How Does the IPO Process Work in India? A Step-by-Step Guide

 For many ambitious companies in India, going public through an Initial Public Offering (IPO) is a milestone moment. It opens doors to raising substantial capital, expanding business operations, and boosting brand credibility. For investors, IPOs can be exciting opportunities to get in early on companies with strong growth potential.

But how exactly does the IPO process work in India? And more importantly, how can you, as an investor, participate effectively and safely? Let’s break it down in simple terms, step by step, while also looking at how a trusted platform like Kotak Neo, the Kotak Securities trading app can make the process seamless.

What is an IPO?

An Initial Public Offering (IPO) is the first time a private company offers its shares to the public and becomes listed on a recognised stock exchange, such as the NSE or BSE. By selling shares, the company raises funds that can be used for expansion, debt repayment, new projects, or other strategic needs.

For investors, IPOs provide a chance to buy shares before they start trading in the secondary market, sometimes at more attractive valuations.

Step-by-Step Breakdown of the IPO Process in India

The IPO journey involves a mix of corporate strategy, regulatory approvals, and market timing. Here’s how it typically unfolds:

1. The Company Decides to Go Public

The process begins when a company’s board and management team decide that going public is the right step. This usually happens when:

The company needs significant funding for growth

1. It wants to reduce debt
2. It aims to increase market visibility and credibility
3. Early investors want an exit opportunity

At this stage, the company appoints merchant bankers (also known as lead managers) to handle the IPO.

2. Regulatory Filings and SEBI Approval

The lead managers prepare a Draft Red Herring Prospectus (DRHP) — a detailed document containing the company’s financials, business model, risks, and IPO details.

The DRHP is filed with SEBI (Securities and Exchange Board of India) for review. SEBI examines the document to ensure transparency and fairness. Once approved, the final prospectus is published.

3. Choosing the Price Band

In most modern IPOs in India, companies use the book-building process to determine the share price. Here:

1. The company sets a price band (for example, ₹500–₹520 per share)
2. Investors bid for shares within this range
3. The final price is decided based on demand

4. Marketing the IPO

To attract investors, companies and their bankers conduct roadshows and presentations. This is where they pitch the company’s growth story, financial performance, and future plans.

5. The Bidding Period

This is the phase where investors can apply for shares. In India, IPO bidding typically stays open for 3 working days.

There are different categories for investors:

1. Retail Investors (investing up to ₹2 lakh)
2. High Net-Worth Individuals (HNI) (₹2 lakh and above)
3. Qualified Institutional Buyers (QIBs)

Tip: Using a digital platform like Kotak Neo makes applying effortless — you can log in via your mobile or desktop, choose the IPO you’re interested in, enter your bid, and block funds via UPI in minutes.

6. Allotment of Shares

Once the bidding closes, the allotment process begins:

1. If demand is high, shares are allotted proportionally or through a lottery system
2. If undersubscribed, all valid applicants receive shares

You can check your IPO allotment status online, and platforms like Kotak Securities notify you instantly when results are out.

7. Listing on the Stock Exchange

On the listing date, the company’s shares start trading on the NSE and BSE. This is when you can sell your allotted shares or hold them as a long-term investment.

Timelines of an IPO in India

From DRHP filing to final listing, an IPO can take several months. However, the actual bidding-to-listing period is short:

1. Bidding Period: 3 days
2. Allotment Finalisation: 6 days after bidding closes
3. Listing Date: Usually 7 days after bidding closes

How Investors Can Participate in an IPO

Here’s a simplified roadmap for you as an investor:

1. Stay Updated: Keep track of upcoming IPOs through reliable sources. Kotak Securities’ IPO Calendar is a handy tool for this.
2. Evaluate the Company: Read the DRHP and final prospectus to understand:

1. Business model
2. Revenue sources
3. Profitability trends
4. Competitive position
5. Risks and challenges

1. Plan Your Investment: Decide how much you want to invest and in which category (Retail, HNI).
2. Apply via a Broker or Bank: With Kotak Neo, you can apply in a few clicks without paperwork.
3. Track Allotment: If you get shares, they’ll appear in your Demat account; if not, your blocked funds will be released.

Things to Keep in Mind Before Investing in an IPO

While IPOs can be lucrative, they also carry risks. Here are a few tips:

1. Don’t invest blindly in hype: Popularity doesn’t guarantee profits.
2. Check valuations: Is the IPO price justified compared to similar listed companies?
3. Look at promoter track record: Strong leadership often means better long-term performance.
4. Be aware of lock-in periods: For certain investor categories, shares can’t be sold immediately.
5. Remember listing day volatility: Prices can swing sharply.

Final Thoughts

The IPO process in India is well-structured and heavily regulated to protect investors. For companies, it’s a major step in their growth story; for investors, it’s an opportunity to become part of that story from the very beginning.

By understanding each stage, from regulatory approval to listing day, and by using reliable tools, you can participate with confidence.

Just remember: every IPO is different. Do your homework, invest within your means, and think long-term. After all, the most successful IPO investors are those who combine opportunity with discipline.