Quick Answer: How Do You Invest in an IPO in India?
To invest in an IPO in India, you need a verified PAN, an active bank account, and a Demat account. During the 3-day bidding window, select the active issue on your broker's app or bank ASBA portal, choose your lot quantity, select the Cut-Off Price, submit your bid, and authorize the UPI mandate or ASBA lien in your bank account. Your funds remain safely blocked until the Basis of Allotment is finalized; if allotted, shares are credited to your Demat account before listing day.
1. What You Need Before Applying for an IPO
Before participating in a public issue, retail investors must have three foundational accounts and identifiers in place. Under regulations established by the Securities and Exchange Board of India (SEBI), all entities must share the same Permanent Account Number (PAN):
1. Permanent Account Number (PAN)
Your PAN is the primary identifier across all financial institutions. The PAN linked to your bank account must exactly match the PAN registered with your depository participant (Demat).
2. Demat Account
An electronic depository account opened with a registered depository participant (DP) under NSDL or CDSL to store your allotted shares in dematerialized form. (Need a complete walkthrough? Read our Demat Account Master Guide).
3. Bank Account (UPI / ASBA)
A savings bank account with an active Net Banking login or a supported UPI application (such as BHIM, Google Pay, PhonePe, or banking apps) for funds blocking.
Understanding the Difference: Demat vs. Trading vs. Bank Account
- Bank Account: Holds your liquid cash and provides the ASBA / UPI funds-blocking mechanism. Because the funds remain in the bank account while blocked, the account continues to be governed by the bank's applicable interest terms.
- Demat Account: Required for receiving and holding securities in electronic form with CDSL or NSDL.
- Trading Account: Used for broker-based application submissions and subsequent secondary market trading on stock exchanges. (Note: A trading account is not universally required to submit an application if you apply directly via an SCSB bank ASBA portal, though it is necessary later if you wish to trade or sell allotted shares on the secondary market).
2. How the IPO Investment Lifecycle Works
When a private corporation transitions into a publicly listed entity on the National Stock Exchange (NSE) and BSE, it conducts a book-built public issue following a structured timeline:
3. Step-by-Step: How to Apply for an IPO Online
Retail investors can submit an online application using either an application through a supported intermediary/broker via UPI mandate or directly through an SCSB bank's Net Banking ASBA portal. Here is the universal workflow:
- Access the IPO Section: Log in to your broker's trading application or your bank's Net Banking portal and navigate to the "IPO" or "Current Public Issues" menu.
- Select the Active Issue: Choose the company whose IPO is currently open for subscription.
- Specify Investor Category: Ensure the category is selected as Retail Individual Investor (RII) (total bid value up to ₹2,00,000).
- Enter Lot Quantity: Enter the number of lots you wish to bid for (must be an exact multiple of the minimum lot size).
- Choose Cut-Off Price: Check the box for "Cut-Off Price" where permitted by the issue terms (or enter your specific bid price within the band).
- Enter Your UPI ID (If applying via Broker): Provide your correct Virtual Payment Address (e.g.,
username@okhdfcbank,username@apl,username@ybl). - Submit Application & Authorize Mandate: Open your UPI payment app, review the mandate request from the exchange/sponsor bank, enter your UPI PIN, and confirm the funds block before the 5:00 PM closing cut-off.
4. Choosing Number of Lots & Minimum Investment
Unlike the secondary stock market where you can purchase a single share, IPO applications in India are submitted in predefined bundles called Lots:
Hypothetical Lot Size Calculation
- Hypothetical Price Band: ₹95 to ₹100 per share
- Hypothetical Lot Size: 150 equity shares per lot
- Minimum Retail Investment (1 Lot): 150 shares × ₹100 = ₹15,000
- Maximum Retail Investment (13 Lots): 1,950 shares × ₹100 = ₹1,95,000 (Must not exceed ₹2,00,000 retail cap)
5. What is the Cut-Off Price and Who Can Use It?
In a book-built public issue, the issuing company announces a price band (e.g., ₹100 to ₹105 per share) rather than a single fixed price. The final price at which shares are issued to investors is discovered at the end of the bidding process based on aggregated demand.
In a book-built IPO, an eligible Retail Individual Bidder may choose the cut-off option, which indicates willingness to accept the final offer price determined within the price band.
6. How the UPI Mandate Process Works Under the ASBA Framework
ASBA is the funds-blocking framework used for IPO applications. For eligible individual applications submitted through intermediaries, UPI is used as the mechanism to authorize blocking of funds under that framework.
Individual investors may use UPI for IPO applications up to ₹5 lakh under the current public-issue framework. However, the Retail Individual Investor (RII) application limit remains up to ₹2 lakh. Individual applications above ₹2 lakh and up to ₹5 lakh fall under the applicable Non-Institutional Investor category.
| Stage | Operational Action | What Happens to Your Funds? |
|---|---|---|
| 1. Bid Submission | Broker submits your bid to exchange order book and sends mandate request to NPCI. | Funds remain unblocked. |
| 2. Mandate Authorization | You open your UPI app and authorize the mandate request by entering your UPI PIN. | Funds are marked under lien (blocked) in your bank account. Because the funds remain in the bank account while blocked, the account continues to be governed by the bank/account's applicable interest terms. |
| 3. Successful Allotment | Registrar confirms share allocation to your Demat account. | Blocked funds are debited only to the extent required for the allotted shares and transferred to the issuer's public issue account. |
| 4. Zero Allotment / Non-Selection | Registrar sends unblock instructions to the sponsor bank and NPCI. | Bank releases the lien. Full amount becomes available for normal withdrawals. |
7. How Direct ASBA (Net Banking) Application Works
Eligible investors may also apply through an SCSB's ASBA facility, including supported internet-banking channels. Category eligibility and application limits depend on applicable issue rules and bank/intermediary support.
- Log in to your SCSB bank's Net Banking portal (e.g., HDFC Bank, ICICI Bank, SBI, Axis Bank, Kotak Mahindra Bank).
- Navigate to e-Services → ASBA / IPO Application.
- Select the active IPO from the list of open public issues.
- Enter your applicant details, PAN, and your 16-digit Demat Account number (comprising the 8-digit DP ID and 8-digit Client ID for NSDL, or the 16-digit numeric BO ID for CDSL).
- Select the number of lots and bid price (or cut-off where permitted), then submit. Your bank places an electronic block on the required balance in your bank account.
8. Application Through Intermediary (UPI Mandate) vs. Direct Bank ASBA Channel
Both routes operate under the statutory ASBA funds-blocking framework. The primary differences lie in the submission channel, authentication workflow, and category parameters:
| Comparison Parameter | Intermediary / Broker Route (UPI Mandate) | Direct SCSB Net Banking Route (Bank ASBA) |
|---|---|---|
| Application Method | Online application through a supported intermediary/broker. | Direct submission through an SCSB's net banking portal. |
| Individual Application Limits | Individual applications up to ₹5,00,000 supported via UPI (Retail up to ₹2 Lakh; sNII for >₹2 Lakh to ₹5 Lakh). | Supports Retail as well as Non-Institutional applications subject to applicable issue rules. |
| Demat ID Entry | Auto-filled by your stockbroker interface. | Entered manually or selected from saved investor profiles. |
| Third-Party Applications | Strictly prohibited (Bank account PAN must match Demat PAN). | Subject to individual SCSB bank policies and SEBI third-party ASBA guidelines. |
9. Applying for Multiple Lots: Does It Increase Retail Odds?
Many beginners assume that applying for 5 or 10 lots in the retail category increases their probability of receiving shares. Under SEBI's ICDR Schedule XIII allotment framework, when a retail issue is oversubscribed, allocation is determined by a draw of lots for the minimum bid lot.
In heavily oversubscribed retail issues, every successful retail applicant receives exactly one minimum lot regardless of whether they bid for 1 lot or 13 lots. For a complete mathematical breakdown of allotment probabilities, explore our detailed guide on Multiple Lots IPO Allotment Probability & Rules.
10. How IPO Allotment is Finalized
After the public bidding window closes at 5:00 PM on closing day ($T$), the appointed Registrar to the Issue (such as Link Intime, KFin Technologies, or Bigshare Services) reconciles electronic bids with bank mandate authorizations.
The registrar prepares the Basis of Allotment document in consultation with the stock exchange's designated official. Once approved, allotment status is published on the registrar's official web portal and the stock exchanges. You can verify your allotment status online by following our comprehensive IPO Allotment Status Master Guide or by checking your PAN on the NSE Allotment Portal.
11. What Happens on Listing Day?
On the designated listing date (typically $T+3$ working days following issue closure), the company's equity shares debut on the secondary market:
- Special Pre-Open Call Auction (~9:00 AM to 9:45 AM): Orders are collected from institutional, HNI, and retail participants. The exchange algorithm calculates the equilibrium opening price where maximum trading volume matches.
- Buffer & Price Matching (~9:45 AM to 10:00 AM): The exchange matches buy and sell orders at the discovered equilibrium listing price.
- Continuous Secondary Market Trading (10:00 AM onwards): Normal trading commences. Investors can hold their allotted shares in their Demat account for long-term growth or sell them immediately through their trading platform.
12. Are There Any Fees or Brokerage Charges for Applying in an IPO?
Applying for an IPO is completely free for retail investors:
- Application Cost: ₹0 (Zero fees charged by stockbrokers, UPI apps, or banks for placing ASBA / UPI bids).
- Selling Allotted Shares: When you sell your allotted shares on listing day or in the secondary market, standard statutory charges apply—including equity delivery brokerage (if applicable), Securities Transaction Tax (STT), exchange turnover charges, GST, SEBI turnover fees, and standard Depository Participant (DP) debit charges.
13. 5 Common Application Mistakes That Cause Rejection
To ensure your IPO application is processed smoothly without technical disqualification, avoid these frequent retail errors:
- PAN Mismatch (Third-Party Applications): Applying from a bank account or UPI ID whose PAN does not match the Demat account holder's PAN. Both must belong to the same person.
- Missing the UPI Mandate Deadline: Failing to authorize the UPI mandate in your payment app before 5:00 PM on issue closing day.
- Duplicate Applications: Submitting multiple retail applications under the same PAN in the same IPO. SEBI regulations permit only one valid application per PAN per category.
- Insufficient Available Bank Balance: Attempting to authorize a mandate when your bank balance is lower than the total bid amount.
- Bidding Below Cut-Off Price: Entering a custom price lower than the upper price band in a high-demand book-built issue.
14. Pre-Investment Checklist: How to Evaluate an IPO
Smart investing requires looking beyond market hype and carefully analyzing verifiable information in the Red Herring Prospectus (RHP):
Fundamental Prospectus Analysis Framework:
- Financial Growth & Margins: Review restated financials for revenue growth, EBITDA margins, and profit after tax (PAT) consistency over the last 3 fiscal years.
- Peer Valuation Multiples: Benchmark the company's asking P/E, EV/EBITDA, and Price-to-Book multiples against established listed competitors. Learn how to calculate fair value benchmarks in our guide on NSE IPO Valuation Targets.
- Objects of the Issue: Identify the proportion of Fresh Issue (funds utilized for growth or debt reduction) versus Offer for Sale (funds flowing to exiting promoters).
- Debt & Interest Coverage: Assess total borrowings and ensure debt servicing obligations do not compromise operating cash flows.
- Promoter Track Record & Governance: Review promoter litigation, regulatory actions, and board independence.
15. Fresh Issue vs. Offer for Sale (OFS): Where Does Your Money Go?
Every IPO prospectus clearly segregates the total issue size into two distinct components:
Fresh Issue
New equity shares are created and issued by the company. The issuer receives fresh-issue proceeds, net of applicable issue expenses, to be utilized towards the disclosed objects of the issue.
Offer for Sale (OFS)
Existing shareholders (such as promoters, venture capital funds, or private equity investors) sell a portion of their holdings. Proceeds from shares sold under an OFS go to the relevant selling shareholders, not to the issuer.
16. A Brief Word on Grey Market Premium (GMP)
During the IPO bidding window, financial news media often discuss Grey Market Premium (GMP). It is vital to recognize that GMP is an unofficial, unregulated sentiment indicator traded in informal OTC markets.
GMP is not published, monitored, or recognized by SEBI, NSE, or BSE, and it does not determine the official listing price. Investors should never base application decisions solely on grey market rumors. For a detailed breakdown, read our comprehensive guide on What is GMP in IPOs and How Grey Market Premium Works.
17. Frequently Asked Questions (FAQs)
How can a beginner invest in an IPO in India?
A beginner needs a PAN card, a bank account with UPI or Net Banking enabled, and an active Demat account. You select an active IPO through your stockbroker's app or your bank's ASBA portal, choose the minimum lot size, bid at the cut-off price where permitted, and authorize the funds-blocking mandate.
Do I need a Demat account to apply for an IPO?
Yes. A Demat account (held with CDSL or NSDL) is mandatory under SEBI regulations to receive electronic credit of allotted equity shares. A trading account is used for buying and selling in the secondary market, but the Demat account holds the securities.
Is a trading account mandatory to apply for an IPO?
No. You can apply for an IPO directly through your bank's Net Banking ASBA portal using only your Demat account number (DP ID + Client ID) and PAN, even without an active trading account. However, a trading account is required later if you wish to sell your allotted shares on the stock exchange.
What is the minimum investment required for an IPO?
The minimum investment is the price of exactly one minimum bid lot. In India, retail IPO lot sizes are typically configured so that the total value of one lot falls between ₹14,000 and ₹15,000.
What does cut-off price mean in an IPO application?
In a book-built IPO, an eligible Retail Individual Bidder may choose the cut-off option, which indicates willingness to accept the final offer price determined within the price band. Non-Institutional Investors (NII) and Qualified Institutional Buyers (QIB) do not have the same cut-off bidding entitlement and must specify exact price bids.
How does the UPI mandate work for an IPO application?
When you apply through a broker app, you enter your UPI ID. A mandate request is sent to your UPI payment app. Upon entering your UPI PIN, the application amount is blocked (held under lien) in your bank account under the ASBA framework. Money is only debited to the extent shares are allotted; otherwise, the block is released.
What is ASBA and how does it protect investors?
ASBA stands for Application Supported by Blocked Amount. It is the funds-blocking framework used for IPO applications. Because the funds remain in the bank account while blocked, the account continues to be governed by the bank's applicable interest terms, and money is debited only upon confirmed allotment.
Is IPO application money debited immediately?
No. The funds are merely blocked in your bank account during the application window. The actual debit occurs only after the Basis of Allotment is finalized (typically on the T+2 working day) and only to the extent of shares allotted to you.
What happens if I do not receive an IPO allotment?
If no shares are allotted to you, your bank receives an unblocking directive from the registrar and releases the lien on your funds (typically on the T+2 working day). The full blocked amount becomes available for normal banking use.
Can an IPO list below its issue price on listing day?
Yes. Stock exchange listing prices are determined by market supply and demand during the morning pre-open discovery session. If market sentiment is weak or the issue was priced aggressively, shares can list at a discount (below the issue price).
18. Statutory Regulatory References & Official Frameworks
The operational processes and compliance guidelines detailed in this guide are governed by statutory regulatory frameworks:
- Securities and Exchange Board of India (SEBI): SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) — Regulatory rules governing public issue pricing, book building, and retail allotments.
- Reserve Bank of India (RBI) & NPCI: Operational guidelines governing Application Supported by Blocked Amount (ASBA) and UPI mandate blocking mechanisms for public issues.
- NSE India & BSE India: Standard operating procedures for electronic book building, pre-open listing discovery sessions, and bid verification.
Statutory Editorial & Investor Education Disclaimer
This guide is published by the Digital Arthalaya Editorial Desk exclusively for educational, informational, and investor awareness purposes. It does not constitute investment advice, financial planning, or a recommendation to buy, sell, or subscribe to any initial public offering. Digital Arthalaya does not rate public issues or promise listing gains. Securities market investments are subject to market risks; please read all offer documents (DRHP/RHP) and consult an independent SEBI-registered financial advisor before investing.