Stock Market Basics · Lesson 4 of 14 · Updated October 2026 · 6 min read
An IPO, or initial public offering, is when a company sells its shares to the public for the first time and gets listed on the stock exchange. After listing, anyone can buy or sell those shares in the market.
In short: You apply during the 3 or more days the issue is open, money is blocked in your bank account through UPI, and shares are allotted (often by lottery) before trading starts on the third working day after the issue closes.
Key terms
- Price band: the range within which you bid, say ₹95 to ₹100 a share.
- Lot size: the minimum number of shares per bid. You bid in whole lots.
- Retail investor: an individual applying for up to ₹2 lakh. At least 35% of a regular IPO is reserved for retail investors.
- Subscription: how many times the issue was applied for. “20 times subscribed” means demand was 20 times the shares on offer.
How to apply
- Open your broker’s app or bank’s net banking during the issue dates.
- Pick the IPO, enter the number of lots and bid at the cut-off price (the top of the band).
- Enter your UPI ID and approve the mandate in your UPI app before the deadline on the closing day.
- The money stays in your account but is blocked until allotment.
How allotment works
When the retail portion is oversubscribed, each retail applicant can get at most one lot, and a computerised lottery decides who gets it. Applying for more lots does not improve your chances of getting that first lot. Applying from family members’ own accounts (each with their own PAN) is how people improve their odds legitimately.
The T+3 timeline
| Day | What happens |
|---|---|
| T | Issue closes |
| T+1 | Basis of allotment finalised |
| T+2 | Shares credited or money unblocked |
| T+3 | Shares list and start trading |
Listing day and tax
On listing day the share may open above or below the issue price. Selling within 12 months means any gain is short-term and taxed at 20%. Holding for more than 12 months makes it long-term, taxed at 12.5% on gains above ₹1.25 lakh a year. See what to do after a big listing for a worked example.
Common questions
Are IPOs a sure way to make money?
No. Some list below the issue price. Read the company’s offer document and judge the business and valuation, not the hype.
What is grey market premium?
An unofficial, unregulated indication of expected listing price. It is not reliable and should not drive your decision.
Next lesson: How to Buy Shares: Order Types, Delivery and Settlement → · See all 14 stock market lessons
Education, not investment advice. Figures and rules as of October 2026; check the latest before you act.