IPO
An Initial Public Offering (IPO) is the process by which a privately held company offers its shares to the public for the first time on a recognised stock exchange, raising primary capital and/or providing an exit to existing shareholders, regulated by SEBI's Issue of Capital and Disclosure Requirements (ICDR) Regulations.
An IPO represented a transformational event in a company's lifecycle — the transition from private ownership, with a small number of identifiable shareholders, to public ownership, with thousands or millions of shareholders transacting on an exchange every trading day. In India, IPOs were regulated by SEBI under the ICDR Regulations, which prescribed eligibility norms, disclosure standards, pricing mechanisms, allotment procedures, and post-listing obligations. The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) were the primary listing destinations.
IPOs in India raised capital through a combination of Fresh Issue and Offer for Sale (OFS). A Fresh Issue involved the company issuing new shares and retaining the proceeds for stated business purposes such as capacity expansion, debt repayment, or working capital. An OFS involved existing shareholders (promoters, private equity investors, or venture capitalists) selling their pre-IPO shares to the public and retaining the proceeds themselves — the company received no capital from OFS. Many IPOs combined both tranches; a predominantly OFS-heavy IPO drew scrutiny from analysts because it signalled that insiders were exiting rather than the company raising growth capital.
SEBI classified IPO investors into three categories for reservation purposes: Qualified Institutional Buyers (QIBs) — including mutual funds, insurance companies, FIIs, and banks — were allocated at least 50 percent of the issue in book-built IPOs. Non-Institutional Investors (NIIs) or High Net Worth Individuals (HNIs), applying for amounts above Rs 2 lakh, received at least 15 percent. Retail Individual Investors (RIIs), applying for up to Rs 2 lakh per application, received at least 35 percent. This tiered structure aimed to balance institutional and retail participation while ensuring adequate price discovery.
The Indian IPO market witnessed remarkable cycles. Calendar year 2021 saw a record-breaking run of IPOs driven by buoyant secondary markets, low interest rates, and digital adoption of IPO investing through UPI-based ASBA (Application Supported by Blocked Amount) mechanisms. Several new-age internet companies made their debut, many at aggressive valuations that subsequently corrected sharply in 2022, reminding retail investors that IPO participation involved genuine business and valuation risks beyond the excitement of listing-day gains.
Lock-in provisions regulated post-IPO promoter and anchor investor shareholding. Promoters were required to lock in a minimum of 20 percent of post-IPO shareholding for three years. The remaining promoter shares and pre-IPO shares held by non-promoters were subject to a six-month lock-in. Anchor investors (large institutional buyers allocated shares one day before the IPO opening) faced a 30-day lock-in on 50 percent of their allocation. These lock-ins were designed to prevent immediate post-listing dumping by informed insiders.