IPO Investment Guide: How to Apply for Upcoming IPOs in India
What is an IPO and how do you invest in one? Learn the IPO application process, allocation logic, grey market premium, and how to evaluate IPOs before subscribing.
What is an IPO?
An Initial Public Offering (IPO) is when a private company raises capital by issuing new shares to the public for the first time, or offers existing shares for sale by promoters and early investors. After an IPO, the company becomes publicly listed and its shares trade on the stock exchange.
India has seen a resurgence in IPO activity — over 80 companies raised ₹1.5 lakh crores through IPOs in 2024. Some of India's largest companies ( LIC, Paytm, Nykaa, Zomato) went public in recent years, creating both opportunities and cautionary tales for retail investors.
How the IPO Process Works
- Company appoints investment banks: As underwriters, they determine the IPO size, pricing, and marketing
- SEBI approval: The company files a Draft Red Herring Prospectus (DRHP) with SEBI
- Roadshows: Institutional investors (FIIs, mutual funds) meet management and get IPO details
- Price band fixed: The company announces a price range (e.g., ₹270-285 per share)
- IPO opens for subscription: Retail, institutional, and anchor investors bid
- Allotment: Shares allocated based on demand and allocation rules
- Listing: Shares begin trading on the exchange
How to Apply for an IPO
Step 1: Check IPO Details
IPOs are announced on NSE/BSE websites, in business newspapers, and on your broker's platform. Key details: price band, issue size, minimum lot size, open and close dates.
Step 2: Apply Through Your Broker
Most brokers (Zerodha, Groww, Upstox, HDFC Securities, ICICI Direct) have dedicated IPO sections. Log in, find the active IPO, and apply directly from the platform.
Step 3: Enter Your Bid
- Select the number of lots you want (minimum 1 lot)
- Enter your bid price (within the price band; retail investors usually bid at the upper end)
- Enter PAN, Demat, and bank details
- Submit the application
Step 4: Ensure Funds in Account
The application amount (bid price × number of shares × lot size) is blocked in your account during the IPO period. This is called an "ASBA" (Application Supported by Blocked Amount) — your money stays in your account but is blocked, not transferred.
Step 5: Wait for Allotment
After the IPO closes, shares are allotted within 7 days (T+7). Allotment is done through a lottery system for retail — not first-come-first-served.
IPO Allocation Rules
- Retail Individual Investors (RII): Up to ₹2 lakhs per application. Minimum 35% of issue reserved.
- Non-Institutional Investors (NII): Above ₹2 lakhs. 15% of issue reserved.
- Qualified Institutional Buyers (QIB): Mutual funds, FIIs, banks. 50% of issue reserved.
- Anchor Investors: Large institutions who get allocated shares before IPO opens (at the same price).
Grey Market Premium (GMP): What It Tells You
The Grey Market is an unofficial market where IPO shares are traded before they list. The Grey Market Premium (GMP) is the difference between the grey market price and the IPO issue price.
- GMP of ₹50 on ₹300 IPO: Grey market price = ₹350, implying ~16% listing gain
- GMP is NOT guaranteed: It's speculative, based on demand and supply at listing time
- Where to check GMP: GreyMarketTalk, IPOWatch, various Telegram channels
High GMP attracts retail applications — but it can also mean inflated expectations that disappoint at listing.
How to Evaluate an IPO
Look at the Fundamentals
- Revenue and profit history: Consistent growth preferred
- Business model: Is it understandable and scalable?
- Industry: Is the sector growing?
- Debt levels: How leveraged is the company?
Valuation: P/E vs Peers
Compare the IPO's P/E (price-to-earnings) to comparable listed companies. If the IPO P/E is significantly higher than peers, the valuation may be expensive.
Check the DRHP
The Draft Red Herring Prospectus (DRHP) filed with SEBI contains everything: financials, risk factors, promoter background, use of IPO proceeds. Read the risk factors section carefully — they tell you what could go wrong.
Frequently Asked Questions
Can I apply for the same IPO from multiple accounts?
No. Each PAN number is allowed only one application per IPO. Applying from multiple accounts with the same PAN is illegal and will result in all applications being rejected. Family members with different PANs can apply separately. Multiple applications with different PANs in the same household are allowed.
What happens if IPO allotment fails? When do I get my money back?
If you don't receive an allotment, the blocked ASBA amount is released within 5-7 working days after the basis of allotment is finalized. No interest is paid — your money was blocked but not transferred, so there's no "refund" process per se, just a release of the block.
Should I apply for every IPO or be selective?
Be selective. Not all IPOs are good investments. Some list at discounts to the issue price (LIC IPO listed below issue price). Evaluate each IPO on its own merits: business quality, valuation, promoter track record, and industry outlook. Avoid applying blindly just because of hype — the grey market premium is not a reliable indicator of listing gains.
Evaluate Before You Subscribe
IPOs can be excellent investment opportunities when you buy quality companies at reasonable valuations. But hype, greed, and FOMO have led many retail investors to subscribe to overpriced or poor-quality IPOs that list below the issue price. Always read the DRHP, understand the business, and never allocate more than 5-10% of your portfolio to IPO applications — especially not to flip for quick listing gains.