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An overview of how IPO bidding works and the main elements involved in the public offering process.
Last updated on: March 17, 2026
When a company offers its shares to the public for the first time, the process is known as an Initial Public Offering (IPO). During this stage, investors place bids for shares within a specified price range before the company becomes publicly listed on a stock exchange.
IPO bidding forms an important stage in the stock market listing process, as it reflects investor demand for the shares being offered and contributes to the final issue price discovery.
IPO bidding refers to the process through which investors apply for shares during an Initial Public Offering. Investors submit bids indicating the number of shares they wish to purchase and the price they are willing to pay within the specified price band.
These bids are collected during the IPO subscription period and are later used to determine the final allotment of shares and the listing price of the company’s stock.
Participation in an IPO typically requires certain prerequisites related to financial accounts and regulatory verification.
These include:
A demat account to hold shares electronically
A bank account enabled for IPO applications through ASBA or UPI mechanisms
Completion of KYC verification with the relevant financial intermediary
These prerequisites are generally required for submitting IPO applications through authorised intermediaries.
During an IPO subscription period, investors place bids within a predefined price band announced by the issuing company and its lead managers.
All bids submitted during this period are collected through stock exchange platforms and processed by intermediaries involved in the offering.
Once the bidding window closes, the total demand across different investor categories is analysed. Based on this demand, shares are allotted to applicants and the company proceeds toward listing on the stock exchange.
Several entities participate in the IPO process:
Issuer
The company offering shares to the public.
Merchant Bankers / Book Running Lead Managers (BRLMs)
Financial institutions responsible for managing the IPO process and coordinating regulatory approvals.
Retail Individual Investors (RIIs)
Individual investors applying for shares under the retail category.
Non-Institutional Investors (NIIs)
High-net-worth individuals or entities applying for shares beyond the retail category limits.
Qualified Institutional Buyers (QIBs)
Institutional investors such as mutual funds, banks, and insurance companies.
Stock Exchanges (e.g., NSE, BSE)
Platforms where IPO shares are eventually listed and traded.
The IPO process generally follows several stages from regulatory filing to stock market listing.
The company files a DRHP with the Securities and Exchange Board of India (SEBI). This document outlines financial information, business operations, risk factors, and the purpose of the IPO.
After regulatory review, the final prospectus specifies the IPO size, price band, and application details.
The subscription window opens during which investors can submit bids.
Investors place bids indicating the number of shares and price within the price band.
Shares are allotted based on demand within different investor categories.
After allotment, shares are credited to demat accounts and begin trading on the stock exchange.
The IPO bidding process involves several procedural stages managed by financial intermediaries and stock exchanges.
IPO applications are typically submitted through broker platforms or banking channels using mechanisms such as ASBA (Application Supported by Blocked Amount) or UPI-based systems.
Application funds remain blocked in the investor’s bank account until the allotment process is completed. Once allotment is finalised, funds corresponding to allotted shares are debited and remaining amounts are released.
Under the ASBA system:
Application funds remain blocked in the investor’s bank account
Funds are debited only if shares are allotted
Any unallotted portion is automatically released after the allotment process
After the IPO subscription period ends, the registrar evaluates total demand across investor categories such as retail investors, non-institutional investors, and qualified institutional buyers.
If demand exceeds the number of shares available, allotment may occur on a proportionate basis or through a lottery system in the retail category. The final allotment details are then published and shares are credited to successful applicants’ demat accounts.
IPO pricing generally occurs through one of two methods:
Fixed Price IPO
A predetermined issue price is announced before the bidding process.
Book Building IPO
Investors submit bids within a price band. The final issue price is determined based on the demand received during the bidding period.
IPO participation is often discussed in relation to several factors associated with newly listed companies:
Opportunity to acquire shares during the initial public offering stage
Access to companies entering public capital markets
Potential participation in companies during their early public trading phase
IPO investments may involve certain risks, including:
Market Risk
Share prices may fluctuate after listing depending on market conditions.
Valuation Uncertainty
IPO valuations may be influenced by investor demand and market sentiment.
Allocation Limitations
Applicants may receive fewer shares than requested if the offering is oversubscribed.
IPO shares are generally allocated across different investor categories.
Retail Investors
Approximately 35% of shares are typically reserved for retail applicants.
Non-Institutional Investors (NIIs)
A portion of shares is allocated to high-net-worth individuals and corporate investors.
Qualified Institutional Buyers (QIBs)
Institutional investors receive a reserved allocation within the offering.
If an IPO application does not receive full allotment, the blocked funds are released through the same payment mechanism used during application.
For partially allotted bids, only the amount corresponding to the allotted shares is debited, and the remaining amount is released.
Certain aspects of the IPO process may influence the application and allotment stages.
These include:
Prospectus documents typically contain information on business operations and risk factors
Understanding company business models and disclosed risk factors
Monitoring subscription levels during the bidding period
After listing, several market indicators are commonly discussed, including:
Listing-day price movement
Company announcements and financial results
Market performance of comparable listed companies
Certain application errors may affect IPO bidding outcomes.
Common issues include:
Entering an incorrect bid price within the price band
Insufficient funds in the linked bank account
Ignoring the specified lot size requirements
Confusion caused by multiple demat accounts during application
IPO bidding represents a structured process through which companies offer shares to the public and investors apply for allocation during the subscription period. The process involves DRHP filings, price discovery, demand collection, and share allotment before the company’s shares begin trading on the stock exchange.
Understanding the different stages and participants involved in IPO bidding helps explain how companies transition from private ownership to public listing.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Reviewer
DRHP stands for Draft Red Herring Prospectus. It is a preliminary document submitted to SEBI that contains details about the company’s operations, financial performance, and risk factors.
In a book-built IPO, retail investors may place bids within the announced price band, subject to the specified lot size requirements.
Lot size refers to the minimum number of shares that must be applied for in an IPO. Applications must generally be made in multiples of the defined lot size.
Funds corresponding to unallotted shares are released automatically through the payment mechanism used during the IPO application.
Promoters may be subject to regulatory lock-in periods during which they cannot sell a specified portion of their holdings after listing.
IPO applications may be modified or cancelled during the subscription period before the bidding window closes.
No. The listing price depends on market demand and supply conditions when trading begins on the stock exchange.
The cut-off price refers to the final price determined after the book-building process at which shares are allotted to investors.
Yes. Applications can be submitted for multiple IPOs simultaneously, provided the applicant satisfies eligibility and funding requirements.
UPI is commonly used for retail IPO applications through broker platforms. However, other mechanisms such as ASBA through bank accounts may also be available.
After submission, the application amount is blocked in the applicant’s bank account until the allotment process is completed. Following allotment, shares are credited to successful applicants’ demat accounts and the company proceeds to listing.
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