IPO FAQs

The grey market operates outside the purview of the stock exchanges and SEBI regulations. While not illegal, it is unregulated, and transactions are based on trust among the parties involved.

There’s no official formula. GMP is purely demand-supply driven and influenced by investor sentiment, IPO oversubscription, market conditions, and peer stock performance.

Kostak rate is the price that an investor can earn by selling (regardless of the allotment) the IPO application in the grey market.

GMP is the price at which IPO shares are traded in the grey market, while the Kostak rate is the price that an investor can earn by selling his IPO application in the grey market.

They are not published by SEBI or the stock exchanges. But you can find them from grey market dealers, IPO discussion forums, or some broker networks

GMP is an indicative estimate, not a guarantee. Listing price also depends on various other factors such as institutional investor demand, market mood, and demand during the IPO.

Not entirely. Though a high GMP indicates strong demand, it is volatile and speculative. Decisions must not be based on GMP alone, but should be accompanied by analyzing the company's fundamentals.

The following are the risks of relying solely on the GMP.

1. It’s unregulated and susceptible to manipulation.
2. It can create false optimism among the investors.
3. Listing gains are never guaranteed, even if GMP is high.
4. It can distract from more important factors like valuation and company fundamentals.

GMP is more relevant to short-term investors looking for listing gains. Long-term investors should rather focus on the company’s financials, management, and growth potential.

If the firm is in a stable and expanding industry, it is likely to do better. Sector expansion, competition, and regulatory conditions may have a substantial influence on a company's long-term success.

The RHP is an official document filed with SEBI by the company going public with an IPO. The RHP includes crucial company information such as financials, risks, and business strategy. It is the most reliable source for evaluating an IPO.

Be cautious if:

• The revenue model is unclear or overly optimistic.
• The company relies too heavily on one product or a few clients.
• It has high debt levels compared to industry standards.

It is the period after the IPO during which company insiders and early investors cannot sell their shares.

The following are the risks of investing in an IPO.

• High volatility post-listing
• Limited historical data to analyze
• Possibility of overvaluation due to market hype

Use resources like:

• SEBI’s website for official filings
• Financial news portals for expert analysis
• Brokerage houses’ research reports

No. Not all IPOs are equal. Always analyze the company’s fundamentals, market conditions, and your own financial goals before investing.

High participation by Institutional Investors such as Mutual Funds, Foreign Institutional Investors (FIIs), and Domestic Institutional Investors (DIIs) usually signals that the IPO has undergone thorough scrutiny. It also reflects confidence in the company's growth potential and fundamentals.

While it does suggest credibility and growth potential, heavy institutional involvement can also lead to short-term volatility. Large investors might exit the stock post-listing to book profit, which may impact the stock price in the short term.

Early Entry: You get a chance to invest in a company before it is publicly traded, potentially at a lower price.

Growth Opportunities: Investing in a potentially growing company might offer long-term returns.

Diversification: IPO allow you to invest in sectors or companies not previously available in the Indian stock market, thereby also helping to diversify the portfolio.

IPOs are suitable for investors looking for long-term growth and diversification, however, they carry risks too. It is important to evaluate the company's fundamentals, sector outlook, and risk appetite before investing.

While some IPOs may offer strong listing gains, this is not guaranteed. Stock prices can also fall post-listing due to market conditions, valuation concerns, or profit-booking by institutional investors.

Look at factors such as:

• Institutional investor interest

• Company fundamentals and financials

• Industry growth potential

• Use of IPO proceeds

• Valuation compared to peers

Multiple factors contribute to IPO oversubscription, such as:

• The company’s brand value and reputation
• Favorable market conditions
• Reasonable IPO pricing
• Strong financial performance or growth potential
• High confidence from promoters or institutional investors
• The attractiveness of the sector
• Effective marketing and promotion

No. While oversubscription may suggest high demand and potential listing day gains, it does not guarantee long-term returns. Investors should evaluate the fundamentals of the company before investing.

In case of oversubscription, shares are generally allotted using a lottery system for retail investors. This means that not everyone, who has applied for the IPO will receive the allotment.

A company with a strong reputation and trustworthy management is more likely to gain investor confidence, leading to higher subscriptions.

If an IPO is well-priced, it will be viewed as a good investment, and thus demand will be higher. IPOs that are overpriced will deter investors and lead to weak subscription.

When institutional investors participate in an IPO, it tends to generate confidence among retail players, driving overall demand and resulting in oversubscription.

Yes. Effective marketing and awareness campaigns can generate investor interest, especially among retail investors, leading to higher subscription levels.

Once you apply, you will receive a mandate request on your UPI app. Go to the app’s “Mandates” or “Autopay” section and approve the request before the IPO closes to ensure your application is accepted.

If shares are not allotted, the amount blocked in your bank account will be released. If the funds are not released within a few working days, contact your bank for assistance.

No. The UPI ID must belong to the same person who is applying for the IPO and must be linked to their bank account and PAN.

As per SEBI’s update, the IPO application limit via UPI has been increased from ₹1 lakh to ₹5 lakhs. For investors applying for amounts exceeding 5 lakhs, have to do it through ASBA.

The common mistakes for IPO rejection via UPI are as follows:

• Incorrect UPI ID
• UPI ID not linked to bank account
• Mandate not approved before IPO closes
• Insufficient funds in bank account

Yes, UPI is secure and uses two-factor authentication. With ASBA, your funds remain in your bank account and are only debited after allotment.

You can check your application status by visiting the IPO registrar’s website such as Link Intime or KFintech using your PAN, DP ID, or application number.

No, you cannot submit more than one IPO application using the same UPI ID, even if you have multiple demat accounts.

Convenience: Instant application from mobile or desktop platforms

Speed: payment amount is instantly blocked using UPI mandate

Security: Two-factor authentication and no requirement for sharing full bank information

ASBA compliance: Funds are blocked, not deducted, until shares are alloted

A valid UPI ID linked to your bank account

A Demat account

Sufficient balance in your bank account to block the IPO amount

Here are the steps involved in the process:

• Get a UPI ID via any UPI-enabled app (Google Pay, PhonePe, BHIM, etc.)

• Log in to your broker or bank's IPO section

• Select the IPO, enter bid details, and your UPI ID

• Submit the application

• Approve the UPI mandate in your app before the IPO closes

Reading the RHP helps retail investors:

• The purpose of the IPO
• Understand the company’s business model and growth potential
• Identify key risks and challenges
• Make informed decisions that are aligned with the personal financial goals and risk tolerance of the investor

Investors should focus on these key areas of the RHP:

• Business Overview
• Industry Overview
• Risk Factors
• Financials (Balance Sheet, Revenue, Profitability, Debt)
• Promoters & Management
• Use of IPO Proceeds
• Valuation & Peer Comparison
• Legal Proceedings

Check if the company:

• Has a sustainable and scalable business model
• Operates in a growing industry
• Has a competitive edge in its segment

• Revenue and profit growth trends
• Profit margins over the years
• Debt levels and liabilities
• Return ratios (like ROE, ROCE)

Very important. Risk factors alert you to potential issues such as:

• Regulatory hurdles
• Dependence of business on particular markets or customers
• Challenges specific to an industry

Compare valuation ratios like P/E and EV/EBITDA with those of peer companies in the same sector. RHP includes such data to help you evaluate whether the IPO pricing seems justified.

It shows how the company plans to use the money raised from the IPO.

• Growth-related investments (like expansion/R&D) are seen positively.
• Debt repayment helps with financial stability, but might not support future growth.

You don't need to read every word, but focus on the key sections mentioned earlier in this FAQ. Skipping the RHP completely can leave you unaware of important risks or weak fundamentals.

Here are common mistakes retail investors make while reading the RHP.

1. Focusing on growth factors and ignoring the risk factors
2. Focusing only on financials and ignoring the management quality and market position of the company
3. Assuming a low valuation automatically means a good investment
4. Not aligning the company’s profile with their own financial goals

RHPs are publicly available on:

• SEBI’s website
• Stock exchanges (NSE/BSE)
• Company websites
• Merchant banker websites

It lays a strong foundation, but also consider other broader factors like market sentiment, recent IPO trends, and your own financial needs before applying.

The key difference between the three documents lies in their timing in the IPO process and the details they contain.
DHRP: It is a preliminary draft document that is filed with SEBI before an IPO. It contains detailed information about the company coming with the IPO.
RHP: It is an updated version of the DHRP filed after approval is received from SEBI.
Prospectus: This is the final document and includes all details of the IPO, including the issue price and number of shares.

Pros

1. Capital raised can be used by the company for growth initiatives
2. Long-term growth potential for investors

Cons

1. Funds raised by the company from IPO are not utilised by the company efefctively.

In Offer for Sale (OFS), the existing shareholders of the company, like promoters, Venture Capitalist, or Private Equity firms, sell a portion of their stake in the compant to public.

1. Increase in share capital of the company as new shares are issued by the company.
2. Funds raised through the IPO goes to the company.
3. Equity dilution for the existing shareholders as more shares reduces the percentage ownership.

1. No fresh capital for the company is raised as shares are transferred from the existing shareholders to the public.
2. Provides liquidity to existing shareholders.
3. As no new shares are issued , there is no dilution of ownership for shareholders who have not sold their shares.

No. In a Fresh Issue, the funds received by the company can be used for expansion, debt repayment, or strategic goals. In an OFS, the proceeds go to the existing shareholders selling their stakes — the company does not receive any funds.

No. Since no new shares are created in an OFS, there is no dilution of ownership for existing shareholders. In contrast, a Fresh Issue increases the number of shares in the market, leading to dilution of existing ownership.

The company’s Draft Red Herring Prospectus (DRHP) filed with SEBI clearly outlines whether the IPO includes a Fresh Issue, an OFS, or a combination of both.

It is dependent on the investor's point of view:

Fresh Issue: Possibility of long-term growth since proceeds are used to invest in the company.

OFS: No dilution of ownership, can be an indication of maturity of the company, but does not inject fresh capital in the company for growth.

Yes. Many IPOs, like Paytm's in 2021, are a combination of Fresh Issue and OFS, serving both fundraising and providing exit for existing shareholders.

As the company does not receive any capital, the growth opportunities could be restricted. Also, early investors selling their shares may at times reflect high valuations or doubt over future performance of the company.

You should assess:

• The type of IPO (Fresh vs OFS)
• The company’s financial health
• Its business model and growth prospects
• Valuation of the shares
• Current market conditions

All of this information can be found in the DRHP on the SEBI website.

Know More

Bull markets are characterized by increasing stock prices and positive investor sentiment. Firms can gain from.

1. Increased valuations
2. Greater demand for shares
3. Strong listing-day performance
4. A successful IPO in a bull market boosts the company’s image and helps raise funds for growth

In a bear market, companies face:

• Lower investor interest
• Reduced valuations
• Risk of poor listing performance
• Possibility of postponing the IPO to avoid losses

Companies adjust by:

• Reducing the size of the IPO
• Exploring overseas listings
• Postponing the IPO until market improves
• Aligning IPO timing with bullish market phase

LIC delayed its IPO due to poor market sentiment and low investor confidence. The aim was to get better valuation and response once the market improved.

Yes. During the bearish phase sentiment among investors is down, valuations are lower, and there's a greater likelihood of underperformance.

High revenue growth indicates there is market demand for the products or services of the company and that there is potential of business expansion. But growth must be balanced with profitability to ensure long-term sustainability.

Valuing a company means checking whether the IPO is fairly priced based on the company's financial strength, growth potential and how it compares with its peers from the same industry. This help you avoid investing in overhyped or overpriced IPOs. Know more

While big brands may seem safe, popularity doesn’t always translate into the company being worth the price.

Some IPOs are overvalued due to hype. It is always worthwhile to study the company’s numbers and future plans before investing.

A high ratio may mean the IPO is expensive. But if the company has strong future potential, it might still be worth it. Always compare with similar companies in the same industry.

Look for:

• Low debt – Safer in tough times.
• Positive cash flow – The company has enough money for daily operations.
• Good ROE/ROA – Shows the company is using money and assets well to generate profit.

A USP (Unique Selling Point) is that differentiator, which makes the company stand out from others.  A good USP, such as a recognizable brand name or unique technology, provides the company with an edge and can make the IPO more appealing.

Very important. If the company is in a growing industry (like tech or green energy) and has a good position in that space, it has better chances of doing well after the IPO.

Here are signs of a good financial health of a company.

1. Low debt to equity ratio
2. Consistent & postive cash flow
3. Higher profitability ratios (ROE & ROA) reflect effective management.

In the 1 to 3-month Pre-IPO phase, the company:

• Assesses if it's ready to go public (financially, legally, and operationally)

• Hires advisors such as lawyers, investment bankers, and auditors

• Undergoes due diligence to clean up any issues before filing with SEBI

The DRHP is a preliminary document filed with SEBI. It includes details about the company’s business model, financials, and potential risks. It’s the first formal step in seeking SEBI’s approval to launch an IPO.

Once SEBI approves the DHRP, the company undertakes 2-4 weeks roadshow. During this period the company’s management and bankers meet with institutional investors to pitch the IPO, explain the business, and build investor confidence.

Based on the feedback received from the roadshow and investor interest, the company and its underwriters set a price band—a range within which investors can place their bids. This range is included in the Final Prospectus.

The IPO bidding process, usually lasts for 3-5 days. During this period Retail Investors, QIBs and NIIs can place their bid within the price band.

The final price is based on demand seen during the bidding process:

• High demand → Price is set at the upper end of the band

• Moderate demand → Midpoint

• Low demand → Lower end of the band

Yes. Retail investors can apply, but the investment is capped at ₹2 lakh per person. If the IPO is oversubscribed, shares may be allotted via a lottery system.

1. Pre-IPO Planning – Internal prep and advisor hiring

2. SEBI Filing – Submitting DRHP and getting approval

3. Marketing & Roadshow – Pitching the IPO to investors

4. Final Prospectus Filing – Declaring IPO price and dates

5. Bidding & Book-Building – Investors place bids

6. Price Finalization – Based on demand

7. Allotment & Listing Day – Shares are distributed, and the company goes public

For official guidelines and detailed regulations, you can visit the SEBI website.

There are three main categories:

• Retail Individual Investors (RII): Individuals investing up to ₹2 lakhs.

• Qualified Institutional Buyers (QIB): Mutual funds, banks, insurance companies, etc.

• Non-Institutional Investors (NII): High Net-Worth Individuals (HNIs) or entities investing more than ₹2 lakhs.

It means that the total demand for shares exceeds the number of shares available. For example, 3x subscription means investors have applied for three times the available shares.

Generally, yes, as it shows strong demand. However, it can also lead to:

• Lower chances of allotment

• Hype created by grey market activity

• Unmet expectations post-listing

• RII: Through a lottery system

• QIB & NII: On a proportionate basis

Because QIBs invest after thorough analysis. Their participation is seen as a vote of confidence in the company's long-term prospects.

It usually signals expectations of strong listing gains, as HNIs often aim for short-term profits.

Low retail subscription may indicate cautious sentiment, but it doesn't always mean the IPO is bad. Consider the company's fundamentals and financials before deciding.

They help gauge investor sentiment and potential listing performance. Combine this data with company fundamentals and market outlook for better decisions.

Yes. A high grey market premium often leads to more retail and NII participation in anticipation of strong listing gains.

No. While helpful, subscription numbers are just one indicator. Always review the company’s fundamentals, valuation, sector outlook, and risk factors.

Start by understanding the company’s business model—how it earns money, its growth prospects, and whether it has a competitive edge. Ask yourself:

• Is it in a growing industry?

• Does it have a unique offering?

• Is its business sustainable?

Before deciding to invest in an IPO, check the company's RHP (Red Herring Prospectus), which is available on the SEBI website or the company's website. It includes revenue trends, profit margins, debt levels, and cash flow insights.

• Revenue growth over the past few years

• Profitability and margin trends

• Cash flow stability

• Debt-to-equity ratio (lower is usually better unless justified by strong earnings)

Very important. Sectors like renewable energy, technology, and healthcare currently show strong growth potential. A company in a booming sector can provide better long-term returns.

Absolutely. The credibility and experience of the promoters play a key role in the company’s future. Be cautious if they have a history of unethical practices or if the company is overly reliant on one individual.

If reputed mutual funds, pension funds, or insurance companies are investing in the IPO, it’s often a good sign. It indicates that professionals have vetted and trusted the business model.

Use these valuation metrics to decide:

• P/E Ratio: Compare with industry peers. A lower P/E may mean undervaluation.

• P/B Ratio: Shows how the market values the company compared to its book value.

• EV/EBITDA: A lower ratio indicates better value.
  Avoid IPOs that seem hyped but have weak fundamentals.

Small and mid-cap IPOs carry more risk but can offer higher returns if the company performs well. Balance them with more stable large-cap IPOs to diversify your portfolio.

A lot! Economic factors like inflation, interest rates, and market trends (bullish or bearish) can impact how an IPO performs after listing.

While listing gains are tempting, long-term holding can generate exponential returns. For example:

• Maruti Suzuki IPO (2003) saw over 3000% returns over time.

• Infosys IPO (1993) turned ₹10,000 into crores.

Stay informed. Track:

• Annual reports to monitor progress

• News updates like leadership changes, acquisitions, or regulatory actions
  Being aware helps you make better decisions.

• Volatility: IPO stocks can fluctuate a lot in the initial period after listing.

• No guaranteed success: Some companies may underperform post-listing.

• Do thorough research on the company.

• Don’t invest all your money in one IPO—diversify across sectors and companies.

• Avoid hype. Stick to companies with strong fundamentals.

Several reasons contribute to the popularity of SME IPOs.

High Listing Gains: Many IPOs have delivered impressive returns on listing day

Retail Participation: Increased awareness has led more retail investors to explore SME IPOs.

Lower Entry Barriers for Companies: The listing process is less stringent for companies belonging to the SME sector, making it easier for them to go public.

Favorable Market Sentiment: India’s economic growth is driving bullish investor sentiment, positively impacting companies from the SME sector, too.

• Capital Without Debt: Companies raise funds without relying on loans.

• Credibility Boost: A public listing fosters trust with stakeholders.

• Liquidity for Founders: Founders and early investors can partially cash out.

• Talent Attraction: Listed companies can offer ESOPs to attract skilled professionals.

• Low Liquidity: Shares may be hard to buy/sell due to low trading volumes.

• High Volatility: Prices can swing sharply even on minor news.

• Lack of Historical Data: SMEs often have limited financial records for analysis.

• Regulatory & Operational Risks: Greater chances of business or compliance-related issues.

• Hype-Driven Listings: Some IPOs are overhyped without strong fundamentals.

SEBI has introduced stricter regulations, such as:

• Minimum Profit Requirement: Net profit of at least ₹1 crore in 2 of the last 3 years.

• Cap on Offer for Sale: Existing shareholders can’t sell more than 20% of the issue size.

• Tighter Due Diligence: Merchant bankers are now held more accountable for proper disclosures.

No, SME IPOs are ideal for:

• Investors with high-risk tolerance.

• Those looking to diversify beyond large-cap and mid-cap stocks.

If you prefer stable and predictable returns, or don’t want to research niche businesses, you might be better off with mainboard IPOs or mutual funds.

Always do your homework:

• Read the DRHP (Draft Red Herring Prospectus).

• Understand the company’s business model and industry.

• Look into the promoters’ track record.

• Evaluate whether the IPO is reasonably priced or overpriced.

No. While some have delivered exceptional returns, not all SME IPOs perform well. Some are driven by hype with weak business fundamentals. A cautious and well-researched approach is essential.

You should evaluate:

• The company’s business model and its sustainability

• Revenue and profit growth

• Sector potential (e.g., tech or renewable energy)

• Financial health and future growth prospects

A fundamentally strong company from a high growth sector is worth holding for long-term.

If the stock lists at a price lower than the IPO price, you can consider holding the stock if the company has strong fundamentals. However, if you had invested for short-term gains and don't believe in the company's fundamentals then selling the shares and cutting your losses makes sense.

• Short-term strategy: Sell the shares on listing if there is a price gain to book quick profits.

• Long-term strategy: Hold the shares despite volatility for potentially higher returns in the future.

This strategy involves selling a portion of your shares after listing to lock in some gains, while keeping the rest to benefit from any long-term upside.

Well, if you are unsure, then wait-and-watch could be a wise decision. Observe the stock's performance in the coming weeks and months, and based on the stock price trend, make a decision.

Yes. In a bullish market, it might be worth holding strong stocks. In bearish or uncertain markets, booking profits on listing could reduce risk.

Yes, if you sell the shares within 12 months of the purchase, then short-term capital gains tax at 20% is applicable.

No. Some IPOs surge initially but may decline later (e.g., Nykaa, Paytm), while others may offer strong long-term returns (e.g., IRCTC, Adani Wilmar). Research is key.

Not necessarily. As seen in the Paytm case, even popular brands can underperform due to weak fundamentals or overvaluation. Always assess the financial and business metrics.

Not necessarily. Insider selling may be for legitimate reasons such as wealth diversification or liquidity needs. However, large-scale selling or unexplained selling can be a red flag, and such selling requires careful scrutiny.

Common reasons include wealth diversification, personal financial needs, business expansion, or as part of an exit strategy for venture capital or private equity investors.

Large-scale insider selling can signal a lack of confidence in the company, triggering a decline in prices. However, if the reasons for selling are transparent and well-communicated, then the market may react neutrally or even positively if it increases liquidity.

You can find this information in the Red Herring Prospectus (RHP) under sections like Shareholding Pattern, Objects of the Offer, and Lock-in Requirements of Promoters.

An OFS is when existing shareholders sell their shares through the IPO. If a large portion of the IPO is OFS, investors should assess whether the sale aligns with the company’s future growth plans.

Promoters must retain at least 20% of post-issue capital for 18 months. Any additional holdings above 20% are locked in for 6 months. The investor must monitor any sudden selling after this period.

Post-IPO insider trades are disclosed through stock exchange filings. You can track these via SEBI’s website or reliable financial news platforms.

Be cautious of:

• High insider selling as a proportion of total holdings

• Frequent or repeated selling post-IPO

• Lack of transparency or unclear communication about reasons for selling

Diversify your investments, don't go all-in on a single IPO. Evaluate insider activities through reliable sources. 

The purpose of the lock-in period is to ensure market stability after the IPO by avoiding a sudden influx of shares in the market, which could otherwise lead to a sudden drop in prices of the shares.

The following stakeholders are subject to a lock-in period after the IPO.

• Promoters

• Anchor Investors

• Employees and Non-Promoter Shareholders (who received shares via preferential allotment)

• Pre-IPO Investors such as Venture Capitalists and Private Equity firms

As per SEBI:

• Promoters must hold at least 20% of post-IPO equity for 18 months (reduced from 3 years).

• For shareholding above 20%, the lock-in period is 6 months (earlier 1 year).

For anchor investors, 50% of their allocated shares are subject to a 90-day lock-in from the date of allotment.

For shares issued through preferential allotments, including employee stock options (ESOPs), the lock-in period is 6 months, reduced from the earlier 12 months.

• Protect retail investors from price volatility due to sudden large-scale selling

• Stabilize stock prices in the early post-listing phase

• Build trust by ensuring promoters and key investors have long-term commitments

Once the lock-in expires, large shareholders may sell their holdings. This can lead to:

• Increased selling pressure

• Temporary dip in stock prices, especially if selling is significant

Yes, if you believe in the company’s long-term growth and fundamentals, a post-lock-in price dip can be a strategic buying opportunity.

Lock-in details are usually mentioned in the IPO prospectus (Red Herring Prospectus)

Anchor investors invest in an IPO before it is open to the public. Their involvement in an IPO signals confidence in the company, helps stabilize the IPO by reducing volatility, and often sets the benchmark for IPO pricing. Also, their presence helps to attract more retail and institutional investors.

Yes. In India, anchor investors need to invest a minimum of ₹10 crore in a mainboard IPO. For SME IPOs, the minimum is ₹1 crore.

Yes, after the shares are allocated. There is a 30-day lock-in period for 50% of the shares, and for the remaining 50%, the period is 90 days. The purpose of the lock-in period is to prevent immediate selling and help maintain post-listing price stability.

Retail investors often view the involvement of anchor investors as a vote of confidence. Their participation reduces perceived risk, generates media buzz, and sometimes creates a “Fear of Missing Out” (FOMO), encouraging more participation from the retail investors.

Not recommended. While the participation of anchor investors lends credibility to the IPO, it’s essential to do your own research—understand the company’s business model, check the Red Herring Prospectus (RHP), and assess overall market conditions before investing.

In LIC’s IPO, major institutions like GIC Singapore and SBI Mutual Fund participated. Similarly, Zomato and Nykaa saw strong participation from Anchor investors. However, in cases like Paytm, despite big names like BlackRock participating, the stock underperformed post-listing.

The following are the benefits of anchor investors participating in an IPO.

1. Boost IPOs credibility
2. Help Justify Valuations
3. Often leads to IPO over-subscription

The anchor investors might sell off their shares after the lock-in period, which can cause stock price volatility. Also, retail investors might put too much faith in their participation without analyzing company fundamentals.

STCG on listed equity shares is taxed at 20% as per the revised rates in Budget 2024 (earlier it was 15%).

Gains up to ₹1.25 lakh are exempt from tax. Gains exceeding ₹1.25 lakh in a financial year are taxed at 12.5%.

Yes. LTCG up to ₹1.25 lakh in a financial year is exempt from tax.

Yes. Short-term capital losses (STCL) can be set off against both STCG and LTCG, helping reduce your tax liability.

Yes. Long-term capital losses (LTCL) can only be offset against LTCG. Unused losses can be carried forward for up to 8 years, provided they are reported in the Income Tax Return (ITR).

Gains from IPOs should be reported under "Schedule CG" in ITR-2 or ITR-3. Details required include:

• Buy and sell prices

• Date of transactions

• ISIN (International Securities Identification Number)

Here are a few tips:

• Plan your exit strategy (short-term vs. long-term)

• Maintain proper records of your trades

• Use set-off provisions for capital losses

• Consult a tax expert for personalized advice

No. There is no tax at the time of IPO allotment. Tax is applicable only when you sell the shares and realize a gain.

The registrar to the IPO (appointed by the company launching the IPO) manages the application verification, share allotment, and refund process.

You can check your IPO allotment status by visiting the website of the IPO registrar (like Link Intime or KFintech) or the stock exchange (BSE/NSE). You'll need one of the following:

• PAN number

• Application number

• DP ID/Client ID

Typically, the IPO allotment status is declared 2 to 3 working days after the IPO closes.

If you don’t receive any shares, the amount blocked in your bank account will be unblocked within a few days of the allotment day.

If the IPO is undersubscribed, all applicants get the full number of shares they applied for.

If the IPO is oversubscribed, allotment for retail investors is done by a lottery system. 

• QIBs: Allotment is done on a proportional basis, even in the case of oversubscription.

• HNIs: Allotment is typically proportional, but if the category is heavily oversubscribed, it may also involve a lottery.

In case of over-subscription, the demand for shares exceeds the number of shares available. A lottery ensures fairness, giving each valid applicant an equal chance at getting an allotment.

While there’s no guaranteed way, here are a few tips:

• Apply through multiple PANs (within family members, if eligible)

• Avoid last-minute applications (technical glitches can cause rejections)

• Maintain a sufficient balance in your bank account for the application amount

Not really, in case of an oversubscribed IPO in the retail category, irrespective of the number of lots applied, only one lot per PAN is considered for allotment. So, applying for more than one lot does not improve your chances of getting shares.

You should consider the following factors before investing.

• Financial performance (revenue growth and profitability)

• Industry and market position

• Valuation metrics (P/E and P/B ratios)

• Promoter holding and management quality

• IPO fundamentals (Fresh Issue vs OFS and use of proceeds)

• Market sentiment and grey market premium (GMP)

Look for key metrics like revenue growth and net profit margin for the past 3 years. A company showing consistent revenue growth with strong profitability scores higher and may indicate a stable business.

The sector reflects the company’s growth potential and market demand. For example, companies belonging to tech or renewable energy are seen as high-growth sectors compared to declining or regulated sectors.

Yes, an Offer for Sale(OFS) means existing shareholders of the company are offloading their stake, which might indicate a lack of long-term commitment. It is always better from a growth perspective that the company uses IPO proceeds for business expansion or debt reduction.

GMP reflects the unofficial price at which IPO shares are trading before listing. A strong GMP often indicates strong demand and positive market sentiment, though it should not be the only factor while deciding to invest in an IPO.

High promoter holding post-IPO (>50%) suggests the promoters have strong confidence in the company’s future and are committed to its growth, which can be a positive signal for investors.

High subscription levels can be interpreted differently for various categories of investors. For example, high subscription levels in the retail category might indicate an expectation of listing gains, while for the NII category, it could mean short-term gains. High subscription in the QIBs category might suggest that the company is fundamentally strong, and they see long-term growth potential in the company. However, subscription levels should be not be solely relied and should be one of the factors to be considered before investing in an IPO.