Business Original explainer
How an IPO moves from a draft prospectus to listing day, and what a retail investor actually does at each step.
When a private company wants ordinary investors to own a part of it, it holds an initial public offering, or IPO. That is the first time its shares are sold to the public. After the sale, the shares list on the NSE or BSE, where demat account holders can buy or sell them. Understanding how IPO works in India means knowing the order of events, who gets what, and where your money sits. In a fresh issue, the money goes to the company; in an offer for sale, it goes to selling shareholders.
Jio Platforms gave investors a recent example. Its IPO opened on 21 October 2026 and closed on 23 October 2026, with a price band of ₹1,065 to ₹1,119 a share and a lot of 12 shares. One lot therefore cost ₹13,428 at the top of the band. It listed on 28 October 2026.
Before the public hears a price, the company files a draft red herring prospectus, or DRHP, with the Securities and Exchange Board of India, or SEBI. The DRHP describes the business, its financial statements, its promoters, the risks it faces, and how it plans to use the money raised. It does not contain the final share price.
SEBI reviews the DRHP and issues observations, asking for corrections or clearer disclosure where needed. Its role is to check that investors get adequate information; it does not approve the business or promise that the shares will do well. Once the observations are addressed, the company files the red herring prospectus, or RHP, with the Registrar of Companies.
The RHP is filed at least three working days before the issue opens, and the price band is announced at least two working days before it opens. Most large IPOs use book building: the company sets a price band, with the cap no more than 120% of the floor, investors bid within it, and the final price is fixed after bidding closes. Anchor investors bid a day before the public issue opens.
Shares in a book-built IPO are divided among three groups. Qualified institutional buyers, or QIBs, including mutual funds, banks, insurers and foreign institutional investors, can take up to 50% of the net issue. Non-institutional investors, or NIIs, often called high-net-worth individuals, get at least 15%. Retail individual investors get at least 35%. Retail means a bid of up to ₹2 lakh; above that, a bid is non-institutional.
Investors bid in lots, a fixed bundle set for each IPO. In the Jio Platforms IPO, one lot was 12 shares. A retail investor could apply for one lot, or several, as long as the total stayed within the ₹2 lakh limit. A bidder can choose a price inside the band or pick the cut-off price, which means accepting whatever final price is fixed after bidding.
To apply, you need a PAN, a demat account, and a bank account in your own name, and you apply through a broker's app or your bank. Applications use ASBA, or Application Supported by Blocked Amount. Your money is not taken when you apply. Instead, your bank blocks the bid amount in your own account. If you are allotted shares, the blocked amount is debited. If you are not allotted, the block is lifted.
With the UPI route, after you submit the bid you get a mandate request in your UPI app, such as Google Pay, PhonePe or BHIM. You check the company name and amount, then approve it with your UPI PIN; until you do, the application is not complete. On the closing day, the mandate must be approved by 5 pm. UPI can be used for bids of up to ₹5 lakh; larger bids go through the bank's own ASBA facility. Bidding is usually open for three working days.
Once bidding closes, the registrar finalises the basis of allotment with the designated stock exchange. Under SEBI's T+3 timeline, mandatory for issues opening on or after 1 December 2023, allotment is finalised one working day after closing, shares are credited and unsuccessful bids unblocked on the second, and the shares list on the third.
When an IPO is oversubscribed, each category follows different rules. In retail, the aim is to give one minimum lot to as many applicants as possible. If there are more valid applicants than lots, winners are picked by a computerised lottery run by the registrar. Applying for more lots does not improve your chance of getting one lot, because each application gets one entry in the draw. Institutional and non-institutional bids are generally allotted proportionately.
On listing day, shares start trading after a pre-open session in the morning, and the opening price is set by buy and sell orders in that session, not by the issue price. A share can open above or below the issue price and move sharply once trading begins. Jio Platforms listed at ₹1,358 on 28 October 2026, against an issue price of ₹1,119 — a strong debut, but one listing proves nothing about the next. A listing gain is never guaranteed.
The same caution applies to the grey market. Before listing, some dealers quote a grey market premium, or GMP, for IPO shares. The grey market is unofficial and unregulated: SEBI and the exchanges do not publish a grey market premium, and deals there are not settled through the exchange, so there is no exchange protection if the other side does not honour the deal. A high premium is, at most, a sign of short-term interest — not a promise about the listing price. Read the RHP before you bid, check the lot size and price band, and approve the UPI mandate in time.
This explainer was written by The Daily Short's desk from the sources listed above. It is general information, not professional advice. Spot an error? See our Corrections Policy or tell us via the Contact page and we will correct it. Follow our official Instagram @thedaily.short.