India has just been through the biggest IPO run in its history. Mainboard issues raised about ₹1.62 lakh crore in FY25 and ₹1.65 lakh crore in the first eleven months of FY26 alone, according to NSE. Grey market premiums became dinner table talk, applications ran into lakhs per issue, and a good number of the most celebrated listings then spent years below their issue price.

IPOs matter to a systematic investor for a quieter reason too. Every new listing eventually becomes a candidate for an index and for a factor screen. Knowing how the process works, how shares are allotted, and what the evidence says about life after listing changes how you treat new names in your universe.

Mainboard IPOs raised more in FY26 with more issues
  1. FY25, 79 IPOsRs 1.62 lakh crore
  2. FY26 to Feb, 99 IPOsRs 1.65 lakh crore

NSE Market Pulse, March 2026. FY26 covers April 2025 to February 2026.

How the book building process works

Almost every mainboard IPO in India uses book building, governed by SEBI's Issue of Capital and Disclosure Requirements (ICDR) Regulations. Step by step:

1
Price band announced
The company and its merchant bankers set a band, for example ₹875 to ₹920. Bids can be at any price in the band or at the cut off price. The red herring prospectus, with the risk factors and financials, is public before the issue opens.
2
Anchor book, one day before
Large institutions can be allotted up to 60% of the institutional portion a day before the issue opens, at a fixed price. Their names are disclosed, which is why the anchor list makes headlines.
3
Subscription, usually 3 working days
You apply through ASBA: the money stays in your bank account and is only blocked. Individuals can use a UPI mandate for bids up to ₹5 lakh.
4
Price discovery and allotment
The final price is set at or below the top of the band from the demand curve. Most individual bidders bid at cut off and accept whatever price is set. Oversubscribed retail portions are allotted by lottery.
5
Listing on T+3
Since 1 December 2023 SEBI requires listing within three working days of the issue closing. Unallotted money is unblocked, and the opening price is found in a special pre open session.
SEBI ICDR Regulations, the rules for public issues in India
  1. Anchor investors bid

    Names and allocations disclosed to NSE and BSE.

  2. Issue open, bids through ASBA or UPI

    Money blocked in your bank, not debited.

  3. Basis of allotment

    Lottery for small bids, proportionate for institutions.

  4. Shares credited, money unblocked

    Allotted shares reach your demat; the rest of the money is released.

  5. Listing on NSE and BSE

    Trading starts after a special pre open session.

The investor categories and their quotas

Who gets the shares depends on whether the company meets SEBI's profitability tests. Most investors only know the numbers for one case.

A profitable company's IPO: at least 35% is kept for individual investors
  • Institutions (QIB), up to50%
  • Non institutional, at least15%
  • Retail individuals, at least35%

SEBI ICDR Regulation 6(1). Up to 60% of the QIB portion can go to anchor investors.

If the company does not meet the profitability tests, which applies to many loss making new age businesses, the split reverses: at least 75% goes to qualified institutional buyers, at most 15% to non institutional investors and at most 10% to retail. The same "hot" IPO can therefore leave very different room for you depending on the company's track record.

  • Retail individual investors bid up to ₹2 lakh. If oversubscribed, each successful applicant gets one minimum lot, chosen by lottery.
  • Non institutional investors bid above ₹2 lakh. Since 2022 their portion is split: one third for bids of ₹2 lakh to ₹10 lakh and two thirds for bids above ₹10 lakh, each allotted by lottery of the minimum application size when oversubscribed.
  • Employees and shareholders of the parent sometimes have small reserved portions.

Your real chance of an allotment in a hot IPO

Lots available 2,33,333
Chance one application gets a lot 11.7%

Arithmetic for an oversubscribed retail portion allotted one lot per winning applicant by lottery. Illustrative inputs.

Run the defaults. A ₹350 crore retail portion with a ₹15,000 lot has about 2.33 lakh lots. With 20 lakh applications, each application has roughly a one in nine chance. Even a 50% listing gain is then worth about ₹7,500 to the winners and nothing to the other eight in nine. Retail IPO allotments are a lottery ticket with a positive expected value in hot markets, not a wealth plan.

Grey market premium: what it is and is not

The grey market is an informal, unregulated market where expected IPO allotments are traded before listing. The grey market premium is the price above the issue price in that market. If an issue is priced at ₹500 and the premium is ₹150, shares are notionally changing hands at ₹650.

It is widely followed as a predictor of listing gains, and it can be self fulfilling for a day. As a guide for an investor it fails on every count:

  • It reflects short term speculative demand, not the value of the business.
  • It can swing sharply in the days before listing with market mood.
  • It is unregulated, with no exchange, no settlement guarantee and no investor protection. SEBI has repeatedly cautioned investors against relying on it.

MythA big grey market premium means the IPO is a good investment.

FactIt measures listing day excitement in an unregulated market. Many issues with large premiums have traded below their issue price a year or two later.

Lock in periods and the overhang problem

After listing, not every share can be sold. SEBI sets lock in periods:

  • Promoters: 18 months for the minimum promoter contribution of 20% of post issue capital; 6 months for the rest of their holding.
  • Pre IPO investors: 6 months from allotment.
  • Anchor investors: 30 days for half their allocation, 90 days for the other half.

When a lock in ends, a large block of stock can come to market. That is the lock in overhang, and it is one reason many new listings see selling pressure at around one, three and six months. The dates are in the prospectus, so they are known in advance.

For a systematic investor: a newly listed stock that has run up fast can rank highly on a momentum screen while a lock in expiry is weeks away. A rule that requires a minimum trading history, or that checks the prospectus dates, avoids buying straight into an overhang.

What the evidence says about IPO performance

The research on IPOs is unusually consistent across countries, India included:

  • Listing day: on average IPOs list above their issue price. Academics call it underpricing, documented by Ritter (1991) and many since. Because hot issues are heavily oversubscribed, the rupee gain to the average retail applicant is small.
  • One to three years: on average, newly listed companies have lagged comparable listed stocks. Long run IPO underperformance is one of the more robust findings in finance.
  • Why: companies and their existing investors choose when to sell, and they tend to sell when prices are high. The information gap between the seller and the buyer is never wider than at the IPO. Hot issuance years have tended to be followed by weak returns for that year's cohort.

Worked example: the real return of an IPO application

Suppose you apply for ₹2 lakh, the retail maximum, in each of 10 hot IPOs in a year. You win an allotment of one ₹15,000 lot in two of them. Both list 40% up and you sell on day one: a gain of ₹12,000, taxed as short term capital gain at 20%, so about ₹9,600 after tax. Your ₹2 lakh was blocked for about a week each time and earned nothing during those days. The headline said "40% listing gains". Your result was ₹9,600 for a year of effort. That is the honest arithmetic of the IPO lottery.

Common mistake: confusing listing gains with returns

The common mistake is reading the listing day pop as the IPO's return. Most applicants are not allotted; most allottees get one lot; and the investors who buy on listing day pay the post pop price, so they own the long run underperformance instead of the listing gain.

The second mistake is reading the anchor list as an endorsement. Anchors are allotted at a fixed price, often sell after their lock in, and have very different goals and diversification from yours. Read the prospectus, the valuation against listed peers and the use of proceeds instead.

How this shows up in RupeeCase

New listings and RupeeCase strategies

RupeeCase strategies pick from defined NSE universes, such as the Nifty 100, the Nifty Midcap 150 or the Nifty Total Market, and rank them on price momentum at each rebalance. A new listing only becomes a candidate once it is part of the strategy's universe and has enough price history to be ranked, so the rules never chase an IPO on its first days. That is a property of the published rule, not a judgement on any company. Read the universe and method on any strategy page, for example Large Midcap.

Questions readers ask

How many days after an IPO closes do shares list?

Three working days. SEBI made T+3 listing mandatory from 1 December 2023, down from six days, so blocked money is also released faster.

Is it better to apply at cut off price?

For a retail bid, applying at cut off means you accept the final price, which avoids being left out if the price is set at the top of the band. It says nothing about whether the issue is worth applying for.

How are IPO listing gains taxed?

Selling within 12 months is a short term capital gain on listed equity, taxed at 20%. Held longer than 12 months, gains above the yearly ₹1.25 lakh exemption are taxed at 12.5%.