How an Indian IPO actually works, from DRHP to listing day

Most people meet an IPO at the last possible moment: an app notification, a three-day window, a price band, and a decision. That is the worst place to meet it. By then every real question has already been answered somewhere — in a document you can read for free, by investors who bid before you were allowed to.

Here is the whole sequence, in the order it actually happens.

1. The company files a DRHP

The Draft Red Herring Prospectus is the company’s first public filing with SEBI. It is long, it is dull, and it is the single most useful thing you will ever read about a company going public. It contains the business description, the financials, who is selling shares and how many, what the money will be used for, and — the section most people skip — the risk factors, written by the company’s own lawyers.

Nothing about the price is in it yet. That is deliberate.

SEBI reviews the draft and issues observations. The company answers them, and the document becomes the RHP — the red herring prospectus — which is the version that actually goes with the offer.

2. The price band appears

Indian mainboard IPOs are almost always book-built: the company doesn’t announce one price, it announces a band, and lets demand decide where inside the band the issue prices.

Two things follow from that:

• You bid at a price inside the band, or you bid at cut-off, which means “whatever the final price turns out to be, I’ll take it.”
• The final price is not known while you’re applying. Your money is blocked against the top of your bid, and the difference comes back if the issue prices lower.

The band, the lot size, and the dates all land at once, usually only a few days before the issue opens. That short window is why reading the DRHP months earlier is such an advantage.

3. Anchor investors go first

One working day before the issue opens to everyone else, a slice of the institutional portion is allocated to anchor investors — large funds, brought in early to give the issue a base of committed demand.

Anchor allocations carry a lock-in, so those shares cannot be sold into the market on listing day. Be careful what you read into that: a lock-in does not mean the price will hold, and it is not a forecast of anything — it is a restriction on selling, nothing more. The anchor list is published, and it states one fact plainly: which institutions committed money at a stated price before the retail window opened.

4. The issue opens, and the buckets fill separately

This is the part that surprises people. You are not competing with everyone. The issue is split into buckets, and you only compete inside yours. For a standard mainboard book-built issue:

Bucket	Share of the issue	Who
QIB	up to 50%	Institutions — mutual funds, insurers, foreign funds
Retail (RII)	35%	Applications up to ₹2 lakh
NII / HNI	15%	Applications above ₹2 lakh

The NII bucket is itself split at ₹10 lakh: applications between ₹2 lakh and ₹10 lakh sit in one sub-bucket, larger ones in another, each with its own allotment pool.

So “the IPO was subscribed 40 times” tells you almost nothing about your own odds. The only number that matters to you is how many times your bucket was subscribed.

5. You apply — and the money doesn’t leave

A retail application is capped at ₹2 lakh, and the minimum for a mainboard issue is typically in the ₹10,000–₹15,000 range, depending on the lot size and the price band. Cross ₹2 lakh and you are no longer a retail applicant; you are in the NII bucket, competing against much larger cheques.

You apply through UPI (up to ₹5 lakh per mandate) or through ASBA on your bank’s net-banking. Either way the money stays in your account, blocked, earning whatever it was earning. It only moves if shares are actually allotted to you. If nothing is allotted, the block simply releases — there is no refund to chase.

Approving the UPI mandate is a step people miss. An unapproved mandate is not an application.

6. Allotment: a lottery, not a queue

If the retail bucket is oversubscribed past the point where every applicant can be given one lot — more retail applicants than there are minimum lots in the retail portion — allotment is done by a draw of lots, and every successful retail applicant gets the same thing: one lot. Not a proportion of what they asked for. One lot.

This has a consequence worth sitting with. In an oversubscribed retail bucket, applying for five lots does not give you five times the shares. It gives you one lot if your number comes up, and nothing if it doesn’t — the same as applying for one. Applying from several different PAN cards in the same family is a different matter: those are separate applications and each gets its own ticket in the draw. One PAN, multiple applications, is not — those get rejected.

If the bucket is under-subscribed, everyone gets what they applied for.

7. Listing: three working days after the issue closes

Since December 2023, SEBI has required shares to list within T+3 — three working days after the issue closes, down from the old six. Allotment is finalised, unblocked funds release, shares land in demat accounts, and trading opens.

The first trade of the day is not the issue price. It is a fresh price discovered in a pre-open call auction from whatever buyers and sellers show up. It can be above the band, inside it, or well below.

8. Who is actually allowed to sell on listing day

Here is the part almost nobody computes: on listing day, most of the company’s share register is not permitted to trade. The rules, as they stand in August 2026:

• Promoters’ minimum contribution — 20% of the post-issue capital — is locked for 18 months from allotment, and for three years when the bulk of the fresh issue funds capital expenditure. Each RHP states which applies to that issue.
• Promoter holdings above that 20% are locked for six months (one year in the capex case).
• Every other pre-IPO shareholder is locked for six months from allotment, with narrow exemptions the RHP lists (certain AIF/VCF/FVCI holdings, ESOP shares).
• Anchor investors are locked in halves, both counted from allotment: 50% for 90 days, the remaining 50% for 30 days.

Which leaves exactly one group free to sell on day one: the people allotted shares in the offer itself — QIBs outside the anchor book, HNIs, retail, and the employee quota. The tradeable float on listing day is the offer minus the anchor allotment, and it is usually a small fraction of the company. The per-issue pages on this site compute that number from each RHP’s own capital-structure chapter.

A lock-in is not a forecast of anything — it is a restriction on selling; it says who may trade, not what the price will do. The durations above change when SEBI amends the regulations — the RHP of any given issue states the locks that bind it.

A word on the grey market

You will see a “GMP” quoted everywhere in the days before listing, and it is worth being precise about what it is: the grey-market premium is an unofficial, unregulated price with no exchange record, no clearing, nothing that settles it, and no obligation to be accurate. It is not a traded price and it is not verifiable. It is not a forecast, it is not data, and it is not something to base a decision on. Anyone quoting it as a reason is telling you about the crowd, not about the company.

When the process bends mid-issue

The sequence above is the normal case. Occasionally the ground moves while an issue is open — a corrigendum, an exchange-directed extension, even a withdrawal window the original advertisement said could never exist. That happened in August 2026, and there is a documented walk-through of it here: the GV Electricals mid-issue extension, from the company’s own filed notices. It is worth reading once before you ever apply to anything, because it also covers where corrigenda are published and the escalation ladder if your money stays blocked.

What actually carries over

An IPO is a one-off event with a deadline, which is exactly the shape of decision that makes people abandon their own rules. The process above is worth knowing so that the deadline doesn’t do your thinking for you — read the document, know which bucket you’re in, size the application like any other position, and write down why before the outcome exists to reason backwards from.

That last part is the whole point of everything else on this site: you grade the decision, not the outcome. A rejected application in a good decision is still a good decision. An allotment that doubles on a coin-flip is still a coin-flip.

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Information as of 8 Aug 2026. This explains a process; it is not an IPO review, and no subscribe/avoid rating is given here or anywhere else on this site. Rules and thresholds change — check the current SEBI circular and the issue’s own RHP before you act on anything above.

This post is for educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security or derivative contract. The author is not a SEBI-registered Research Analyst or Investment Adviser. Futures and options trading carries a high risk of loss and is not suitable for every investor — you can lose your entire premium, and more when selling naked. All figures and examples in this post, including the rupee premiums and price levels, are hypothetical and used only to illustrate the framework; they are not predictions, return promises, performance claims, or a recommendation to trade any specific instrument. Lot sizes and premiums change over time — always check current exchange data before trading. Please consult a SEBI-registered investment adviser before making any investment decisions.