IPO Process in India: A Complete Step-by-Step Guide

If you're exploring the Initial Public Offering (IPO) process in India , you're at the right place. Whether you're an investor, entrepreneur, or a curious reader, understanding how a company gets listed on the stock market is key to making informed financial decisions. In this detailed guide, we’ll walk you through the entire IPO journey —from planning to listing, including comparisons between Mainboard and SME IPOs , timelines, and regulations. Let’s dive into the fascinating world of IPOs!  

What is an IPO?

An Initial Public Offering (IPO) is when a private company offers its shares to the public for the first time. This move transforms a privately held company into a publicly traded one, unlocking a new phase of growth, visibility, and financial leverage.

1. Appointment of a Merchant Banker (Lead Manager)

The first step in the IPO process is the appointment of a Merchant Banker, also known as the Lead Manager. This SEBI-registered financial expert plays a critical role in guiding the issuer through every stage of the IPO. They assist with:

• Due diligence
• Preparation of the draft documents
• Underwriting
• Roadshows
• Pricing
• Post-listing formalities

Large IPOs often have multiple lead managers to coordinate the process efficiently.

2. Preparation and Submission of DRHP

Once appointed, the Merchant Banker collaborates with the company to prepare the Draft Red Herring Prospectus (DRHP). This document contains vital information about the company’s operations, financials, objectives for raising funds, and associated risks.

The DRHP is then submitted to the Securities and Exchange Board of India (SEBI) for approval. This process typically takes 2 to 4 months.

Note: In the case of SME IPOs, the DRHP is approved by the stock exchange, not SEBI.

3. Filing the IPO Application with Stock Exchanges

After SEBI approves the DRHP, the Merchant Banker files the IPO application with the desired stock exchanges (like NSE or BSE). Once the application is reviewed and found satisfactory, the exchange grants in-principle approval .  

4. Price Determination Mechanism

Next, the company and its Merchant Banker decide the IPO pricing model, choosing between:

Fixed Price Issue

• The issue price is disclosed beforehand.
• Investors know the price before applying.

Book Building Issue

• A price band (e.g., ₹80–₹90) is set.
• Investors bid within the range.
• The final price is determined after the bidding closes.

This flexible model helps in gauging investor interest and optimizing pricing.

5. Filing of the RHP (Red Herring Prospectus)

Following SEBI’s nod and pricing decision, the company files the Red Herring Prospectus (RHP). This updated document includes:

• Latest financials
• IPO schedule
• Pricing details
• Business updates

The RHP helps investors make more informed decisions based on the most recent data.

6. IPO Roadshows and Marketing

The Merchant Banker teams up with PR and advertising agencies to promote the IPO through roadshows. These marketing efforts include:

• Investor meetings
• Media briefings
• Analyst interactions

The goal is to generate excitement, boost investor confidence, and ensure wider participation.

7. Anchor Investor Bidding (Optional)

Before the IPO opens to the public, it may be opened to Anchor Investors. These are institutional investors who:

• Bid for ₹10 crore or more
• Receive share allotment a day before public bidding begins
• Serve as confidence boosters for retail investors

8. Public Subscription Phase

Once the anchor investment phase ends (if applicable), the IPO opens to the general public for bidding. The bidding window lasts for a minimum of 3 days and a maximum of 10 days.

Investors can place their bids through their broker or bank using their demat account and are issued a unique application number for tracking.

9. Share Allotment Process

After the IPO subscription closes:

• The stock exchange forwards bid details to the IPO Registrar.
• The registrar checks for third-party applications and verifies bank and demat account ownership.
• Shares are allocated via lottery or pro-rata basis.
• Funds are debited from investors’ accounts.
• Allotted shares are credited to their demat accounts.

This process is typically completed within 1-2 days of issue closure.

10. Listing Date Announcement

The company then files listing documentation with the exchange. After the depositories confirm share credits, the stock exchange issues a listing circular detailing:

• Final price
• ISIN
• Trading symbol
• Listing date

11. IPO Share Listing on the Exchange

Trading begins in two phases:

Pre-Open Session (9:00 a.m. – 9:45 a.m.)

• Orders are collected and matched.
• The opening price is discovered.

Normal Trading (Starts at 10:00 a.m.)

• Shares are freely tradable.
• Market forces dictate the price from here on.

12. Post-Listing Compliance

Post listing, the issuer has ongoing obligations, such as:

• Submitting board meeting invites
• Publishing annual and audit reports
• Filing corporate governance documents
• Maintaining public disclosures

This ensures transparency and adherence to SEBI and stock exchange regulations.

Mainboard and SME IPO Process Comparison

While the core process remains the same, there are some key differences between Mainboard and SME IPOs:

IPO Process Timeline India

Here’s a broad estimate of the IPO process timeline in India:

By IPO Type

By Process Stage

Conclusion: IPOs are Gateways to Growth

Launching an IPO is a complex but rewarding journey for any company. It allows businesses to raise capital, gain credibility, and offer liquidity to investors. Understanding the step-by-step IPO process, from appointing a merchant banker to the final day of listing, empowers both companies and investors.

Whether you’re a startup planning an IPO or an investor exploring opportunities, this comprehensive guide to the IPO process in India will help you navigate every stage with confidence and clarity.