Why Everyone Around You Seems to Be Talking About IPOs
If you follow any business news channel or scroll through a finance WhatsApp group, you’ve probably come across this word — IPO. Someone applied for Zomato. Your colleague made money on Tata Technologies. Your cousin keeps asking you to check the GMP of some upcoming listing.
The buzz is real. But so is the confusion. A lot of people apply for IPOs without really understanding what they’re signing up for. And many others skip them entirely because the whole thing sounds too complicated.
This article is for both kinds of people. By the end, you’ll know what an IPO actually is, whether it makes sense for you, and how to approach it without letting hype drive your decisions.
What Is an IPO, Really?
IPO stands for Initial Public Offering. It’s the process by which a private company sells its shares to the general public for the very first time.
Think of it like this. Say you and a friend started a tiffin delivery business in Pune. For two years, it’s just the two of you putting in money and running the show. But now you want to expand — more staff, more delivery zones, maybe a proper kitchen setup. One way to raise money is to let outside people own a small piece of your business in return for cash. That’s basically what an IPO is, just at a company-wide, stock-exchange level.
When a company decides to go public, it lists its shares on the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange). People like you and me can apply to buy those shares during the IPO window, which is usually open for three days.
Why Do Companies Do IPOs?
Companies go public mostly to raise money. That money goes toward expanding the business, paying off debt, funding new projects, or sometimes letting early investors cash out. It’s not done as a favour to retail investors — it’s a business decision. Knowing this helps you approach IPOs with a clearer head.
Who Regulates IPOs in India?
SEBI — the Securities and Exchange Board of India — oversees the entire IPO process. Before a company can go public, it has to file a document called the DRHP (Draft Red Herring Prospectus). This document tells you everything about the company — its financials, the risks involved, the management team, and how it plans to use the money raised. You can read the DRHP on SEBI’s website or the company’s IPO page before you invest.
How Does the Application Process Work?
- The company announces the IPO with a price band — for example, ₹480 to ₹500 per share.
- You apply through your bank’s net banking portal or a trading app like Zerodha, Groww, or Upstox using a system called ASBA. Your money stays in your bank account but gets blocked until allotment.
- You apply in ‘lots’ — each lot has a fixed number of shares. The minimum application is usually one lot.
- If the IPO is oversubscribed (more applications than available shares), shares are allotted through a computerised lottery.
- On listing day, the shares start trading on the exchange and you can sell them immediately or hold for the long term.
If you don’t get allotment, the blocked amount is released back to your account within a few business days.
A Real-Life Example:
Let’s take Tata Technologies, which had one of the most discussed IPOs of 2023.
The company fixed its price band at ₹475 to ₹500 per share. One lot had 30 shares. So to apply for one lot, you needed ₹15,000 (₹500 × 30 shares).
On listing day, Tata Technologies shares opened at around ₹1,200 on the NSE — more than double the issue price.
Someone who got allotment of one lot at ₹500 and sold on listing day would have made roughly ₹21,000 in profit (₹700 gain per share × 30 shares) on an investment of ₹15,000. That’s a listing gain of around 140%.
Sounds great, right? But here’s the other side of the story.
Paytm, which listed in November 2021, is a very different example. It came in at an issue price of ₹2,150 per share and fell nearly 27% on listing day itself. People who bought in and held on saw their investment lose significant value over the months that followed.
These two examples show that IPO investing is not a guaranteed route to profit. Some IPOs give strong listing gains. Others disappoint on day one and continue falling. The outcome depends on the company’s fundamentals, market conditions at the time, and how investors value the business.
IPO vs. Buying from the Stock Market — What’s the Difference?
A lot of beginners wonder: why bother applying in an IPO when I can just buy shares after it lists? Fair question. Here’s a simple comparison to help you think it through:
| What to Consider | Applying in IPO | Buying After Listing | Which Works Better? |
| Price | Fixed by company (price band) | Set by the market (may be higher or lower) | IPO if listing pops; secondary market if it dips |
| Ease of Access | Need allotment via lottery | Buy anytime during market hours | Secondary market is more convenient |
| Information Available | Only DRHP before applying | You can track price history post-listing | Secondary market gives more data |
| Ideal For | Short-term listing gains | Long-term investors who watch first | Depends on your goal |
| Minimum Amount | Usually ₹10,000–15,000 per lot | Can buy even 1 share if affordable | Secondary market is more flexible |
There’s no single right answer here. Some investors apply for IPOs purely to sell on listing day for quick gains. Others prefer waiting to observe how the stock behaves over a few months before buying. Both approaches have their place.
When Should a Beginner Consider Applying for an IPO?
Honestly, not every IPO deserves your money. Here are some things worth thinking through before you apply:
1. Read at Least the Basics of the DRHP
You don’t need to go through all 400 pages. But do look at the company’s revenue trend, whether it is profitable, and what it plans to do with the money raised from the IPO. If the company is consistently losing money with no clear path to profitability, that’s a red flag.
2. Check the Subscription Numbers
During the IPO window, you can see how many times the issue has been subscribed. For example, ‘50x’ means 50 times more applications than shares available. High subscription, especially in the QIB (Qualified Institutional Buyers) category, generally indicates confidence from experienced investors. But don’t chase every heavily subscribed IPO blindly — sometimes hype is just hype.
3. Apply Only With Money You Can Afford to Lock Up
Your application money stays blocked for around 6 to 8 days. Make sure you’re not applying with funds you might need urgently during that time. And since allotment is never guaranteed, don’t mentally count that money as already invested.
4. Don’t Apply Just Because Everyone Else Is
IPO FOMO is very real in India. When a big brand goes public, people apply without much thought. Some of the worst IPO losses in recent years came from exactly this kind of behaviour. Before applying, ask yourself: do I understand what this business does? Does the valuation make sense at this price?
5. Decide Upfront — Are You Holding or Flipping?
If you’re applying for listing gains, that’s a short-term play — sell on listing day if the price looks good. If you believe in the company’s long-term story, hold it the way you would any other stock. Either approach is fine, but knowing your goal before applying saves a lot of confusion later.
Quick Steps to Apply for an IPO in India
- Open a Demat account if you don’t already have one. Zerodha, Groww, Angel One, and Upstox are popular options.
- Link your bank account and make sure UPI or net banking is active.
- During the IPO window, go to the IPO section on your app and bid at the cut-off price — the safest choice for beginners.
- Approve the UPI mandate request. This blocks — but does not immediately deduct — the amount from your account.
- Wait for allotment results, usually declared about 6 days after the IPO closes.
So, Are IPOs Worth It?
That depends entirely on which IPO you’re looking at, when you’re investing, and what your goal is. Some IPOs have created real wealth for retail investors. Others have caused significant losses. There is no blanket answer.
What you can do is make better-informed decisions — understand the basics before applying, don’t put in more than you can afford to lose, and avoid chasing IPOs just because they’re trending. Treat an IPO like any other investment: with some curiosity, some caution, and a clear sense of what you’re getting into.
The stock market tends to reward people who pause and think before they act. IPOs are no different.
FAQs – about IPOs in India
Is it guaranteed I will make money if I invest in an IPO?
No. IPOs can list above the issue price (at a premium) or below it (at a discount). There is no guarantee of returns. Some IPOs have delivered strong listing gains; others have fallen sharply from day one and continued to decline.
Do I need a lot of money to apply?
Not necessarily. Most mainboard IPOs require a minimum of one lot, which typically costs between ₹10,000 and ₹15,000. Some smaller IPOs can be cheaper. That said, allotment is not guaranteed in heavily subscribed IPOs, so you might not get shares even after applying.
What is GMP and should I trust it?
GMP stands for Grey Market Premium. It’s an unofficial, unregulated market where people buy and sell IPO application forms before the listing. A high GMP suggests demand is strong, but since it’s not regulated by SEBI, it can also be inflated. Treat it as one data point among many, not as a reliable predictor.
Can I apply for more than one lot?
Yes, you can apply for multiple lots, but SEBI allows only one application per PAN card per IPO. You can also apply from different family members’ accounts (each with their own PAN and Demat account). Multiple applications from the same PAN will all be rejected.
Should I always sell on listing day?
Not necessarily. If you have conviction in the business and its long-term prospects, holding can be worthwhile. But if you applied for a quick gain and the listing price is good, selling on listing day is completely valid. Just keep in mind that any profit made within a year is taxed as Short Term Capital Gains (STCG) at 20%.
What if I don’t get allotment?
The blocked amount is released back to your bank account within a few business days. You are not charged anything.
Are SME IPOs the same as regular IPOs?
No. SME (Small and Medium Enterprise) IPOs are for smaller companies and are listed on SME platforms of BSE and NSE. The lot sizes are bigger, the companies are less established, and the risk is generally higher. As a beginner, it is better to start with mainboard IPOs and get comfortable with the process first.
Disclaimer: This article is for educational purposes only. It does not constitute financial advice. Please consult a SEBI-registered financial advisor before making any investment decisions.
