A current IPO, or Initial Public Offering, is when a private company offers its shares to the public for the first time, allowing everyday people to buy a part of the business. This process helps companies raise funds for growth, repay loans, or expand operations.
With trending stocks today like Indus Tower, Wipro, and Bank of India drawing attention, many investors are interested in learning how to participate in new IPOs and become early shareholders in companies making headlines.
Who Can Invest in a Current IPO?
Any adult who is legally allowed to sign a contract can invest in a current IPO. They must have a PAN card issued by the Income Tax department and a valid demat account, which is used to store shares electronically.
A trading account is not required to apply for an IPO, but it is needed if the person wants to sell shares later. This is why many brokers suggest opening both accounts while applying for an IPO for the first time.
Applying for an IPO is not the same as buying shares directly. When someone applies, it is treated as an offer to invest. After the IPO closes, the company and its underwriters check all bids and decide the number of shares to allot based on demand. Once shares are allotted, the investor’s bank account is debited, and shares are credited to their demat account. At that point, the investor becomes a shareholder and can benefit from future company performance, including dividends if announced.
Application Process
Step 1: Appointment of Investment Bankers/Underwriters
The company hires experts, usually large banks, to help with the IPO process. They assist in deciding how many shares to offer and what price range to set.
Step 2: Registration for IPO
The company prepares a draft document called the Red Herring Prospectus (RHP). This includes key details about the company and is submitted to SEBI (Securities and Exchange Board of India) for review.
Step 3: Cooling-Off Period
SEBI reviews the documents and verifies the information. This period usually lasts 2–4 months. No public issue can happen until SEBI gives its approval.
Step 4: Application to Stock Exchange
After SEBI’s approval, the company applies to stock exchanges like NSE or BSE to list its shares. The exchange checks the application before giving final permission.
Step 5: Promoting the Offering
To attract investors, the company holds roadshows and shares information through advertisements. These efforts explain the business model and growth plans to the public.
Step 6: Types of IPOs
There are two main pricing methods:
- Fixed Price Issue: The company fixes one price for each share.
- Book Building Issue: The company gives a price band. Investors enter bids within this band. The share value is determined by analyzing the bids that investors place.
For example, if the price band is ₹100–₹120, and most bids are at ₹115, that could become the final price.
Step 7: Lock-In Period for Insiders
Before launching the IPO, companies impose a lock-in period on insiders like employees and early investors. This means they cannot sell their shares for a certain time after the listing. This helps avoid sudden large sell-offs that could affect the share price.
Step 8: Public Issue and Bidding
Once the IPO opens, investors can apply by placing bids through banks or broker platforms using UPI. The bidding period usually lasts three to five working days.
For instance, an investor can log into their broker’s app, select the IPO, enter the number of shares they want, and complete the payment using UPI.
Step 9: Allotment of Shares
After the IPO closes, the company allots shares based on the number of bids. If more people apply than there are shares (oversubscription), shares are distributed proportionately.
For instance, if an IPO is oversubscribed 4 times, and someone applied for 10,000 shares, they may receive around 2,500 shares. Allotted shares are credited to the demat account within 10 days of the IPO closing.
Conclusion
Investing in a current IPO involves a clear process. The company starts by hiring experts, files documents with SEBI, and promotes the offering. Once approved, it sets a price or price range and opens the IPO for bidding. Investors apply during the window and receive shares if allotted. This method ensures transparency and gives both companies and investors a structured way to participate in the stock market.
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