What is IPO Listing and How Does It Work?
Written by Dev Sethia
3 min read | Updated on November 25, 2025, 17:14 IST
Rising IPO Demand in India
India’s key markets are still seeing strong demand as more and more private companies look to launch Initial Public Offerings (IPOs) to access new capital and provide liquidity to shareholders.
The IPO option, which was primarily for larger companies, is now being tackled by companies across industries, such as technology, finance, manufacturing, and consumer, all of which are attempting to benefit from the competitive landscape by rapidly scaling.
Industry insiders have astutely noted that IPOs are much more than just capital markets fundraising options, but also signify an important time in the evolution of a company from private to public.
What Is an IPO and Why Companies Opt for It?
An Initial Public Offering (IPO) signifies the moment when a private company becomes a publicly traded company by selling shares to the general public for the first time and becoming listed on a stock exchange.
The funds raised from an IPO can be used for a variety of corporate purposes, including expanding operations, funding new projects, paying down debt, or simply any purpose disclosed in the company’s official offer document. Before going public, most companies have limited shareholders, typically founders, angel investors and venture capitalists.
When a company launches an IPO, it opens its ownership to the general public, allowing retail and institutional investors to acquire shares directly from the company and become part of its future growth.
How does the IPO Listing Process Work?
The initial phase of the IPO listing procedure starts with a company preparing to go public. The company goes through a series of filings with the company's regulator, bidding from investors, allocation of shares and then publicly trading the shares on a stock exchange on its listing date.
Preparation Filing
The process starts when the company engages an investment bank or underwriter to guide the company through the IPO process. The company will draft a Draft Red Herring Prospectus (DRHP), which includes financial information, risk factors and business information, which is filed with SEBI for review.
Filing
The company will also seek in-principle approval from the stock exchange(s) where it intends to list its shares. Once the company receives approval from SEBI, it will file a final Red Herring Prospectus (RHP), which signifies they are ready to commence the IPO.
Marketing and Bidding
The firm organises a series of roadshows to spark interest from potential investors and publicises a price band for the issue. Thereafter, the IPO is opened for bidding, during which potential investors (retail, institutional and non-institutional) enter applications online or offline.
Allocation
After the close of the bidding window, the final issue price is determined based on the level of demand. Bidders are allocated shares according to the subscription levels and SEBI guidelines.
Listing
In the event of oversubscription, allocation may be made through a lottery or pro-rata allocation process. Finally, the shares are officially listed on the selected stock exchange(s) on the IPO listing date and traded on the secondary market.
After Listing
Once listed, the company may take stabilisation measures to support the price of the stock in the initial trading period. Lock-up constraints may be imposed on certain shareholders and promoters, prohibiting them from selling shares for a fixed time.
The company will have ongoing disclosure requirements, whereby it must regularly provide to the stock exchange and investors updates with respect to the financial performance and other operational matters.
How IPO Allotment Works?
The allotment of IPO is as per SEBI rules to ensure transparency. Shares of the company are divided into lots and investors are permitted to apply for a quantity of lots.
The registrar for the IPO will be responsible for conducting the allotment, whereby the allotment process will comply with the rules for the following categories of applicants: Qualified Institutional Buyers (QIB), Non-Institutional Investors (NII), and retail.
When the IPO is oversubscribed, which means the number of bids received exceeded the number of shares available for allotment, allotments will be made to each successful category of applicant either on a pro-rata basis or through a draw process.
Definitions of Oversubscription
Small Oversubscription
All successful applicants will get allotted at least 1 lot and successful applicants in the oversubscription will get allotted in a pro-rata process.
Large Oversubscription
A draw process is followed when the number of investors from each category of applicants is so large that each successful applicant cannot get allotted one lot of shares even if the registrars wanted to allot as many.
Factors That Influence Listing Price
The listing price depends on several factors, including:
Demand
Generally, if there is an increased demand for the issue, it will list at a premium.
Grey Market Premium (GMP)
This is an unofficial data point that provides an indicator of investor sentiment before the listing.
Offer for Sale (OFS)
A larger OFS will generally put downward pressure on the listing price as additional shares dilute the demand.
The initial public offering (IPO) ecosystem in India is evolving with more companies seeking public growth and visibility and investors seeking access to a wider range of up-and-coming companies.
With defined regulatory processes, a structured allotment approach and a market approach to listings, IPOs remain an important link between private companies and public investors, enhancing transparency, liquidity and long-term economic expansion.
About Author
Dev Sethia
Sub-Editor
a journalism post-graduate from ACJ-Bloomberg with over three years of experience covering financial and business stories. At Upstox, he writes on capital markets and personal finance, with a keen focus on the stock market, companies, and multimedia reporting. When he’s not writing, you’ll find him on the cricket pitch
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Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.