An Initial Public Offering (IPO) is when a company sells its shares to the public for the first time. Demand for popular IPOs often exceeds the number of shares on offer, so allotment is not guaranteed.
Applying for an IPO
You apply through your broker or bank using UPI or ASBA, which blocks the amount in your account until allotment. You bid for a minimum lot size, which is a fixed number of shares, within the stated price band.
Categories of investors
- Retail: applications up to ₹2 lakh.
- Non-institutional investors: above ₹2 lakh.
- Qualified institutional buyers: funds and large institutions.
Subscription and lottery
Subscription shows how many times the offer was applied for. If the retail portion is subscribed 10 times, only about one in ten applicants may receive shares. When oversubscribed, retail allotment is done by computerised lottery, with each valid application getting an equal chance.
After allotment
Shares are credited to your demat account, usually a day before listing. Unsuccessful applicants have their blocked amount released. Listing day price depends on demand, market mood, and the company's fundamentals.
Tips
Read the prospectus, check the company's financials and use of proceeds, and treat grey market premium as sentiment, not a promise. Decide in advance whether you invest for listing gains or long-term ownership.