IPO Listing Process in India: 8 Key Steps and Basic Practices

Initial Public Offerings (IPOs) represent a pivotal moment in a company's journey. It signifies the transition from a privately held entity to one that trades publicly on stock exchanges such as the NSE or BSE. Hence, knowing the IPO process is important. 

For retail investors, understanding the IPO process in India is essential not only for educational purposes but also to make sense of how companies enter the capital markets.  This way, you can start informed and take advantage of the investment opportunity for handsome returns

An Initial Public Offering (IPO) is the process through which a privately held company issues shares to the public for the first time. This transition allows the company to raise capital from public investors and gain access to the equity markets.

Through an IPO, companies diversify their funding sources, improve visibility, and unlock opportunities for expansion. On the other hand, investors gain a chance to invest in a business at the start of its public journey, though this also comes with associated market risks.

Understanding each phase of the IPO listing process helps demystify what goes into a public offering. Here are the eight major steps involved:

1. Appointment of Intermediaries

The IPO process begins with a company selecting experienced intermediaries who handle different aspects of the listing:

• Merchant Bankers (Book Running Lead Managers - BRLMs): Coordinate the IPO process, prepare legal and financial documentation, and assist in price discovery.
  

• Registrars to the Issue: Manage the investor applications, allotment, and refunds
  

• Underwriters: Provide a commitment to subscribe to a portion of the IPO in case of under-subscription
  

• Legal Advisors: Ensure the offering complies with laws and regulations
  

• Auditors: Validate and present the financial statements required in the offer document
  

Their combined expertise ensures the IPO runs smoothly and remains compliant with regulations.

2. Due Diligence and Drafting the Draft Red Herring Prospectus (DRHP)

Once the team is in place, the paperwork begins. This includes a comprehensive audit of:

• Financial records
  

• Legal compliance
  

• Litigation status
  

• Business risks
  

• Corporate structure
  

Based on this, the company’s team prepares a Draft Red Herring Prospectus (DRHP). This document contains important disclosures such as:

• Company overview
  

• Industry landscape
  

• Risk factors
  

• Use of IPO proceeds
  

• Promoter and management details
  

• Financial performance
  

The DRHP does not include the price or number of shares and serves as the preliminary offer document.

3. Filing the DRHP with SEBI

The company files the DRHP with SEBI, which is the regulatory body overseeing securities markets in India. SEBI generally takes 4 to 6 weeks to review and provide feedback or seek clarifications. However, this timeframe can vary depending on the complexity of the offer and the completeness of disclosures.

During this period, the DRHP is also made available to the public on SEBI’s website for comments, ensuring a transparent process.

4. SEBI Review and Observations

SEBI examines whether the disclosures made in the DRHP are complete and compliant. If the board finds any issues, it sends observations to the company and merchant bankers.

Once the company responds and complies with all requirements, SEBI issues a final go-ahead to move forward with the IPO.

5. Filing the Red Herring Prospectus (RHP)

After addressing SEBI’s observations, the company files the final Red Herring Prospectus (RHP) with the Registrar of Companies (RoC). Unlike the DRHP, this version contains:

• Final issue size
  

• Price band
  

• Timelines for bidding
  

• Updated financials
  

This version becomes the official offer document shared with potential investors.

6. Marketing and Roadshows

To generate interest among investors, the company and its merchant bankers organise marketing campaigns or “roadshows”:

• Domestic and international presentations to institutional investors
  

• Media interactions and press releases to explain the company’s objectives
  

• Investor education programmes in major financial hubs
  

These campaigns allow management to highlight business strengths and growth prospects, helping to build demand.

7. Book Building and Bidding Process

Companies use the book-building process to discover the optimal issue price. Here’s how it works:

• Investors place bids within a defined price band (e.g., ₹95 – ₹100 per share).
  

• The issue is typically open for 3–5 working days
  

• Based on demand across categories (retail, institutional, HNIs), the merchant bankers decide the final price

• Investors make applications using ASBA (Applications Supported by Blocked Amount), which blocks the bid amount in the applicant’s account until allotment.
  

Institutional investors may also participate through the Anchor Investor route, where they commit to investing before the IPO opens to the public.

8. Allotment and Listing

The registrar performs share allotment based on investor category and oversubscription levels. Here is the allotment process:

• Retail investors may get shares through a lottery system in case of oversubscription
  

• The registrar processes refunds via electronic transfer for non-allottees
  

• The registrar credits shares to successful applicants’ demat accounts within three working days (T+3) of the last bidding day
  

• Stock exchanges then list the company, and trading commences on the assigned date
  

The listing day marks the company’s official entry into public markets, and the performance on this day is often viewed as a benchmark of market sentiment.

Despite its structured nature, the IPO process can encounter hurdles. Key challenges include:

• Regulatory Compliance: Ensuring full adherence to SEBI norms
  

• Valuation Dilemmas: Striking the right balance between company expectations and investor sentiment
  

• Market Volatility: Unpredictable conditions can delay or derail IPO plans
  

• Investor Awareness: Limited understanding can impact participation, especially in retail categories
  

Robust planning, clear disclosures, and guidance from experienced intermediaries can help navigate these challenges effectively.

The IPO listing process in India is both intricate and highly regulated. It involves several stages, from planning and documentation to regulatory approval, pricing, and eventual public listing. While it opens the door to capital and credibility for companies, it also introduces stringent compliance and disclosure norms.

For investors, understanding how IPOs function helps demystify the offering and allows them to participate more knowledgeably in the capital markets.

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.