IPO Made Easy: 6 Key Things to Know From Beginner to Pro Guide with Process, Allotment, and Strategies

1. IPO Full Form & Meaning: What Is an IPO?

An IPO (Initial Public Offering) is when a private company offers its shares to the public for the first time to raise money.
Think of it like this: A business that was owned by a few people now wants to grow bigger so it invites regular people (like you and me) to invest and become part-owners by buying its shares through the stock market.

When a company grows and needs more money to expand, it looks for big funding. One of the best ways to get that money is by going public — this means selling shares to the public for the first time. This process is called an IPO (Initial Public Offering).

2.Main Reasons Why Companies Launch an IPO:

Purpose:-

• To Raise Big Money (Capital)
• Launching new products
• Entering new markets
• Building factories, offices, or warehouses
• Hiring more employees
• To Pay Off Debts
• To Give Early Invesntor an Exit
• To Build Brand Trust and Public Image
• To Use Shares as Currency

An Pubic Offering brings huge money from the public without taking loans.

---

In Simple Words:

An IPO helps a private company become bigger, borrow less, and give people a chance to own a piece of its success.

Two Types of IPO Issues

1️⃣ Fresh Issue

What is it?
This is when the company issues new shares to the public to raise fresh capital (new money).

💡 Why companies do it?

• To grow the business
• To repay loans
• To expand operations
• To buy assets or build infrastructure

✅ Key Point:
In Fresh Issue, the money goes directly to the company.

2️⃣ Offer for Sale (OFS)

What is it?
This is when existing shareholders (like promoters or early investors) sell their shares to the public.

💡 Why companies do it?

• To allow early investors to exit
• Promoters want to reduce their stake
• It adds liquidity to the shares

❌ Key Point:
In OFS, the money goes to the selling shareholders, not the company.

3.IPO Process Step-by-Step: From DRHP to Allotment

1. DRHP Filing (Draft Red Herring Prospectus)

The company prepares a big document called DRHP and submits it to SEBI (the stock market regulator).
This document tells everything about the company – how it works, its profits/losses, how much money it wants to raise, and where it will use the money.

In short: It’s like a resume of the company for investors to read before applying.

---

✅ 2. SEBI Review & Approval

SEBI checks the DRHP carefully. If everything is okay, it gives permission to go ahead with the IPO.

---

✅ 3. Price Band is Announced

The company sets a price range (like ₹95–₹100 per share). This is called the price band.
Investors can choose how much they want to bid within this range.

Example: If price band is ₹95–₹100, retail investors usually apply at ₹100 (cut-off price) to improve their chances.

---

✅ 4.Opens for Public

The IPO opens for 3 days (normally). During this time, investors can apply using their UPI ID or bank account (ASBA) through apps, brokers, or banks.

---

✅ 5.Closes and Bidding Ends

After 3 days, the IPO closes. The company checks how many people applied and at what price.

---

✅ 6. Final Price is Fixed (Cut-off Price)

Based on the demand, the company decides the final price of the share. This is called the cut-off price.

---

✅ 7. Shares Are Allotted

If more people applied than available shares, then lottery-style allotment happens (called oversubscription).
If you get selected, you’ll receive shares. If not, your money is refunded.

---

✅ 8. Listing on Stock Exchange (NSE/BSE)

The company’s shares are listed on a fixed date. You can now buy or sell shares on the stock market like any other stock.

If the listing price is higher than the allotment price, investors get listing gains.

---

💡 Summary:

A company files DRHP, gets SEBI approval, sets price, collects applications, allots shares, and finally gets listed on the stock exchange.

4.Types of IPO Investors:

When a company launches an Initial Public Offering, different types of investors participate. SEBI (India’s market regulator) has divided them into clear categories based on how much they invest and who they are.

Summary of all types of Investors In IPO

Investor Category	Bid Limit / Entry	Reservation	Allotment Basis	Cut‑off Price	Lock‑in
Retail (RII)	Up to ₹2 lakhs	≥35%	Lottery (if oversubscribed)	✅ Yes	None
Small HNI (sNII)	₹2–10 lakhs	~5%	Lottery (~₹2 lakhs minimum)	❌	None
Big HNI (bNII)	Above ₹10 lakhs	~10%	Pro-rata allocation	❌	None
QIB (Institutional buyers)	No upper limit	Up to ~50%	Pro-rata allocation	❌	Usually 90 days
Anchor Investors	₹10 Cr+ (Mainboard)	Up to 60% of QIB quota	Pre‑IPO allocation	❌	30–90 days
Employees / Shareholder quota	Per prospectus rules	5–10%	Discretionary / Fixed price	❓ Depends	Generally none

5. Step-by-Step: How to Apply for an IPO in India

✅ Step 1: Open a Demat & Trading Account

You’ll need a Demat Account to hold shares and a Trading Account to buy/sell.
You can open them with brokers like:

• Zerodha
• Groww
• Upstox
• Angel One
• ICICI Direct
• Kotak Securities

👉 Pro Tip: Choose a broker with UPI support for faster IPO applications.

---

✅ Step 2: Check Upcoming IPOs

Go to websites like:

• NSE India or BSE India
• Your broker’s IPO section
• Mithila Bull IPO Calendar

Look for IPO details: Issue date, price band, lot size, GMP, etc.

✅ Step 3: Apply via ASBA or UPIThere are two methods to apply for IPOs:

🔵 1. ASBA Method (Net Banking)

ASBA stands for Application Supported by Blocked Amount.
Your bank locks the IPO amount in your account, but it’s only debited if shares are allotted.

How to apply via ASBA:

1. Login to your net banking (SBI, HDFC, ICICI, etc.)
2. Go to the IPO/ASBA section
3. Select the IPO you want to apply
4. Enter:
   • PAN
   • Demat ID
   • Bid quantity (in lots)
   • Price (cut-off option recommended)
5. Submit the form

✅ Safe method, no UPI needed.

🔵 2. UPI Method (Through Broker Apps)

This is faster and paperless. Use apps like:

• Zerodha
• Groww
• Paytm Money
• Upstock

Steps:

1. Go to IPO section and choose the the Company
   • Lot size
   • Cut-off price (tick box)
   • UPI ID (linked to your bank)
2. Approve the UPI request in Google Pay/PhonePe/BHIM
3. Done!

🔔 UPI payment gets blocked, not debited immediately.

🔢 Minimum Investment Amount

IPO Lot size varies.
Example:

• Lot size = 50 shares
• Price = ₹100 per share
  ➡️ You’ll need ₹5,000 to apply for 1 lot.

6. What Happens After IPO Application?

Funds are blocked (not debited)

1. If you get shares → Amount debited, shares come to your Demat
2. If not allotted → Funds are auto-unblocked

---

📤 How to Check IPO Allotment Status

You can check allotment on:

• Registrar Website (KFinTech)
• NSE
• BSE
• Broker App

🏁 Final Words

IPO investing is now easy, fast, and online. Whether you choose UPI or ASBA, the steps are simple. Make sure to check company details and only invest in fundamentally strong IPOs.

Follow the IPO calendar, read expert reviews, and make informed decisions before investing.
Remember, wise investing begins with the right knowledge and timing. Stay updated, stay smart!