What is an IPO?
An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time to raise capital. The company lists on stock exchanges like NSE and BSE, allowing retail and institutional investors to buy shares. IPOs in India are regulated by SEBI, which mandates that companies file a Draft Red Herring Prospectus (DRHP) detailing financials, business model, risk factors, and the intended use of raised capital.
How to Apply for an IPO
Retail investors can apply for IPOs through their Demat account using the ASBA (Application Supported by Blocked Amount) facility. The application amount is blocked in your bank account and only debited upon allotment. UPI-based applications via platforms like Google Pay, PhonePe, and Paytm have simplified the process. The minimum application size for retail investors is one lot, and the maximum investment is Rs 2 lakh. Allotment is done on a proportional or lottery basis depending on oversubscription.
Key IPO Terms
DRHP (Draft Red Herring Prospectus) is filed with SEBI before the IPO. RHP (Red Herring Prospectus) is the final offer document. GMP (Grey Market Premium) indicates unofficial pre-listing demand. The price band is the range within which investors can bid. Book Building is the process of price discovery through investor bids. The listing date is when shares begin trading on the exchange. Anchor investors are institutional investors who invest before the public issue opens.