How to Invest in IPO: Complete Step-by-Step Guide
- Share.Market
- 5 min read
- 29 Apr 2026
Highlights
- Understand retail investor eligibility with a ₹2 lakh investment limit and 35% reservation quota.
- Learn prerequisites, including a demat account, PAN linkage, and UPI-ASBA payment mandate.
- Discover multiple application channels and a step-by-step process for IPO subscription.
- Know allotment timelines, tax implications, and investor protection resources.
Introduction
Ever wondered how investors get shares before a company becomes famous in the stock market? That opportunity comes through an Initial Public Offering, or IPO. It is when a private company offers its shares to the public for the first time.
For retail investors in India, IPOs can be an exciting way to participate in a company’s growth from the beginning. However, the process follows specific rules and timelines set by the regulator.
The Securities and Exchange Board of India (SEBI) regulates IPO investments under the Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018. Understanding who can apply, what you need before applying, and how the process works will help you invest confidently and avoid common mistakes.
Understanding IPO Investor Categories
SEBI classifies IPO investors into three distinct categories with different investment ranges and reservation quotas:
| Category | Investment Range | Reservation |
| Retail Individual Investors (RII) | Up to ₹2 lakh | 35% |
| High Net Worth Individuals (HNI) | Above ₹2 lakh | 15% |
| Qualified Institutional Buyers (QIB) | No limit | 50% |
Retail Individual Investors are those who apply for shares worth up to ₹2 lakh per IPO. This category enjoys a mandatory 35% quota reservation, improving allotment chances. The minimum application size is one lot, typically ranging from ₹10,000–₹15,000 depending on the IPO’s price band and lot size.
Prerequisites for IPO Investment
Before applying, ensure you have these essentials:
- Demat Account: A dematerialised account with NSDL or CDSL through a registered Depository Participant is mandatory. All IPO shares are issued in electronic form only.
- PAN Card: Permanent Account Number linked to both your demat and bank accounts is compulsory for IPO applications.
- Bank Account: Must be linked to your demat account and enabled for UPI transactions, as SEBI mandates UPI-based payment blocking.
- UPI ID: Required for authorising payment through the Applications Supported by Blocked Amount (ASBA) mechanism.
Complete KYC verification with your depository participant beforehand to avoid application rejection.
Step-By-Step IPO Application Process
SEBI mandated UPI-based ASBA as the payment method for retail IPO applications through Circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated 1 November 2018. Your funds remain blocked in your account until allotment; no actual debit occurs until shares are allocated.
Application channels:
- Net Banking ASBA: Log in to your bank’s net banking portal, go to the IPO/ASBA section, enter the application details, and submit the request. The application amount remains blocked in your bank account until allotment.
- Broker Platform: Apply through your trading app or broker’s IPO section by filling in the application details and approving the UPI mandate linked to your bank account.
- Registrar Website (Limited Role): Registrar websites are typically used to check IPO allotment status or application details, not for submitting fresh IPO applications.
Application steps:
- Enter your demat account details (DP ID and Client ID)
- Specify bid quantity (in multiples of lot size) and price
- Confirm the application within the price band
- Approve the UPI mandate request on your linked app within the stipulated time
Funds remain blocked until allotment or refund processing.
Allotment and Listing Timeline
For oversubscribed retail categories, IPO allotment follows a proportionate basis or computerised lottery. SEBI regulations ensure that at least one lot is allocated to each retail applicant, where possible.
Timeline:
- Day 0 (T Day): IPO closes for subscription
- Day 1 (T+1): Registrar finalises the Basis of Allotment
- Day 2 (T+2): Shares credited to the demat accounts of successful applicants. Refunds/unblocking of funds processed for unsuccessful or partial allotments
- Day 3 (T+3): IPO lists on stock exchanges.
You can check your IPO allotment status on the registrar’s website using your PAN, application number, or DP ID/Client ID. If shares are not allotted, the blocked ASBA/UPI amount is automatically released back to your bank account.
Tax Implications on IPO Shares
Capital gains from IPO shares attract taxation based on the holding period:
| Holding Period | Tax Rate | Section |
| Beyond 12 months | 12.5% LTCG | 112A |
| Within 12 months | 20% STCG | 111A |
Long-term capital gains above ₹1.25 lakh annually attract tax. Calculate your holding from the allotment date, not the listing date. Plan your exit strategy accordingly to optimise tax liability.
Your Path to IPO Participation
IPOs often create excitement, especially when listing gains make headlines. But successful investing is not about chasing hype. It is about understanding the company, knowing the risks, and following the correct process.
With a demat account, UPI setup, and basic knowledge of timelines, you are ready to participate confidently. If you ever face issues related to IPO applications, SEBI’s SCORES platform is available for grievance redressal.
Invest with research, patience, and realistic expectations. An IPO is just the beginning of a company’s journey in the stock market. Your success depends on informed decisions, not just first-day performance.
FAQs
The minimum investment depends on lot size and price band, typically ranging from ₹10,000–₹15,000 for one lot. Retail investors can apply up to ₹2 lakh per IPO across multiple applications within this limit.
No, a demat account is mandatory as all shares are issued in dematerialised form only. It must be linked with your PAN and bank account for the UPI-ASBA application process to work.
For oversubscribed retail quota, allotment follows a proportionate basis or computerised lottery, ensuring a minimum of one lot per applicant where possible. The registrar conducts this under SEBI supervision within stipulated timelines.
Funds are unblocked within 2 working days after the IPO closes (by T+2) if you do not receive an allotment. Since ASBA blocks the application amount instead of debiting it, the blocked funds are automatically released back to your account once allotment is finalised. In the case of UPI-based applications, the mandate is revoked, and the funds become available for use again.
Yes, but a single PAN can apply only once per category. Multiple applications with the same PAN are rejected. You can use family members’ separate demat accounts to increase household participation within regulatory limits.
