Learn hub
Short lessons that explain the IPO process in plain language, from your first application to reading a prospectus.
What is an IPO?
An IPO, or Initial Public Offering, is the first time a private company sells its shares to the public and gets listed on a stock exchange.
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What is a price band?
A price band is the range between the lowest and highest price at which you can apply for shares in a book-built IPO.
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What is a lot size?
Lot size is the fixed number of shares you must apply for in one application. You can apply for one lot or a whole number of lots, never a part of one.
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What is GMP (grey market premium)?
Grey market premium is an unofficial, unregulated price that some traders quote for IPO shares before listing. It is not published or verified by any exchange or regulator.
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What is IPO subscription?
Subscription shows how many times the shares on offer have been applied for. A subscription of 4x means applications were received for four times the shares available.
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What is allotment?
Allotment is the process of deciding who receives shares after an IPO closes, and how many.
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What happens on listing day?
Listing day is when the shares begin trading on the exchange and a market price is discovered for the first time.
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Mainboard IPO vs SME IPO
Mainboard IPOs come from larger companies listing on the main exchange platforms. SME IPOs come from smaller companies listing on dedicated small and medium enterprise platforms.
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How to apply for an IPO
You apply through your broker or bank using ASBA or a UPI mandate, which blocks the application amount in your bank account until allotment.
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How IPO refunds work
If you do not receive shares, or receive fewer than applied for, the blocked amount is released back to your bank account.
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Common IPO mistakes
Most beginner mistakes come from acting on excitement rather than on the information available in the offer documents.
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How to read an IPO prospectus
The prospectus, filed as a DRHP and later an RHP, is the official document describing the company, its finances, its risks and how the money will be used.
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Reading IPO financial statements
Three statements matter: the profit and loss account, the balance sheet, and the cash flow statement. Together they show earnings, what is owned and owed, and actual cash movement.
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Valuation basics for IPOs
Valuation compares the price you pay against what the company earns or owns, most commonly through the price to earnings and price to book ratios.
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Subscription categories explained
IPO shares are reserved in fixed proportions for institutional buyers, non-institutional investors, retail investors and sometimes employees and existing shareholders.
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Fresh issue vs offer for sale
In a fresh issue, new shares are created and the money goes to the company. In an offer for sale, existing shareholders sell their shares and the money goes to them.
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Understanding use of proceeds
Use of proceeds explains exactly how the company plans to spend the money raised in the fresh issue.
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Peer valuation and industry analysis
Peer valuation places an IPO's ratios next to comparable listed companies to see whether the pricing is in line with the industry.
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Cash flow and risk factor analysis
Cash flow analysis checks whether reported profits turn into actual cash, while risk factor analysis reads what the company itself says could go wrong.
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Post-listing performance analysis
Post-listing analysis studies how a share behaves after listing, comparing the issue price, listing price and current market price over time.
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IPO glossary
- ASBA
- Application Supported by Blocked Amount. Your money is blocked in your bank account instead of being debited.
- Anchor investor
- A large institutional investor that is allotted shares a day before the issue opens to the public.
- Book building
- A price discovery process where investors bid within a price band and the final price is set from demand.
- Cut-off price
- An option for retail investors to accept the final issue price whatever it turns out to be within the band.
- Demat account
- An electronic account that holds your shares.
- DRHP
- Draft Red Herring Prospectus, the first detailed document filed with the regulator.
- Face value
- The nominal value of a share recorded in the company's accounts, unrelated to its market price.
- Lock-in
- A period during which specified shareholders cannot sell their shares after listing.
- Net worth
- Total assets minus total liabilities, the shareholders' share of the company.
- Oversubscription
- When applications exceed the number of shares offered.
- QIB
- Qualified Institutional Buyer, such as a mutual fund or insurance company.
- Registrar
- The agency that processes applications, decides allotment and handles refunds.
- RoNW
- Return on net worth, profit as a percentage of shareholders' funds.
- UPI mandate
- A request sent to your UPI app to approve blocking funds for your IPO application.