Startup 
Valuation 
Registrations 
Compliances 
Tax 
IPR 
IEPF IPO Guide
Introduction to IPO
Introduction to Initial Public Offer (IPO) in India Stock Markets. Learn about IPO basics, eligibility, process, valuation, pricing, Grey Market Premium, refunds, and subscription. The IPO process enables the company to offer the shares to the public for the first time and get listed on the stock exchanges. This IPO Information guide will enhance your knowledge about IPO.
1. IPO Basics
IPO is a process by which a company offers its shares to the general public for the first time via the stock market. Learn IPO’s meaning, benefits, and regulations.
2. IPO Eligibility
A company wishing to go public must comply with the regulations laid down by the government authorities (SEBI) and the stock exchanges (BSE and NSE). There are certain IPO approval norms in India that a company must meet before it can go public.
3. IPO Pricing
The IPO price is the price at which a company’s shares are first offered to the public in an IPO. The IPO price can be either a fixed price or a price range (book building).
4. IPO Process
The IPO process begins on the day the issuing company decides to go public till the listing of the IPO and the post-issue activities. The IPO process in India is a complex and lengthy task. The IPO process is governed by SEBI, the market regulator , which protects the interests of investors and regulates the securities market and related matters. The presence of many IPOs is a sign of a healthy stock market and economy.
5. IPO Intermediaries
IPO intermediaries are the parties (companies/individuals) that assist an issuer in completing an IPO and a successful listing. Major IPO intermediaries include merchant bankers, registrars, bankers, underwriters, and market makers.
6. IPO Investors
An IPO investor is a person or organization that buys shares offered in a company’s initial public offering. Investors make this purchase with the expectation of making a profit.
7. IPO Prospectus
The IPO prospectus is an offering document that provides potential investors with details about the company and helps them decide whether or not to invest in the company.
8. IPO Valuation
IPO valuation is a process to determine an appropriate valuation of the company to help determine the correct IPO price.
9. IPO Application
IPO application is the process of applying for shares offered in an initial public offering. An investor may apply for IPO shares when the public issue is open.
10. ASBA IPO
ASBA is a mechanism used to submit bids in a public offering. ASBA gives the Self-Certified Syndicate Bank (SCSB) permission to block funds in the applicant’s bank account in exchange for subscribing to the offering.
11. UPI IPO Application
The Unified Payment Interface (UPI) is a simpler, easier and convenient payment method for IPOs.
12. IPO Application Modification
The IPO cancellation and modification facility helps investors to make these desired changes.
13. IPO Subscription
IPO subscription reflects the number of shares and people bidding for IPO shares offered by a company.
14. IPO Allotment
IPO allotment is the process of allocating shares to the investors who have applied for the IPO.
15. IPO Funds Unblocking
Funds blocked in the bank account for IPO get released in the event of non-allotment. Find out more about the IPO refund procedure.
16. IPO Listing
IPO listing is a procedure by which shares offered in an initial public offering are admitted for trading on designated stock exchanges.
17. IPO Grey Market
IPO Grey market is an unofficial and informal market where the IPO shares are traded before they are officially listed on the stock exchange.
18. Unlisted Shares
Unlisted shares are the shares of the company that are not listed on stock exchanges. These shares are traded over-the-counter.
19. IPO KPIs
IPO KPIs are quantitative measures of a company that provide information about the course of business and performance over a certain period of time.
IPO Allotment
IPO Allotment FAQ provide answers to commonly asked questions about IPO Allotment FAQ in Indian Stock Market. This IPO Allotment FAQ list is to help investors better understand of IPO Allotment FAQ and resolve their queries.
We welcome you for your comments to improve answers to the questions asked in this category. Please feel free to post comments. We appreciate your participation in building this page into a simple, easy-to-understand, relevant and correct information provider to the Indian Investor Community.
How many days it usually takes to get an allotment of an IPO?
In Book Building Issue, IPO allotment completes with in 6 days of IPO subscription closing date.
Will the share be deposit to my account when the allotment status shown?
It usually takes 3 to 5 business days to receive allocated shares in your demat account. Again it depends upon registrar, some of them transfer the share first and then make allotment status available online and others publish the result first and then transfer the shares.
But in any case shares don’t get listed until all the allotees receive allocated shares in their Demat account
Why do I get redirected to other websites to when I click ‘XYZ IPO Allotment Status’ link?
Allotments are done by the registrars of the public issue. Registrars hold the data for allotment. Some of the registrar’s share this data with us and others not.
To make allotment status available to all the IPO’s, if we do not have allocation data available with us we redirect our visitors to the webpage of the registrar’s website where allotment status is available.
When I check allotment status on your website it shows x amount of shares allocated to me, but I don’t see them in my Demat account. Why is it so?
Shares are not immediately available in your Demat account. It usually takes couple of days to transfer the shares in your account after allotment is finalized.
How can I get confirm allotment?
It is difficult to get a key for this but one can try to bid for the maximum if the subscription figures are high.
its completely depends upon the rate of oversubscription and only thing you can do is to applied for maximum lots on last day but it has more risk for a underperformance IPO.
Also make sure to put the correct DP ID and Client ID details in the bid/application forms.
What is the formula for shares allotment in an IPO?
Once the subscription closes, one can make out probability of allotment.
e.g. XYZ ltd. issues IPO with lot size of 60, let’s assume that retail subscription was 5 times after closure.
So it’s clear that people who applied for 5 lots will definitely get atleast 1, but for those who applied for less than 5 lots it will be done on lottery basis. i.e. for those who applied for say 1 lot 1 of every 5 will get allotment.
For detail knowledge of shares allotment formula, please refer Basis of allotment document of recent IPO’s.
How do I know the allotment status of shares I applied in an IPO?
The registrar of the IPO is responsible for the allotment of the share. The results are published on the registrar’s website as soon as they finalized the allotment process.
The registrar of the issue and the stock exchange also send emails to the applicant once the allotment is done.
I apply for every IPO, but get allotment from some IPOs. Good IPOs don’t get alloted to me. Where’s the problem?
Now a day’s IPOs have gained a lot of interest among retail investors. And therefore we see a lot of people applying for IPOs of good companies and issues getting oversubscribed. While applying for good IPOs is right but there is also a chance of not getting allotment due to oversubscription. It is because every IPO has a predetermined portion for different categories of investors like- Qualified Institutional Buyers(QIB), Non-institutional investors (NII), Retail individual investors (RII) and Employees etc. The portion for retail investors is 35% of the total shares on offer.
Suppose, ABC IPO has 2,00,000 shares on offer for retail investors. The minimum lot size is 20 and say 2000 retail investors apply for it. When an IPO is oversubscribed, allotment happens as per SEBI guidelines. The total number of shares on offer for retail investors is divided by lot size i.e. 2,00,000/20= 1000 lots. So only 1000 applicants out of 2000 will get an allotment. The applicants are then selected for allotment based on a lottery. Whether you applied for the IPO on first day or the number of lots applied doesn’t matter.
So, there’s no problem with your application, it’s just that your luck is favoring on some IPOs and not in others. So, keep applying for good IPOs and hope for the best.
How to know whether I have been allotted shares and amount refunded?
As per SEBI guidelines, as an investor you are entitled to receive a Confirmatory Allotment Note (CAN) within 15 days of the closure of the issue in case shares have been allotted. The refund should also be done within 15 days of issue closure. To know whether you have been allotted shares, you can visit the allotment status page of the specific IPO in our website.
How to know the allotment status of old IPOs?
The allotment status of an IPO is made available in the registrar’s website. Some lead managers also publish it in their website. You can also know the allotment status of an old IPO from our website. Select the IPO from our List of IPOs and click on it. This will take you to the specific IPO page. Click on the ‘allotment status’ available on the page to get access to the relevant link to know the allotment status.
I have allotted one lot of shares in an IPO. Now, what to do next?
Once you have allotted shares in an IPO, the next thing to do is to wait for the listing date. The listing date will be announced via circulars in NSE, BSE website and also it’s available on chittorgarh.com. Once the company is listed, you can sell your holdings or buy more of it. The trading process is same as for other stocks available in the market.
I apply for an IPO on first day of issue, morning time on cut-off rate but most of the time I am not allotted shares. Please guide me, what to do, what to follow?
The timing of your application doesn’t matter as shares are not allotted on first-come-first-serve basis. Here are a few things you can do to maximize your chances of getting the allotment in an IPO-
- Fill the IPO form accurately. A lot of applications gets rejected due to technical mistakes.
- In a book building issue, always apply at a cut-off price. This facility is only available to retail investors.
- Ask your family members to apply for the IPO on your behalf. As allottees are selected on the basis of lottery, your family members applying will increase the chance of getting an allotment. However, your family members need to have a PAN and a demat account to apply.
Is there any advantage for RII (retail investors) if he applies for maximum permissible no. of lots rather than minimum no. of lots in a single application in case of a highly oversubscribed IPO?
In any IPO, allocation of shares to retail investors depends on the total number of shares available in the retail quota divided by the minimum lot size. So, if 10 lakh shares are available for retail investors and 2000 shares is a lot size then 500 applicants will get the shares. If the applicants are more than 500 then a lottery is used to pick the applicants. So, whether you apply for maximum lots or minimum lots, it doesn’t matter.
Does applying for IPO at upper price band stands more chance of allotment than lower price band?
Yes, applying at high price band increases your chances of allotment. Most of the cutoffs are around the high price band. And thus applications with lower price band doesn’t qualify.
Does IPO gets allocated to people who apply first?
IPO allotment doesn’t happen on the basis of who applied first or the first come, first serve basis. It depends on the response to the IPO from investors. If the IPO has not received good response from the investors and it is under subscribed then you may get allotted as many lots you have applied for. In other case, if the IPO is oversubscribed owing to high demand from investors, then allocation of shares to retail investors depends on the total number of shares available in the retail quota divided by the minimum lot size. So, if 10 lakh shares are available for retail investors and 2000 shares is a lot size then 500 applicants will get the shares. If the applicants are more than 500 then a lottery is used to select the applicants for allotment.
I am receiving emails and sms of allotment and application made through ASBA even though i have never applied for such IPO? How and where to track such application and lodge complaint?
You can write a mail to the registrar of the IPO. The contact details of the registrar of the IPO is available in the Drhp and Rhp document.
How IPO allotment happens for NII category if it’s oversubscribed?
Non Institutional Investors (NIIs)/ High Net worth individuals (HNIs) have a minimum reserve portion of 15% of the shares on offer. For NIIs and HNIs, the allotment is done proportionately. So, if the issue is subscribed 2 times, in that case 50% of the shares are alloted to an investor.
Why I haven’t got allotment in most of the IPO’s?
The acceptance of application is no guarantee for allotment of shares in an IPO, if it is oversubscribed. In under subscribed IPOs, you will surely get allotment. In the case of over subscription of an IPO, allotments are done using a specific process followed by a lottery.
If my fund is blocked in the account, does it mean I will surely get the IPO allotment?
No, the application amount is blocked at the time of applying for the IPO. It doesn’t mean that you will get allotment. However, if the blocked amount is debited from your account then it means you have got an allotment.
Even if a retail investor applies for Rs 2 Lakhs, allotment is limited to only one lot. Why is it that way?
An individual is allotted 1 lot, irrespective of the number of lots applied, only if the issue is oversubscribed. In case of an unsubscribed issue, he should generally get the desired number of lots.
Let’s understand how shares are allotted in an IPO?
The number of shares offered for retail investors is divided by the number of shares in 1 lot to identify the number of applicants who will get at least 1 lot.
For example, consider ABC company issuing an IPO. The lot size is of 20 shares. So, if 2,00,000 shares are available for retail investors and 1 lot in the issue is 20 shares then
2,00,000/20= 10,000.
It means 10,000 applicants will get 1 lot. In case of oversubscription, the applicants applying for the IPO are greater than the number of applicants who can get at least 1 lot, so a lottery is used to select the applicants for allotment.
In the case of under subscription, in some cases, some applicants may get less than what they applied for while others getting the desired lots.
Continuing the above example, say the issue was undersubscribed and only 8000 applicants applied for the issue. Now, these 8000 will be given at least 1 lot while the remaining 2000 lots will be divided based on criteria determined by the registrar of the issue.
Why I didn’t get IPO allotment?
Key reasons for not getting an IPO allotment are:
- IPO oversubscription and allotment is done through a lottery
- Application rejected due to mismatch/incomplete information
- The issue price is higher than the bid price
Let’s discuss them in detail:
- IPO OversubscriptionBased on demand and supply, it is possible an IPO oversubscribed (received more bids than the available shares for the public).Here are the two cases of oversubscription to allocate shares.
- IPO Received Huge OversubscriptionIn a big oversubscription case where the issue is heavily subscribed, the shares will be distributed on the basis of a computerized lottery. Each applicant has an equal chance to get allotment.For example, a company has 20,000 lot size to offer to the retail investors. And, the application received till the closing date is 1 lakh lot, which is 5 times than the offered lots. In this case, every 1 out of 5 applicants will receive the allotment. So, this can be the case of not getting an IPO allotment.Read the report of Top 10 IPO by Subscription
- Small Oversubscription Scenario
- Application RejectedYour IPO application can be rejected by the registrar of the IPO for multiple reasons. Some of the common reasons include:
- Multiple IPO application and in the same IPO using the same PAN Number. Note that only 1 application is allowed per person in an IPO.
- Filled invalid information in IPO application including PAN Number.
- Final Issue Price is higher than bid PriceBook Building IPOs require investors to bid not only for lots but also for the price within the price band declared by the company. If you have submitted an application to bid for the price which is lower than the Issue price, then you will not get the IPO allotment.It is advisable to retail investors to bid on the cut-off price to increase chances of getting IPO allotment. Selecting the cut-off price means that you’re agreeing to pay the price decided by the company at the end of the book building process. The price still remains in the range of IPO.
How to get Confirmed IPO Allotment?
There is no guaranteed process to get a confirm IPO allotment. In case of oversubscription, the allotment is done using a lottery. Similar to any other lottery your changes reduce with a higher number of participants.
But, there are ways through which you can increase the chances of getting the allotment:
- Fill the form correctly to avoid rejection of IPO application
- Do not apply multiple applications in an IPO using the same PAN number.
- Use family members demat account.
- Always opt for the cut-off price while applying IPO.
Let’s discuss some of these points in detail:
- Fill the form correctlyA lot of IPO applications get rejected due to incomplete or mismatch information provided. So fill the IPO application form carefully and ensure that important details like PAN & Demat Number etc., are filled correctly.
- Using friends or family members demat accountIn addition to your account increases the change of allotment significantly in case of oversubscribed IPO. If an IPO oversubscribed 4 times, your chances of getting the allotment are 25%. If you apply in the IPO using 4 family members name, there is a high chance that you will get an allotment in one of the application.
- Opt for the cut-off priceIn case of book building IPOs where you also need to bid for the price, either bid for upper band limit or opt for cut-off price so that your application doesn’t get rejected due to lower bid price than the issue price.
What Happens when an IPO is oversubscribed in India?
When the IPO oversubscription happens, the applicant may or may not get the allotment of the shares or the number of lots applied. Depending on the category in which you have applied, the IPO allotment differs in oversubscription case:
- IPO Share Allotment to Institutional Buyers (QIB)In the QIB category, shares are allocated proportionally. So, if the issue is subscribed by 5 times, then an applicant who has applied for 10 lakh shares will receive 2 lakh shares only.
- IPO Share Allotment to High Net worth Investors (HNI)HNI also receives allotment on a proportionate basis.
- IPO Share Allotment to Retail investors (RII)Case 1: RII Applications are Less or Equal to Offered LotsIn this case, each applicant first gets at least minimum 1 lot. And, the rest available lots are allocated proportionally.Case 2: RII Applications are Greater than Offered LotsIn this case, the allotment is done through a computerized draw to pick applicants for IPO allotment.
When the NII (HNI) quota in an IPO unsubscribe, who gets the remaining shares?
When NII (HNI) quota unsubscribe, the company takes the call to distribute the remaining shares in other categories i.e. retail, QIB, employee, or shareholders.
The detail about the distribution mechanism is provided in the IPO RHP document.
For example:
Paytm IPO RHP page 490 says
What is an IPO?
PO or Initial Public Offer is a way for a company to raise money from investors for its future projects and get listed to Stock Exchange. Or An Initial Public Offer (IPO) is the selling of securities to the public in the primary stock market.
From an investor point of view, IPO gives a chance to buy shares of a company, directly from the company at the price of their choice (In book build IPO’s). Many a times there is a big difference between the price at which companies decides for its shares and the price on which investor are willing to buy share and that gives a good listing gain for shares allocated to the investor in IPO.
From a company prospective, IPO help them to identify their real value which is decided by millions of investor once their shares are listed in stock exchanges. IPO’s also provide funds for their future growth or for paying their previous borrowings.
In other words;
An initial public offering (IPO) is when a company issues common stock or shares to the public for the first time.
It is the process where a privately held company becomes a publicly traded company with the initial sale of its stock. An IPO is a tool that companies use to secure capital through investments for future use. In most instances, this investment is used to expand or improve the business.
A corporate may raise capital in the primary market by way of an Initial Public Offer (IPO), rights issue or private placement. An IPO is the selling of securities to the public in the primary market. It is the largest source of funds with long or indefinite maturity for the company. The requirement of funds in order to finance the business activities motivates entrepreneurs to approach the new issue market. Initial Public Offer (IPO) is a route for a company to raise capital from investors to meet the expenses of its projects and to get a global exposure by getting listed in the Stock Exchange.
IPOs are issued by smaller, younger companies seeking capital to expand, as well as by large privately owned companies looking to expand & become publicly traded. When a company lists its securities on a public exchange, the money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide it with capital for future growth, repayment of debt or working capital.
IPO can be used as both a financing strategy and an exit strategy. In a financing strategy, the main purpose of the IPO is to raise funds for the company. In an exit strategy for existing investors, IPOs may be used to offload equity holdings to the public through a public issue. A company selling common shares is never required to repay the capital to investors. Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public.
There are several benefits for being a public company, namely:
- Supporting and diversifying equity base
- Enabling cheaper access to capital
- Exposure, prestige and public image
- Attracting and retaining better management and employees through liquid equity participation
- Facilitating acquisitions
- Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
- Increased liquidity for the equity holder
Who decides the Price Band?
Company with help of lead managers (merchant bankers or syndicate members) decides the price or price band of an IPO.
SEBI, the regulatory authority in India or Stock Exchanges do not play any role in fixing the price of a public issue. SEBI just validate the content of the IPO prospectus.
Companies and lead managers does lots of market research and road shows before they decide the appropriate price for the IPO. Companies carry a high risk of IPO failure if they ask for higher premium. Many a time investors do not like the company or the issue price and doesn’t apply for it, resulting unsubscribe or undersubscribed issue. In this case companies’ either revises the issue price or suspends the IPO.
Who decides the date of the issue?
Once ‘Draft Prospectus’ of an IPO is cleared by SEBI and approved by Stock Exchanges then it’s up to company going public to finalize the date and duration of an IPO. Company consult with the Lead Managers, Registrar of the issue and Stock Exchanges before decides the date.
