IPO Investing in India: How to Apply, How Allotment Works and How to Judge an Issue

An initial public offering, or IPO, is when a company sells shares to the public for the first time and gets listed on stock exchanges. IPOs get a lot of attention, especially when a listing pops on day one, but they also lose investors money when the price is too high. This guide explains how the process works and how to judge an issue yourself.

Key terms

How to apply

1. You need a demat account, a bank account and a UPI ID linked to it.
2. Open the IPO in your broker's app during the subscription window, which is generally three working days.
3. Choose the category (retail individuals can apply up to ₹2 lakh), the number of lots and the price. Most people bid at the cut-off price, which means they accept whatever the final price turns out to be.
4. Enter your UPI ID and approve the mandate request in your UPI app. The amount is blocked in your account, not debited, under the ASBA process.
5. After allotment, the blocked amount is released for shares you did not receive, and shares you did are debited and credited to your demat account.

How allotment works

If the issue is subscribed less than the retail quota, everyone gets what they applied for. If it is oversubscribed, retail allotment is by lottery among valid applications, and each winner receives one lot, or sometimes none. So a heavily subscribed issue can mean a small chance of getting even one lot. Applying through several family members' separate demat accounts, with their own PAN and consent, increases the chance, but duplicate applications on one PAN are rejected. Allotment status is posted on the registrar's website, and listing normally happens about three working days after the issue closes.

How to evaluate an IPO

Read the summary of the prospectus. At the least, check:

• Use of proceeds: growth and debt reduction are better reasons than exits by early investors. An issue that is mostly an OFS means money goes to sellers.
• Profitability and cash flow: several years of revenue and profit trends, and whether the business generates cash, not just reported profit.
• Valuation: compare price-to-earnings or price-to-sales with listed companies in the same business. If the valuation leaves no room for error, the risk of a fall rises.
• Promoter background and holding after the IPO: look at past conduct, pledged shares and legal cases.
• Business model and competition: can you explain in two sentences how the company makes money?
• Risk factors: the prospectus lists them. Customer concentration or dependence on one product deserves attention.

The grey market and subscription numbers

The grey market premium, or GMP, is an unofficial, unregulated price at which allotments trade before listing. It is not reliable, can be manipulated and has no legal standing, and it is fine to ignore. High subscription numbers show demand, not value. Many popular issues have listed above the issue price and then dropped well below it.

Listing day and after

You can sell on the day of listing, or hold. Gains within 12 months are short-term capital gains, taxed at 20%. After 12 months, gains above ₹1.25 lakh in a year are taxed at 12.5%. Decide your plan before you apply: are you applying for a quick listing gain or to own the business? Use the stock return calculator to compute returns and the stock average calculator if you add to a position.

Mistakes to avoid

• Applying without reading anything because of social media hype.
• Borrowing to apply.
• Putting too much of your savings into a single IPO.
• Believing a listing gain is guaranteed.
• Falling for "guaranteed allotment" offers from agents, which are scams.

Rules on issue size, categories and timelines are set by SEBI and change over time. Read the offer document of each issue. This guide is general information, not investment advice.

Frequently asked questions

How do I apply for an IPO?

Through your broker or bank app, using your demat account and UPI ID, and approving the mandate to block the amount.

Is my money debited when I apply?

No. It is blocked under ASBA and released if you are not allotted shares.

How many IPO shares will I get?

If oversubscribed, allotment is by lottery and winners usually get one lot.

What is the grey market premium?

An unofficial indicator of the expected listing price. It is unregulated and unreliable.

How are IPO gains taxed?

Short-term gains within 12 months at 20%, long-term gains above ₹1.25 lakh a year at 12.5%.

Should I invest in every IPO?

No. Evaluate each issue on business quality and valuation.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.