The process by which a private company offers its shares to the public for the first time, listing on a stock exchange.
An Initial Public Offering (IPO) is the event where a privately held company sells its shares to public investors for the first time, becoming a listed entity on a stock exchange. It is the primary method through which companies raise equity capital from the public market.
In India, IPOs are regulated by SEBI under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. A company must appoint merchant bankers (Book Running Lead Managers), file a Draft Red Herring Prospectus (DRHP) with SEBI, and receive observations before proceeding. The entire process from DRHP filing to listing typically takes 3–6 months.
Indian IPOs follow the book-building process, where a price band is set (e.g., ₹350–₹370 per share) and investors bid within that range. The issue is divided into three categories: Retail Individual Investors (up to ₹2 lakh), Non-Institutional Investors (HNI, above ₹2 lakh), and Qualified Institutional Buyers (mutual funds, insurance companies). Retail investors get 35% of the issue, HNI gets 15%, and QIBs get 50%.
Applications are made through ASBA (Application Supported by Blocked Amount), where the bid amount is blocked in your bank account and only debited upon allotment. Listing typically happens on the 6th working day after the issue closes (T+6 under SEBI's new timeline, reduced from T+12).
Key metrics to evaluate an IPO include the Listing Price premium/discount, Grey Market Premium (GMP, an unofficial indicator of expected listing gains), Oversubscription ratios across categories, and the company's fundamental valuation relative to listed peers.
India Context
SEBI regulates IPOs via ICDR Regulations 2018. ASBA is mandatory. T+6 listing timeline. 35% retail / 15% NII / 50% QIB allocation split. DRHP must be filed with SEBI.