IPO FAQs
Here are frequently asked questions about IPOs in the Indian Stock Market. If something is missing, email us at ipowatchinfo (at) gmail (dot) com.
What is IPO & How does IPO work in India?
IPO (Initial Public Offering) is when a private company offers its shares to the public for the first time to raise equity capital or to allow existing shareholders to sell their shares. Companies file a Draft Red Herring Prospectus (DRHP) with SEBI; after approvals and finalization they issue the Red Herring Prospectus (RHP) with price band and IPO dates.
How & Who decides the Price Band in IPO?
Lead managers (merchant bankers or syndicate members) decide the IPO price band in consultation with the company. SEBI validates the prospectus content.
Difference between Cut-off Price & Floor Price
In a book-built IPO the minimum bid price is the Floor Price, while Cut-off is when investors agree to accept the final price decided by the company. Example: price band 90-100; floor is 90, cut-off means accept final price (e.g. 95).
Fresh Issue vs Offer for Sale
Fresh Issue creates new shares and raises capital for the company. Offer for Sale is existing shareholders (promoters or early investors) selling their stake without raising fresh capital.
Who decides IPO Dates?
After DRHP approval, the company together with lead managers and merchant bankers finalizes IPO dates.
Role of IPO Registrar
Registrar (SEBI-registered) manages application collection, allotment processing across categories, refunds, and transferring allotted shares to investors’ Demat accounts.
Role of Lead Managers
Lead managers (merchant bankers) draft the prospectus, coordinate with SEBI, set price band, and manage the IPO process and listing. Large issues may have multiple lead managers.
Primary vs Secondary Market
Primary market: investors buy shares directly from the company via IPO. Secondary market: trading of shares after listing on stock exchanges.
DRHP & RHP — What are they?
DRHP (Draft Red Herring Prospectus) is the initial draft filed with SEBI. After approvals, the company files RHP/Red Herring Prospectus which contains final details like issue size, dates and price band.
Do you need a Demat Account to apply?
Yes. You must have a Demat account (NSDL/CDSL) to receive allotted shares.
Is PAN mandatory?
Yes. PAN is mandatory for IPO applications as per SEBI rules.
Can I apply multiple times with one PAN?
No. Multiple applications with the same PAN/name/Demat will likely be rejected.
Applying via UPI / BHIM
SEBI allows UPI-based IPO applications. Use your UPI ID (e.g., BHIM) when applying and approve the mandate to complete the application.
Book Building vs Fixed Price
Book building allows a price band where investors bid; fixed price is a fixed issue price. Combination methods are possible. See exchange documentation for differences.
Categories: RII, NII, QIB, Anchor
Retail Individual Investors (RII): bids up to Rs.2 lakh; Non-Institutional Investors (NII): bids above Rs.2 lakh; Qualified Institutional Buyers (QIB): institutions (mutual funds, banks) with a larger allocation; Anchor investors subscribe prior to the IPO to anchor demand.
How long does the IPO open?
Typically 3 days; can be up to 10 days in special cases (price band revision etc.).
Market Lot Size and Allotment
Market lot size is the minimum shares per application. Retail lot sizes and amounts vary; allotment is determined by the registrar based on subscription and category allocation rules.
Is allotment guaranteed?
No. If oversubscribed, allotment may be done by lottery as per the basis of allotment published by the registrar. If undersubscribed, allotment may be firm.
How to cancel or withdraw an application?
You can revise or withdraw a bid during the IPO subscription window. After the window closes you cannot cancel.
Minor, HUF, and corporate applications
Minors (via guardian), HUFs and companies have specific rules. HUFs can apply as per category rules; minors typically use a guardian’s Demat account as permitted by the registrar/broker.
Listing & Allotment timelines
Allotment is usually finalized within 3–4 working days post issue closing; listing generally happens within 6 working days of issue close.
Where to check allotment status?
Check the registrar’s website (e.g., LinkIntime) or BSE/NSE allotment pages for allotment status.
Tax treatment
Gains on shares sold within 12 months are typically short-term capital gains and taxed accordingly; consult a tax advisor for specifics.
If you have more questions or want this FAQ updated, email us at ipowatchinfo (at) gmail (dot) com and we’ll prioritize updates.