What is an IPO? How to Apply in India (2025) — Step-by-Step Guide

IPO investing has grown rapidly in India, especially after 2020, as more retail investors entered the market through Demat and UPI-based platforms. Yet many beginners still struggle to understand what an IPO really is, how allotment works, and which method—ASBA or UPI—is safest.

This 2025 guide explains IPOs in simple language, covering the entire journey from DRHP filing to listing day. It is based on SEBI rules, exchange guidelines, and verified broker processes.

Last Updated: November 2025
Author: Himanshu Gurha
Credentials: 12+ years trading experience, founder of Trading Shastra Academy, based in Noida.

What Is an IPO?

An IPO, or Initial Public Offering, is when a private company sells its shares to the public for the first time. Once listed, these shares trade live on NSE and BSE.

In India, IPOs are regulated strictly by SEBI. Before any issue opens, the company must file a DRHP (Draft Red Herring Prospectus) detailing its financials, risks, use of funds, and management background.

If SEBI approves the filing, the company announces the price band, lot size, subscription dates, and listing timeline.

Why Companies Launch IPOs

Companies usually launch IPOs for strategic and financial goals. Common reasons include:

Raising money for expansion or new projects
Reducing debt and improving the balance sheet
Allowing early investors (VCs/PEs) to exit
Establishing public credibility and better governance
Listing benefits like easier capital access and market visibility

Every IPO prospectus must clearly mention the “use of proceeds”—always read this section before applying.

IPO Process in India

Understanding the IPO lifecycle helps beginners track what actually happens behind the scenes.

1. DRHP Filing with SEBI

A company submits its Draft Red Herring Prospectus to SEBI. This document reveals the company’s finances, risks, promoter details, and business model.

2. SEBI Review & Final Prospectus

After reviewing the draft, SEBI may raise queries. Once cleared, the company publishes the final prospectus, setting a price band and timeline.

3. Subscription Window (3–5 Days)

Retail, HNI, and institutional investors place bids within the given price band. This is when you apply.

4. Allotment Finalisation

Registrars use SEBI-approved rules to allocate shares. In oversubscribed issues, retail allotment often happens via lottery.

5. Listing on NSE/BSE

Allotted shares get credited to your Demat account. The stock begins trading on listing day.

Do You Need a Demat Account to Apply?

Yes.
A Demat account is mandatory because IPO shares are credited electronically. Without it, even a successful allotment cannot be delivered.

Banks and brokers help open Demat accounts in a few days. Ensure your PAN matches your Demat details; mismatches can cause application rejection.

Three Ways to Apply for an IPO in 2025

1. Bank ASBA (Netbanking Method)

ASBA stands for “Application Supported by Blocked Amount.” It blocks the required money in your bank account instead of immediately deducting it.

How it works:

Login to netbanking
Go to IPO/Investments
Choose the IPO
Enter lot quantity and price (or cut-off)
Submit

Money remains blocked. If no shares are allotted, the block is removed automatically.

ASBA remains one of the safest and most reliable ways to apply.

2. Broker / UPI Mandate Method (Most Popular)

This method is simple and mobile-friendly.

Steps:

Open your broker’s IPO section
Select the IPO
Enter quantity & price
Enter UPI ID
Approve the UPI mandate in your UPI app

If allotted, funds are deducted automatically. Otherwise, the mandate expires, and the block is lifted.

This method is common for Zerodha, Groww, Upstox, Angel, and other brokers.

3. Exchange Platforms (NSE/BSE IPO Portal)

These portals allow direct application without relying on brokers.

You need:

PAN
Demat account
Internet banking / UPI

This method is less popular among retail investors but is officially supported.

How IPO Allotment Works — Retail Quota Explained

Retail investors typically get around 35% of the total issue in most IPOs. Oversubscribed issues often use a lottery system where each valid retail application gets an equal chance at allotment.

Key points:

Applying early doesn’t increase chances.
Oversubscribed IPOs usually allot only one lot at most.
Applying at cut-off price maximises eligibility.
Multiple accounts should not use the same PAN (strictly prohibited).

If you’re not allotted shares, the blocked funds return automatically.

Who Is Considered a Retail Investor?

Any individual applying for shares worth up to ₹2 lakh is treated as a Retail Individual Investor (RII).

Above ₹2 lakh falls under HNI/HNI-S categories.

Retail quota rules and cut-offs are always mentioned in the prospectus.

What Happens After Allotment?

After allotment:

Allotted shares get credited to your Demat
If not allotted, funds unblock automatically
Registrars publish allotment reports
You can check allotment status on registrar websites or brokers
Listing price decides your initial gain or loss

Listing can be volatile, depending on market sentiment and subscription figures.

Beginner-Friendly IPO Tips (For Safer Decisions)

1. Read the Prospectus Summary

Focus on the business model, financials, and risk factors. Don’t rely solely on social media opinions.

2. Avoid blindly following GMP

Grey Market Premium is not an official metric; treat it as sentiment, not valuation.

3. Apply via ASBA or UPI Cut-Off Price

Both methods block funds until allotment, keeping the process safe and smooth.

4. Diversify Across Issues

Instead of putting a large amount into one IPO, apply to 2–3 issues.

5. Prepare for Listing Volatility

IPO listing gains are not guaranteed. Some issues list below their offer price. Avoid emotional decisions on listing day.

Case Example — What Nykaa Taught Retail Investors

Nykaa’s IPO (2021) highlighted that strong fundamentals + high demand = good listing performance.
But many IPOs since have listed flat or negative.

Lesson:
Follow business and valuation, not hype. Each IPO behaves differently based on fundamentals and market conditions.

FAQs

1) Do I need a Demat account to apply?

Yes. IPO allotment and share custody are always in electronic (Demat) form.

2) Which is safer — ASBA or UPI?

Both are safe. ASBA is bank-based; UPI is app-based. Money stays blocked until allotment.

3) Can I improve my allotment chances?

Only by making valid, unique applications with different PANs within the family. Beyond that, allotment is largely random.

4) What is the minimum amount needed to apply?

The cost of one lot, which differs for each IPO. Check the prospectus or broker for lot size.

5) How do I check IPO allotment status?

Use the registrar’s website (KFintech/Link Intime), NSE/BSE portal, or your broker’s IPO section.

Conclusion

IPO participation is one of the simplest ways for retail investors to explore equity markets without active trading. But beginners must understand the process clearly—DRHP, subscription, allotment, and listing.

Using ASBA or UPI ensures your money remains safe until allotment.
Reading the prospectus, tracking fundamentals, and being aware of risks helps you make stronger decisions.

IPO investing becomes more rewarding when you combine information, discipline, and realistic expectations.

Author Bio

Himanshu Gurha
Founder & Lead Mentor — Trading Shastra Academy
12+ years experience in markets, options, arbitrage, and trading education. Himanshu specialises in simplifying complex trading concepts for beginners and building structured learning pathways for retail participants.