Master IPOInvesting
Learn IPO basics, allotment rules, GMP, SME IPOs, taxation, subscription data and everything you need to make informed investment decisions.
Complete IPO Guide
Everything from basics to advanced concepts
Investor Education
Understand risks, allotment and taxation
Introduction to IPO in India
An IPO (Initial Public Offering) marks a crucial milestone in a company's lifecycle. It is the process through which a privately held company becomes publicly traded by offering its shares to the general public for the first time. In India, IPOs are regulated by SEBI and listed on NSE or BSE.
For investors, IPOs offer a unique opportunity to invest in companies at an early public stage, potentially benefiting from listing gains and long-term growth. The Indian IPO market has evolved significantly with transparent processes, online applications, and faster allotments.
What is an IPO?
An IPO is the first sale of a company's equity shares to public investors. Before an IPO, ownership is limited to promoters, founders, private investors, and venture capitalists. Once listed, shares can be freely traded in the secondary market.
Key Objectives of an IPO
- Raise capital for expansion and growth
- Repay existing debt
- Fund new projects or acquisitions
- Provide exit to early investors
- Enhance corporate visibility and brand trust
Evolution of IPO Market in India
- India's IPO ecosystem has matured due to:
- Strong regulatory framework by SEBI
- Digitization of IPO applications (UPI-ASBA)
- Increased retail investor participation
- Growth of SME IPO platforms
- The Indian IPO market has seen participation from startups, manufacturing giants, technology firms, and government-backed PSUs.
IPO Tracker
Live & Upcoming IPOs in India
Types of IPOs in India
Based on Pricing Mechanism
Fixed Price Issue
- Price decided before issue opens
- Investors apply at a single fixed price
- Mostly used in SME IPOs
- Example: Price: ₹80 per share
Book Building Issue
- Price band provided (Lower & Upper price)
- Final price determined based on demand
- Most mainboard IPOs follow this method
- Example: Price Band: ₹100 – ₹105
Based on Share Offering
Fresh Issue
- New shares are issued
- Funds go directly to the company
- Used for: Business expansion, Debt repayment, Working capital
Offer for Sale (OFS)
- Existing shareholders sell shares
- Company does not receive funds
- Used for: Partial exit by promoters, Improving public shareholding
- Most IPOs combine Fresh Issue + OFS
Mainboard IPO vs SME IPO
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Listing Exchange | NSE/BSE | NSE SME / BSE SME |
| Investment Size | Higher | Lower |
| Risk Level | Moderate | High |
| Liquidity | High | Limited |
| Disclosure Norms | Strict | Moderate |
IPO Investor Categories
Who are Retail Investors?
Retail Individual Investors (RII) are individual investors who apply for IPO shares for personal investment purposes.
Investment Limit
- Maximum investment: ₹2,00,000
- Applications above ₹2 lakh are not considered under retail category
Key Characteristics
- This category sees the highest participation volume in IPOs
- Reserved portion in Mainboard IPOs: At least 35% of the total issue size
- Applications must be made using ASBA (Application Supported by Blocked Amount)
Allotment Process
- If the IPO is oversubscribed, allotment is done through a computerized lottery system
- Every valid retail applicant has an equal chance of allotment, irrespective of the number of lots applied
- Partial or single-lot allotment is common in highly subscribed IPOs
Best For
- First-time investors
- Small investors looking for listing gains or long-term investments
Who are NIIs / HNIs?
Non-Institutional Investors (NII), commonly known as High Net Worth Individuals (HNI), include: Individuals, Corporates, Trusts, NRIs (non-repatriation basis)
Investment Limit
- Investment above ₹2,00,000
- No upper investment limit
Sub-Categories
- SEBI further divides NIIs into:
- Small HNIs (sHNI): ₹2 lakh to ₹10 lakh
- Big HNIs (bHNI): Above ₹10 lakh
Key Characteristics
- Reserved portion in Mainboard IPOs: At least 15% of the issue size
- Higher application amounts increase the probability of allotment, but allotment is not guaranteed
- No lottery system like retail category
- Allotment is done on a proportionate basis
Best For
- Investors with higher capital
- Investors aiming for listing gains
- Experienced market participants
Who are QIBs?
Qualified Institutional Buyers are professional and regulated investors, such as: Mutual Funds, Banks, Insurance Companies, Foreign Institutional Investors (FIIs / FPIs), Pension Funds
Investment Limit
- No maximum investment limit
- Typically invest large sums
Key Characteristics
- Reserved portion in Mainboard IPOs: At least 50% of the issue size
- Considered informed and sophisticated investors
- Their participation reflects market confidence
- Strong QIB subscription often indicates positive listing prospects
Allotment Process
- Allotment is done on a proportionate basis
- No lottery system
- Cornerstone investors may get shares before IPO opening (in select cases)
Best For
- Institutional and professional investors
- Long-term strategic investments
IPO Category Reservation Summary (Mainboard IPOs)
| Investor Category | Reservation |
|---|---|
| QIB | ≥ 50% |
| Retail (RII) | ≥ 35% |
| NII / HNI | ≥ 15% |
| Employee/Shareholder quota (if applicable) | - |
IPO Price Band, Lot Size & Issue Size
IPO Price Band
What is an IPO Price Band?
The IPO Price Band is the price range within which investors can bid for shares during the IPO subscription period.
Example: Price Band: ₹100 – ₹105 per share. Investors can bid at any price within this range.
Types of IPO Pricing
- Fixed Price Issue: Offered at one fixed price. Common in SME IPOs. Example: ₹80 per share
- Book-Building Issue (Most Common): Price band with lower & upper limits. Final price decided based on demand. Example: ₹100 – ₹105
What is Cut-Off Price?
The final IPO price at which shares are allotted. Retail investors can apply at "Cut-Off". Usually set at the upper end if demand is strong.
Why Price Band Matters
- Determines minimum investment amount
- Helps evaluate IPO valuation
- Affects listing gains and long-term returns
IPO Lot Size
What is IPO Lot Size?
The minimum number of shares an investor must apply for in an IPO.
Example: Lot Size: 150 shares, Price Band: ₹100 – ₹105 → Minimum investment = 150 × 105 = ₹15,750
Key Points About Lot Size
- Investors must apply in multiples of lot size
- Retail investors can apply up to ₹2 lakh
- Lot size differs for Mainboard and SME IPOs
Why Lot Size Is Important
- Determines retail participation level
- Smaller lots encourage higher applications
- Affects allotment chances in oversubscribed IPOs
IPO Issue Size
What is IPO Issue Size?
The total value of shares offered to the public in the IPO.
Example: 1 crore shares at ₹100 → Issue Size = ₹100 crore
Types of Issue
- Fresh Issue: New shares issued → Funds go to company (expansion, debt repayment, etc.)
- Offer for Sale (OFS): Existing shareholders sell → No funds to company (promoter exit, public float)
- Combination Issue: Both Fresh + OFS (most common)
Why Issue Size Matters
- Large size → Lower subscription pressure
- Small size → Higher oversubscription risk
- Impacts post-listing liquidity
Price Band vs Lot Size vs Issue Size – Quick Comparison
| Component | Meaning | Impact on Investors |
|---|---|---|
| Price Band | Share price range | Decides IPO valuation |
| Lot Size | Minimum shares per application | Determines investment amount |
| Issue Size | Total IPO value | Impacts demand & liquidity |
Example: Putting It All Together
Price Band: ₹200 – ₹210
Lot Size: 70 shares
Issue Size: ₹600 crore
Minimum investment = 70 × 210 = ₹14,700
Retail investors can apply up to ~13 lots (≈ ₹1.91 lakh)
Quick Info on SME IPOs in India
SME IPOs are designed for small and medium enterprises seeking capital from public markets.
Key Characteristics of SME IPOs
- Listed on NSE SME / BSE SME platforms
- Lower issue size
- Higher risk & reward
- Lower liquidity
- Fixed price issues common
SME IPO Eligibility Criteria
- Minimum paid-up capital
- Positive net worth
- Business track record
- SEBI compliance
Who Should Invest in SME IPOs?
- High-risk investors
- Long-term investors
- Investors with small capital exposure
- Not recommended for beginners without research
SME IPO vs Mainboard IPO – Risk Comparison
| Parameter | SME IPO | Mainboard IPO |
|---|---|---|
| Risk Level | High | Moderate |
| Liquidity | Low | High |
| Volatility | Very High | Medium |
| Retail Allocation | Higher | Standard |
| Disclosure Norms | Moderate | Strict |
IPO Allotment Process Explained
- If IPO is undersubscribed → All applicants receive shares
- If oversubscribed → Lottery system for retail investors
- Allotment is finalized by the registrar.
IPO Taxation in India
Short-term Gains
Holding < 1 year
15%
Long-term Gains
Above ₹1 lakh (Holding > 1 year)
10%
How to Apply for an IPO in India
Demat Account
Trading Account / Bank ASBA
PAN Card
UPI ID
Sufficient Bank Balance
Application Methods: Broker platforms (Zerodha, Groww, Angel One), Bank ASBA portals, UPI mandate approval is mandatory for retail investors.
IPO FAQs
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