What is an IPO? How a startup goes public in India

An IPO is the moment a private company becomes a public one. Before it, the shares are held by a small group: founders, early employees, angel investors and venture capital funds. During it, the company offers shares to anyone who wants to buy, through the stock market. After it, the shares are listed, which means they trade every day on an exchange and anyone with a demat account can buy or sell them.

In India, the two exchanges that matter are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). A company can list on one or both. The market regulator, the Securities and Exchange Board of India (SEBI), writes the rules for how an IPO must be run and what the company must tell the public.

The first reason is money. A listed company can raise large amounts from many investors at once, often more than a private round can give. That money can pay for growth, repay debt or fund new products.

The second reason is a way out for early backers. Venture funds have a fixed life, usually around ten years, and must return cash to their own investors. An IPO lets them sell part of their holding in the open market, either in the IPO itself or later. Employees who hold stock options also get shares they can actually sell.

The third reason is trust and visibility. Listed companies publish results every quarter and follow strict disclosure rules. That can help with hiring, with large customers and with using shares as currency for acquisitions.

SEBI's rules for a main board IPO are in the Issue of Capital and Disclosure Requirements (ICDR) Regulations. As of October 2026, there are two broad routes. The first is for companies with a record of profit and net worth, where the rules set minimum track-record conditions and require at least a third of the offer for retail investors. The second is for companies that do not meet those profit tests, which covers many new-age technology firms that were still losing money when they listed. These companies can list if a large share of the offer, at least three quarters, is allotted to qualified institutional buyers (QIBs), such as mutual funds and insurers.

Smaller companies can use a separate SME platform, covered in the guide on SME IPOs. The exact numbers change from time to time, so the offer document of any IPO is the place to confirm which route was used.

The path is long, usually several months from the decision to list to the first trading day. The main steps are below.

• The company picks merchant bankers, called book running lead managers (BRLMs), plus lawyers, auditors and a registrar.
• It converts into a public limited company if needed, cleans up its books and fixes its board, since listed companies need independent directors.
• The bankers prepare a draft red herring prospectus (DRHP) and file it with SEBI. SEBI reviews it and sends observations.
• After approval, the company files the red herring prospectus (RHP) with the Registrar of Companies, announces the price band and opens the issue for three working days.
• Before it opens to the public, anchor investors are allotted shares, which builds early demand.
• When bidding closes, the shares are allotted, refunds go out for unsuccessful bids, and the stock lists on the exchange.

The company and its promoters are the sellers. The merchant bankers manage the process, check the disclosures and market the issue to institutions. SEBI approves the DRHP and sets the rules. The registrar handles applications, allotment and refunds. The exchanges run the bidding system and list the shares. Depositories, NSDL and CDSL, hold the shares in electronic form.

Buyers fall into three groups: qualified institutional buyers, non-institutional investors (which include wealthy individuals bidding above ₹2 lakh) and retail investors, who bid up to ₹2 lakh. Each group has its own share of the offer, and the details are in the guide on the RHP and price band.

A retail investor needs a demat account, a trading account and a bank account linked to UPI or ASBA, which stands for Application Supported by Blocked Amount. When you bid, the money stays in your own account and is only blocked, not paid out. If you get no shares, the block is released. If you get shares, the amount is debited and they appear in your demat account.

Bids must be in lots. The lot size and the price band are in the RHP, and your bid amount is the lot size multiplied by the price. Allotment for oversubscribed retail quotas is usually done by lottery.

Listing day is when the price starts moving freely. Shares can open above or below the issue price, and many are volatile in the first weeks. This does not tell you much about the company's long-term value.

After listing, the company must publish quarterly results, report big events quickly and hold annual meetings. Shares held by promoters and pre-IPO investors are locked in for a set period before they can be sold, which is why news about lock-in expiry sometimes moves a stock. The guides on anchor investors and the offer for sale cover these.

An IPO is not a guarantee of a profit. Prices are set by the company and its bankers, and demand on the day can push them either way. Read the risk factors section of the offer document, check how the money will be used, and see how much of the issue is fresh capital and how much is existing holders selling. Nothing here is investment, legal or tax advice. Check with a qualified professional before you invest or plan a listing.