IPO Investing — How to Apply and What to Watch
IPO process in India, RII/NII/QIB categories, UPI ASBA, GMP, allotment, and listing day strategies.
IPOs create massive excitement in India — millions of applications for a single issue. But most retail investors go in blind. Let's understand how IPOs actually work and how to invest smartly.
How the IPO Process Works in India
The typical IPO timeline:
- Company files DRHP (Draft Red Herring Prospectus) with SEBI
- SEBI reviews and gives observations (usually 30-75 days)
- Company does roadshows and fixes a price band
- IPO opens for 3 working days for bidding
- Allotment happens within 6 days, listing within 3 days after that
Investor Categories — RII, NII, QIB
| Category | Who | Reservation | Min/Max Bid |
|---|---|---|---|
| RII (Retail) | Individuals investing up to ₹2L | 35% of issue | Up to ₹2,00,000 |
| NII (Non-Institutional) | Individuals investing above ₹2L | 15% of issue | Above ₹2,00,000 |
| QIB (Qualified Institutional) | Mutual funds, banks, FIIs | 50% of issue | No upper limit |
NII is further split: sNII (₹2L-₹10L) gets 1/3 of NII quota, bNII (above ₹10L) gets 2/3. Since 2022, both use lottery-based allotment like retail.
How to Apply — UPI ASBA Process
Applying for an IPO is now fully digital through UPI:
- Open your broker app (Zerodha, Groww, Angel One, etc.)
- Select the IPO and choose lot size (minimum 1 lot)
- Enter your UPI ID (linked to your bank account)
- Submit the bid — a mandate request appears on your UPI app
- Approve the mandate — the bid amount gets blocked (not debited) in your bank account
- If allotted, money is debited. If not, the block is released automatically
Understanding GMP (Grey Market Premium)
GMP is based on unofficial trades and can swing wildly. Many IPOs with high GMP have listed flat or negative. Never use GMP as your only decision factor.
Listing Day Strategies
Priya gets allotted 1 lot (13 shares) of an IPO at ₹1,500 per share. Investment: ₹19,500. On listing day, the stock opens at ₹2,100 (40% premium).
Strategy 1 — Sell on listing: She sells all at ₹2,100 and books ₹7,800 profit (taxed as STCG at 20%).
Strategy 2 — Partial exit: She sells 7 shares at ₹2,100, recovers ₹14,700, and holds 6 shares as "free" investment.
Strategy 3 — Hold: She believes in the company long-term and holds all shares. If she holds over 1 year, gains above ₹1.25L qualify for 12.5% LTCG.
How to Evaluate an IPO Before Applying
Don't apply to every IPO. Check these factors:
- Promoter track record — Have they built successful businesses before?
- Financial growth — Is revenue and profit growing consistently over 3 years?
- PE ratio vs listed peers — Is the IPO fairly priced compared to similar companies?
- Object of the issue — Fresh capital for growth (good) vs OFS for promoter exit (less good)
- Subscription data — High QIB subscription (3x+) signals institutional confidence
The Red Herring Prospectus contains risk factors, financials, and use of funds. At minimum, read the risk factors section and peer comparison table.
Key Rules for Anchor Investors
Anchor investors (large institutions) get shares 1 day before the IPO opens. But they have lock-in restrictions:
- 50% of anchor allocation is locked for 90 days
- Remaining 50% is locked for 30 days
- Heavy anchor selling after lock-in expiry can pressure stock price
Key Takeaways
- Apply via UPI ASBA — your money stays in your bank until allotment
- Retail investors (RII) can bid up to ₹2L and get 35% reservation
- Don't rely on GMP — it is unofficial and unreliable
- Compare IPO valuation with listed peers before applying
- Have a listing day strategy ready — full exit, partial exit, or long-term hold
What happens to your money when you apply for an IPO via ASBA?
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