Money Basics · Stocks & demat

IPOs

Every few months India loses its mind over an IPO. Office group chats, 'apply from every family member's account', memes about allotment. Time to understand what's actually happening.

What an IPO is

An Initial Public Offering is a private company selling its shares to the public for the first time, to raise money, or to let early investors cash out. (Read which one in the prospectus: 'fresh issue' funds the company; 'offer for sale' pays exiting insiders. A mostly-OFS IPO means insiders are selling to YOU.)

How applying works

1. IPO opens for ~3 days with a price band (e.g. ₹95-100)

2. Apply via your broker using UPI. Money gets BLOCKED (ASBA), not debited

3. Oversubscribed? Allotment is a computerised LOTTERY. Retail applicants for popular IPOs often have single-digit odds

4. No allotment → block released. Allotment → shares land in demat, trading starts on listing day

The two games people confuse

• Listing-gain hunting, flip on day one. Sometimes +50%, regularly negative. Driven by 'GMP' (grey market premium), an UNOFFICIAL, unregulated, manipulable signal that group chats treat as gospel.
• Investing, buying a business you'd hold for years, which happens to be newly listed.

> Remember who prices an IPO: the company and its bankers, whose job is to sell HIGH. You're buying from the most informed seller in the room, at a moment of maximum marketing. Hype ≠ returns.

The sane approach

Two different activities get called IPO investing: flipping on listing day, and buying a business that happens to be newly listed. The allotment lottery only applies to the first. Skip if your only thesis is a WhatsApp GMP screenshot. And missing an IPO costs nothing. The stock is available every day after listing, often cheaper.

~3 daysapplication window; allotment = lottery when oversubscribed

Takeaway. IPO allotment is a lottery and the price is set by the seller at peak hype. Apply for businesses you'd hold for years, never on GMP screenshots.