them on a stock exchange. In a fresh issue the company creates new shares and keeps the money; in an offer for sale existing shareholders sell and receive the money. Many IPOs combine both. Jio Platforms’ IPO is reported to be entirely a fresh issue.

What is a DRHP?

The Draft Red Herring Prospectus is the first offer document a company files with SEBI. It describes the business, financials, risks, legal cases and how the money will be used. SEBI reviews it and issues “observations”. SEBI’s observations allow the company to proceed; they are not an endorsement of the investment.

What is an RHP?

The Red Herring Prospectus is the updated document filed with the Registrar of Companies before bidding opens. It includes the issue dates and, usually with an accompanying announcement, the price band. It is “red herring” because the final price and number of shares are not yet filled in; the final Prospectus follows after pricing.

What is an IPO price band?

In a book-built issue, the company sets a floor and a cap price — for example ₹1,065–₹1,119. Investors bid within the band. After bidding closes, the company and its bankers fix one final issue price, usually based on demand. Retail investors can choose “cut-off” to accept whatever final price is set.

What is a lot size?

The lot (or minimum bid lot) is the smallest number of shares you can apply for; you bid in multiples of it. If the lot is 12 shares and the cap price is ₹1,119, the minimum application is ₹13,428. Retail individual investors can apply for up to ₹2 lakh in total.

How to apply for an IPO, step by step

1. Open a demat and trading account with a SEBI-registered broker, linked to your PAN.
2. During the bidding window, open the IPO in your broker’s app (or your bank’s net-banking ASBA section).
3. Select your category, the number of lots and the price (or tick cut-off).
4. Enter your UPI ID and approve the mandate in your UPI app before the deadline. The money is blocked, not debited.
5. After the issue closes, check allotment on the registrar or exchange website.
6. If allotted, the shares are credited to your demat account before listing; otherwise the funds are unblocked.

Under SEBI’s T+3 timeline, listing usually happens on the third working day after the issue closes.

How does IPO allotment work?

Allotment is decided by the registrar, under SEBI rules, with the exchanges. If the retail portion is oversubscribed, SEBI rules aim to give the minimum lot to as many retail applicants as possible, chosen by computerised lottery. That’s why applying for more lots in the retail category often doesn’t increase what you receive in a popular IPO. Non-institutional and institutional categories follow their own rules described in the RHP.

What is listing gain?

Listing gain is the difference between the issue price and the price at which the shares trade when they list. It can be positive or negative. Many popular IPOs have listed below their issue price. Use our calculator to see what any listing price would mean.

What is GMP, and why is it unofficial and unreliable?

The grey market premium (GMP) is the price premium at which some dealers informally trade IPO applications or allotments before listing. It is not regulated, not reported by any exchange, not backed by settlement guarantees, and based on thin, unverifiable trades. GMP can swing sharply in days and has often been wrong about listing prices. Treat it as rumour, not data.

What is an unlisted share?

A share of a company that isn’t traded on an exchange. Buying one is a private transaction with limited liquidity, opaque pricing, possible transfer restrictions and higher counterparty risk. More on Jio Platforms unlisted shares.

What is a demat account?

A dematerialised account holds your shares electronically with a depository (NSDL or CDSL) through a depository participant, usually your broker. You need one to receive IPO shares. A trading account, often opened together, lets you sell them on the exchange.

How are IPO profits taxed in India?

Selling listed shares at a profit creates a capital gain. Gains on shares held for 12 months or less are short-term; longer holdings are long-term. After the July 2024 Budget, short-term gains on listed equity were taxed at 20% and long-term gains at 12.5% above an annual exemption of ₹1.25 lakh, with Securities Transaction Tax paid on the sale. Tax law changes regularly, so check the current position on the Income Tax Department’s website or with a tax professional. This is not tax advice.

What risks come with private-market investments?

• Liquidity: you may not find a buyer when you want to sell.
• Pricing: no transparent market price; dealer spreads can be large.
• Counterparty: you depend on the other side to deliver shares or pay.
• Lock-in: pre-IPO holdings may be locked in after listing.
• Information: fewer disclosures than a listed company.
• Fraud: fake “pre-IPO” offers are a common scam.