Steps Involved In Initial Public Offering: IPO Process In India Explained

Everything you need to know about the IPO process in India: Every IPO is different, but it always hits an investor with the same zeal. Share marketers see nothing but the potential to become the next Facebook or Amazon. As an investor, you must expect allotment. But do you know what goes behind the scenes of releasing an IPO in India? 

Though most companies start from unlisted share space, many companies go public to raise huge amounts of funds in exchange for equity. It takes only an IPO to change status from a privately-held body to a publicly-traded company. Typically, companies offer IPO to raise capital and get open access to liquidity by trading their shares on the stock exchange. If you are embarking on your share trading journey, knowing the process of IPO in India will enhance your understanding and help you lock in lucrative opportunities.

So what are the steps for an IPO listing? We will talk about it in detail but let’s understand some financial terminologies you might find tough.

  • IPO: Initial Public Offering (IPO) refers to the process when a company lists its shares on the stock exchange for public trading.
  • Underwriter/Lead Manager: These are independent financial institutions or investment banks appointed by businesses to take care of all the activities throughout the IPO issue process.
  • DRHP: A Draft Red Herring Prospectus is a draft that introduces a new business/product/service to potential investors. It generally talks about the company’s values, mission, and vision.
  • BID: It is an initial price tag to purchase something at a specific price.

Process of IPO In India

The lifecycle of an IPO goes from different stages, that starts with selecting a bank for investment, completing due diligence and filing process, stabilising pricing, etc., finally resulting in a successful public offering generating millions of dollars. While many well-established and successful companies still work through pre-IPO share trading (unlisted equity shares). Companies like  HDFC Securities, OYO, Reliance Retail, etc., are famous companies that still trade through unlisted shares.

IPO Process In India – Clearing The Picture

Here are the simple steps involved in turning from a privately held company to a publicly-traded company.

Appointing An Underwriter or Lead Manager

To kickstart the IPO process in India, companies need to approach market experts called underwriters or lead managers. These financial experts specialise in the IPO process and act as intermediaries between companies and their investors.

Underwriters and lead managers also study a company’s financial condition, check crucial financial parameters, and if the company trusts them, they sign an underwriting agreement. The underwriting agreement usually consists of the following components.

  • Details of the deal
  • Expected ammount
  • Details of securities behind issued

Registering For IPO

The next step involved in the IPO process in India is IPO registration. It includes creating a Draft Red Herring Prospectus and the registration statement. This is mandatory as per the Companies Act, and DRHP should consist of all compulsory disclosures as per the Companies Act and SEBI.

the company’s lead managers or underwriters prepare the Draft Red Herring Prospectus. Submission of RHP or DRHP is crucial because this is the only source of information helping investors make an informed decision. Moreover, the document helps in marketing the IPOs to prospective investors.

SEBI Approval

After submitting a Red Herring Prospectus, The Stock Exchange Board reviews the application. The board ensures that every important detail about the company is available to its prospective investors.

There are multiple checks throughout the IPO process in India. Once the application is compliant with the SEBI guidelines, the company can announce the dates of its IPO.

Applying For Listing On Stock Exchange

The next step in the IPO process in India is applying for a listing on the stock exchange, where it plans to float the issue. There are two major stock exchanges in India – National Stock Exchange and the Bombay Stock Exchange.

It’s Time For Roadshow

Before an IPO becomes public, the company does roadshows and promotions to create a buzz in the market. Over a week or two, the internal staff and team members, including the underwriter, will advertise and promote the impending IPOs before being available for public trading.

This is basically a marketing tactic to attract potential investors. In this process, the company’s key highlights and unique selling points pass on to various people. It includes fund managers and investment managers. This roadshow aims to resolve investors’ queries via question and answer sessions, multimedia screening, group meetings, and other tactics.

Setting Price of IPO

Now, this is another crucial step of the IPO process in India. Companies can now initiate the pricing of an IPO either through a fixed price IPO or a bookbinding offer. Both methods are effective but have a few differences. Companies announce the price of stocks in advance of a fixed-price offering. On the other hand, the price range of the first 20% stocks is announced in advance in Book Binding Offering.

For the bidding process, investors are required to bid as per the company’s quoted lot price. Lot also refers to the minimum number of shares to be purchased. Moreover, the company also facilitates an IPO floor price, which indicates the minimum bid price and IPO cap price. Post compilation of the bidding process, the company will determine the cut-off price based on which the final price will be decided.

Distribution of Shares

Once the IPO price is decided, the company and its underwriter will analyse the shares allotted to each investor. In case of oversubscription, companies can make partial allotments.

There is a period of 5 days in which the final prospectus and applications are made available to the public traders online and offline. Investors can apply for IPO during this period, or a few companies float their shares in unlisted share markets so they can also trade over there.

These are the most crucial steps in the IPO process in India, but there are a few other factors too. Companies also try to prevent insiders or internal investors from participating in the IPO process.

Wrap-up Thoughts!

Now that you know the IPO process in India and its significance, you can quickly identify opportunities and make a better decision to invest in an IPO. If you cannot wait for the company to list its IPO, just have a look at the list of pre-IPO shares in India. These shares will list soon, and you can make a profit multiple times!
If you need to know anything else about unlisted shares or pre-IPO shares, feel free to connect with expert unlisted share brokers at Stockify!

Table of Contents

Are you an IPO seeker? Wondering what goes inside an initial public offering? Here is a detailed IPO process in India. Check it out!


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Piyush Jhunjhunwala
Piyush Jhunjhunwala
CA, CPA, Ex. PepsiCo, Reckitt, Coty
CEO & Founder
Dubai, UAE.
Rahul Khatuwala
Rahul Khatuwala
Ex. Wipro & Finaco Founder
Bangalore, India.