IPO Process Explained - From Filing to Listing in India

In the Capital Markets - Equity, Debt & Derivatives Overview, the primary market is the place where companies raise fresh capital through new issuances. An Initial Public Offering, or IPO, is one of the most visible primary market events because it takes a company from regulatory filing to public trading on NSE and BSE. For interviews, especially in investment banking and capital markets roles, you need to explain not just the steps, but also how SEBI regulation, investor demand, valuation, allotment, and listing outcomes connect.

The Big Picture: IPO as a SEBI-Regulated Journey

An IPO in India is not a single event. It is a staged process involving company approvals, investment banks, SEBI, stock exchanges, registrars, depositories, institutional investors, and retail investors. The sequence matters because each stage reduces uncertainty: governance approval comes first, disclosures follow, investor demand is tested, price is discovered, shares are allotted, and trading begins.

At a high level, the process looks like this:

What the IPO Raises and Why the Primary Market Matters

The primary market is where companies raise fresh capital through new issuances. In an IPO, the key interview idea is that money is being raised through a new issue, unlike secondary market trading where existing shares are bought and sold after listing. This is why IPOs sit at the intersection of corporate finance, capital markets, regulation, and investor appetite.

India's primary market is regulated by SEBI, the Securities and Exchange Board of India. SEBI's role is important because IPO investors need detailed, comparable information before they bid. The source content notes that India has seen a surge in activity with record IPO filings since 2020, making IPO mechanics a practical topic for banking, equity capital markets, and securities interviews.

For candidates, the first mistake to avoid is treating an IPO as just a listing-day return story. The listing return is only the visible final result. The real process starts months earlier with approvals, banker appointment, disclosure, investor education, price discovery, and allocation design.

Board Approval and Banker Appointment

The IPO journey begins with governance approval. The board passes a resolution to raise capital, and shareholders approve the proposal through an Extraordinary General Meeting, or EGM. This stage is typically placed between D-Day and D-6 months in the IPO timeline.

After that, the company appoints Book Running Lead Managers, or BRLMs. A BRLM is an investment bank that leads due diligence, coordinates the offering, helps build the order book, and supports the company through the execution process. The source names Kotak, Axis, ICICI Securities, and JM Financial as examples of investment banks involved in this stage.

This stage matters because banker selection affects both process quality and investor reach. A strong BRLM team helps convert the company's business story into disclosures, valuation arguments, and investor conversations. In many organisations, ownership may overlap between company management, legal teams, bankers, and company secretarial teams, but the board approval and banker appointment are the foundation for the rest of the process.

DRHP Filing and SEBI Review

The Draft Red Herring Prospectus, or DRHP, is the central disclosure document filed with SEBI. It contains detailed disclosures on the business, risks, and financials. In the timeline given, the DRHP filing happens around D-4 months, and SEBI takes 30 days to review it.

The word "draft" matters. At this stage, the company is putting its story, risks, and financial position in front of the regulator before launching the issue. Investors, bankers, and exchanges use this document to understand what is being offered and what risks are attached to the business.

In an interview, connect DRHP filing to trust. A good answer should say that IPOs need disclosure because investors are being asked to price a company before it becomes a regularly traded public security. Without detailed disclosure on business, risks, and financials, book building would become a pure sentiment exercise.

Roadshows, Investor Buckets, and Price Band Setting

After regulatory filing, management conducts roadshows. A roadshow is a set of management presentations to institutional investors to explain the business and gauge demand. The source specifically mentions Foreign Institutional Investors, or FIIs, domestic Mutual Funds, or MFs, and High Net worth Individuals, or HNIs. This pre-IPO period typically lasts 2-3 weeks.

The price band is then announced 3-5 days before the IPO opens. It is fixed by the company and BRLMs based on investor feedback, and the investor portions are defined as 75% for Qualified Institutional Buyers, or QIBs, 15% for HNIs, and 10% for retail investors. A QIB is an institutional investor category used in the IPO allocation process, while HNI and retail refer to non-institutional and smaller investor categories respectively.

This is where demand meets valuation. If demand is strong but the price is too aggressive, listing performance can disappoint. If the price leaves room for investors, the IPO may see stronger subscription and better listing sentiment, depending on the business, market conditions, and investor expectations.

How an IPO Is Priced

Book building is the price discovery process in which BRLMs gather bids from institutional investors, especially QIBs. The aim is not to guess a random price, but to triangulate value using business fundamentals, listed market benchmarks, recent IPO evidence, and investor demand signals.

This pricing framework is a common interview favourite because it tests both finance and market judgement. DCF is useful when the business has cash flow visibility. Peer multiples help anchor the valuation to listed market reality. Precedent IPO multiples show how similar offerings were valued. Roadshow demand signals reveal whether investors are willing to support the price.

The nuance is that none of these inputs works alone. A loss-making company may still attract interest if investors believe in growth, but the Paytm example shows that premium pricing can be challenged when peers are derating. Good candidates usually say that pricing should balance issuer objectives with investor return expectations.

Subscription, ASBA, Allotment, and Listing

The IPO subscription window runs for 3 working days. Investors bid through ASBA, which means Application Supported by Blocked Amount. The practical point is simple: banks block funds in the investor's account instead of transferring them immediately. The source also mentions physical and UPI ASBA.

After the subscription closes, allotment is handled by the registrar. In oversubscribed IPOs, retail allotment is done by lottery, while QIB and HNI allotment is proportionate. Refunds are processed, shares are credited to demat accounts, and trading begins on NSE and BSE. The source places allotment at D+6 and listing between D+6 and D+10.

The named market infrastructure participants are important in interviews. Registrars such as KFinTech and Link Intime manage allotment and refunds. Depositories such as NSDL and CDSL support demat credit. NSE and BSE are the exchanges where trading commences after listing.

Recent Indian IPO Outcomes and What They Teach

Recent IPOs show that the process is standardised, but outcomes vary sharply. Listing returns are shaped by the issue price, investor expectations, market mood, business quality, and valuation comfort. The source table below uses SEBI, BSE, NSE, and Prime Database data for FY2021-2024.

Compare the spread of outcomes. Tata Technologies delivered a +140% listing return, while Paytm delivered -27.3%. Nykaa and Zomato had strong listing returns of +79% and +52.6%, while LIC and Hyundai India listed below issue price at -8.6% and -1.3% respectively. This variety is exactly why interviewers ask candidates to go beyond the mechanics and discuss pricing discipline.

Worked Example: Paytm and the Pricing Discipline Question

Paytm is a useful worked example because it links valuation method, market context, listing outcome, and learning in one case. The issue was not that the IPO process failed mechanically. The lesson is that book building and pricing still require judgement about what investors are willing to pay for growth, especially when comparable global fintech peers are derating.

The "so what" for interviews is direct: price discovery is not just about filling the order book. It is about setting a valuation that institutional investors, HNIs, and retail participants can support after comparing the company with peers, precedents, and market expectations.

Structuring an IPO Process Explained Interview Answer

Conclusion

The IPO process in India is a structured, SEBI-regulated journey that connects capital raising, disclosure, investor education, price discovery, allotment, and exchange listing. The final takeaway is that IPO mechanics get the company to market, but pricing discipline determines whether investors believe the issue offers fair value.