IPO & IPO Process FAQs

An Initial Public Offering is the first time a company offers its shares to the public. Once the issue closes and shares list on an exchange, the company becomes a publicly listed entity and takes on ongoing disclosure obligations under SEBI's LODR Regulations.

Only if it satisfies SEBI's ICDR eligibility conditions and the listing requirements of the exchange it's targeting — Mainboard (NSE/BSE) or the SME platforms (NSE Emerge/BSE SME). On listing, the company converts to a public limited entity and must comply with post-listing corporate governance norms.

Mainboard IPOs list on NSE or BSE and carry stricter financial thresholds — higher paid-up capital, profitability and net worth requirements. SME IPOs list on NSE Emerge or BSE SME with relaxed eligibility aimed at smaller companies, but require 100% underwriting of the issue, unlike Mainboard IPOs where underwriting isn't mandatory.

The IPO itself only happens once — it's the first sale of shares to the public. After listing, a company can raise further capital through a Follow-on Public Offer (FPO), a rights issue, or a Qualified Institutional Placement (QIP).

The issuer company bears the cost of going public — merchant banking fees, underwriting, regulatory and exchange charges, depository fees, and marketing costs all form part of IPO expenses, typically settled out of the funds raised or paid directly by the company.

Under SEBI ICDR Regulation 6(1), a company generally needs: post-issue paid-up capital of at least ₹10 crore and market capitalisation of at least ₹25 crore, average operating profit of at least ₹15 crore over the last three years (positive in each), net tangible assets of at least ₹3 crore in each of the last three years (no more than 50% in monetary assets, unless the issue is entirely an offer for sale), positive net worth, and a three-year business track record.

Yes, through the QIB Route under ICDR Regulation 6(2). The issue must go through book-building with at least 75% allocated to Qualified Institutional Buyers, which limits retail participation and reflects the higher risk. Zomato and Swiggy both listed under this route.

For NSE Emerge: paid-up capital of at least ₹1 crore, net tangible assets of at least ₹3 crore, three years of operating history, positive net worth in at least two of the last three years, operating profit of at least ₹1 crore in two of the last three years, and — since September 2024 — positive Free Cash Flow to Equity in two of the last three years. Post-issue paid-up capital for an SME issue must stay under ₹25 crore.

Regulators and merchant bankers also look closely at corporate governance and operational hygiene: up-to-date ROC filings and statutory registers, a properly constituted board and committees, documented related-party transaction approvals, a qualified CFO and Company Secretary in place, clean IP ownership, and no unresolved litigation, tax demands or labour-law gaps. Most companies discover these gaps only once the IPO process is already underway — an early readiness check catches them sooner.

Yes. Under ICDR Regulation 277, an SME-listed company with post-issue paid-up capital between ₹10 crore and ₹25 crore can migrate to the Mainboard by shareholder special resolution — with non-promoter votes in favour needing to be at least twice those against — provided it also meets Mainboard listing eligibility.

The Draft Red Herring Prospectus is the preliminary disclosure document a company files before an IPO. It covers the business, financials, risk factors, promoter details and the objects of the issue — but not the final price or exact issue size, which come later.

No. SEBI mandates that every public issue have at least one SEBI-registered merchant banker acting as Book Running Lead Manager (BRLM). The BRLM prepares the DRHP, files it, and manages all communication with SEBI on the company's behalf.

SEBI is required to issue its observations within 30 days of receiving a complete filing. In practice, requests to expand risk factors, clarify inter-company fund flows, or refresh financials can add several weeks before that clock even starts.

SEBI's observations aren't a yes/no approval — they're the formal clearance to proceed, often with required changes. Once issued, the company has 12 months (18 months under the confidential pre-filing route) to open its IPO. If it doesn't launch in that window, it must refile the DRHP and restart the clock.

The DRHP is the first draft, filed before SEBI review, with no price or final size. The UDRHP-I is that same document updated with the changes SEBI and the exchanges requested, filed after observations are received. The RHP is the final version — filed with the Registrar of Companies just before the issue opens — and includes the price band and confirmed issue size.

Introduced by SEBI in November 2022, it lets a company submit its DRHP privately, receive SEBI's initial feedback, revise it, and only then make the updated document public. This allows testing investor appetite — particularly among QIBs — before disclosing sensitive commercial details to the wider market.

At least 21 days from the date of filing. The company must also announce the filing in three widely circulated newspapers (English, Hindi and a regional-language paper) within two working days. After the window closes, the BRLM submits a summary of public comments — and any resulting changes — to the exchange or SEBI.

SME IPOs typically take 4–6 months; Mainboard IPOs run 6–8 months and can stretch past a year for large or complex companies. The bulk of that time goes into DRHP preparation and due diligence before the filing itself — the filing is usually the midpoint of the journey, not the beginning.

The Book Running Lead Manager runs the IPO end to end: due diligence on the company, drafting and filing the DRHP/RHP, valuation and pricing, coordinating other intermediaries, marketing and roadshows, managing the book-building process, and overseeing allotment. Post-listing support commonly continues for one to two years.

No. SEBI (Merchant Bankers) Regulations, 1992 make a SEBI-registered merchant banker mandatory for every public issue. There's no route for a company to self-manage the process.

Alongside the BRLM: the Registrar (RTA) handles applications, allotment and refunds; Underwriters commit to buying unsold shares; Bankers to the Issue collect application funds; NSDL and CDSL credit allotted shares to investors' demat accounts; and the stock exchanges (NSE, BSE, or their SME platforms) provide the listing and trading venue.

Weigh their track record with similarly sized IPOs, sector expertise, investor and distribution reach, transparency around fees, and the strength of their post-listing support — not just brand name.

It varies significantly with issue size, complexity and exchange. Merchant banking fees are usually the largest fixed-cost component; underwriting is a variable cost tied to funds raised (mandatory 100% underwriting for SME issues, with the lead manager covering at least 15%); on top of that sit depository fees (NSDL/CDSL), stamp duty, ROC and SEBI charges, legal and audit fees, and marketing/roadshow costs — often ₹5–10 lakh for an SME issue.

Fees are negotiated per deal, structured as a percentage of the total issue size. Large Mainboard IPOs generally see fees of 1–5% of funds raised, depending on complexity and competitive dynamics; smaller SME issues often carry a higher percentage.

Yes — itemised IPO expenses are disclosed in the RHP as mandated by SEBI, so investors can see exactly how much of the raise went toward intermediary fees and issue costs.

In book-building, the company sets a price band — the band must be at least 5% wide and no more than 20% above the floor price — and investors bid within that range, with the final price set by demand. In a fixed-price issue, the merchant banker sets one price upfront and there's no bidding.

A minimum of three working days and a maximum of ten. If the price band is revised during the window, the bidding period must be extended by at least three additional working days.

ASBA (Application Supported by Blocked Amount) blocks the bid amount in the investor's own bank account rather than debiting it upfront — funds move only if shares are allotted. Retail and HNI applications up to ₹5 lakh typically go through UPI-based ASBA, where the investor approves a mandate request in their banking app. Either way, unblocked funds for non-allottees are released within 24–48 hours of the basis of allotment being finalised.

NSDL and CDSL are India's two securities depositories. They hold shares in dematerialised (electronic) form and credit allotted shares directly to investors' demat accounts — physical share certificates are no longer used. On the issuer side, promoters' pre-IPO shareholding must also be fully dematerialised before the offer document is filed.

Under the current T+3 listing timeline, the Registrar finalises the basis of allotment, unblocked funds are released to non-allottees, shares are credited to demat accounts, and trading begins roughly three working days after the issue closes.

Minimum promoter contribution is subject to a lock-in under the ICDR Regulations. Anchor investors face a staggered lock-in too: 50% of their allotted shares can be sold 30 days after allotment, with the remainder released after 90 days.

Ongoing obligations under SEBI's LODR Regulations kick in immediately — quarterly financial results, shareholding pattern disclosures, corporate governance reporting, and related-party transaction disclosures, among others. Merchant bankers and registrars typically continue supporting this for one to two years post-listing.

Yes — through a Follow-on Public Offer (FPO), a rights issue to existing shareholders, a Qualified Institutional Placement (QIP), or a preferential issue.