How to read an IPO: price band, GMP, allotment and listing day
An IPO (initial public offering) is the first time a company sells its shares to the public. In India the whole process, from bidding to the shares trading on NSE and BSE, takes about a week. Here is what each stage means.
1. DRHP and SEBI approval
The company first files a Draft Red Herring Prospectus (DRHP) with SEBI. It describes the business, its finances, the risks and how much it wants to raise. SEBI reviews it and may ask for changes; its approval (often called the SEBI "nod") lets the company launch the IPO, usually within a year.
2. Price band and lot size
A few days before the issue opens, the company announces the price band, for example ₹100–105 per share, and the lot size: the minimum number of shares you can bid for. You bid in multiples of the lot.
3. Anchor investors
A day before the issue opens, large institutions (mutual funds, insurers, foreign funds) can buy part of the issue as anchor investors. Strong anchor demand is often read as a vote of confidence. Their shares are locked in, partly for 30 days and partly for 90 days after allotment, and those lock-in expiry dates can bring selling.
4. Subscription: opens and closes
The issue stays open for bidding for usually three working days. Bids are split into categories: retail investors, high net-worth individuals (non-institutional) and qualified institutions. The subscription figure shows demand: "subscribed 20 times" means bids for 20 times the shares on offer.
5. Grey market premium (GMP)
The GMP is the price at which IPO shares change hands unofficially before listing. It is not regulated, can be manipulated and is often wrong. Treat it as gossip about demand, not a forecast of the listing price.
6. Allotment
When an issue is oversubscribed, not everyone gets shares. Retail allotment is by lottery, one lot per winning applicant. Allotment is finalised about a day after the issue closes; you can check your status on the registrar's website, and money is unblocked from your account if you don't get shares.
7. Listing day
Since SEBI's T+3 rule, shares list on the third working day after the issue closes. On listing day a special pre-open session discovers the opening price; the gap between the issue price and that price is the listing gain (or loss).
What to watch on the calendar
The dates that matter are the open and close dates (when you can bid), the allotment date and listing day. Our IPO calendar shows all of them for current and upcoming issues on NSE, including SME IPOs.
For education only. Not investment advice; My Market Desk is not a SEBI-registered investment adviser. Rules and timings change, so check the exchange or regulator for the current position.