An initial public offering is the first time a company sells its shares to the public and lists them on a stock exchange. Before that sale, the shares sit with promoters, early investors, and employees. After the listing, anyone with a demat account can buy or sell them on NSE or BSE during market hours, at whatever price buyers and sellers agree. The IPO price and the market price are different events. The IPO price is fixed through the offer. The market price starts on listing day and then changes every second the market is open.
People talk about “applying for an IPO” as if they were booking a product at a discount. The closer picture is this: you ask for shares at a price inside a published band, your bank blocks the money, a registrar decides who gets shares if too many people asked, and only then does a market exist. If you are not allotted, you never owned the company. If you are allotted, you own a small piece at the issue price, and the first price you can sell at is decided by other people on listing morning.
Two different piles of shares
Most mainboard offers are a mix of two piles, and the mix matters more than the grey-market chatter around them.
A fresh issue is new shares. The company receives that money. The prospectus has to say what it will do with it: repay debt, build a plant, fund working capital, or something vaguer such as “general corporate purposes”. Vague objects deserve a slower read. Money that goes into the company can change the balance sheet. It can also be spent badly.
An offer for sale is old shares. Promoters or investors sell part of what they already own. That money goes to the sellers, not into the company’s bank account. A large offer for sale is not automatically a trick. Early investors are allowed to exit. It does mean you should stop saying “the company is raising ₹1,000 crore” if half of that number never reaches the company. The prospectus cover splits the two. How to read a DRHP shows where that split is printed.
The price is a range, then a single number
In a book-built issue the company and its bankers publish a floor and a cap. SEBI’s framework keeps the cap from floating far above the floor: the top of the band is not more than 20% above the bottom. Demand from institutional bidders is used to discover a single issue price inside that band. Retail applicants are allowed to tick “cut-off”, which means “I will take the discovered price, whatever it is inside the band”. If you bid a specific price and the discovered price comes in above your bid, you are out.
A fixed-price issue skips the range and states one price. SME platforms use both styles depending on the offer. The rupee figure that will be blocked in your account is lot size times the price you are bidding, and at cut-off that means lot size times the upper end of the band, because the bank has to block the maximum until the price is known. Price band, lot size, and cut-off works through that arithmetic with an example.
Who is on the other side of your application
You do not send a cheque to the company. Your broker sends an application. Your bank blocks funds under ASBA, or you approve a UPI mandate. The registrar — a firm such as KFintech or Link Intime, named in the prospectus — keeps the book of applications and runs allotment. The stock exchanges collect the bids. Merchant bankers run the process for the company. Each of them has a job. None of them is promising you a listing gain.
Retail, in this market, means an application up to ₹2 lakh. Above that you are in the non-institutional book, with different rules and a larger cheque. Qualified institutional buyers have their own half of a typical mainboard book. Mixing those three into one “subscription” number is the fastest way to misunderstand demand. The category guide separates them.
What you actually own after listing
A listed share is a residual claim. You get a vote, you may get dividends if the board declares them, and you can sell to someone else. You do not get a guaranteed exit at the IPO price. You do not get the grey-market premium as a coupon. If the company dilutes later, your fraction of the business shrinks. If the promoters pledged shares, or if a large investor’s lock-in ends, extra supply can hit the market without any change in this year’s profit.
Lock-in is the rule that stops certain shareholders from selling immediately. Promoter lock-in and anchor lock-in are different clocks. When a lock-in date arrives, the share count that is free to trade increases. That is not a prediction of selling. It is a date to know, because the float changes.
A small numerical picture
Imagine a company offering shares at ₹180–₹190, with a lot of 78 shares. One retail application at cut-off blocks 78 × ₹190 = ₹14,820. Suppose the offer is ₹600 crore, of which ₹250 crore is a fresh issue and ₹350 crore is an offer for sale. Only ₹250 crore is new money for the business. If the discovered price is ₹190, your block matches the price. If you are not allotted, the ₹14,820 is released. If you are allotted one lot, you own 78 shares at ₹190 and the listing price is still unknown. A grey-market quote of ₹40 the evening before listing would imply chatter around ₹230. The share can open at ₹210. The arithmetic of the quote was never a contract.
What an IPO is not
It is not a lottery ticket you are owed because you “always get one lot”. Allotment in a crowded retail book is a draw, described in how allotment works. It is not a SEBI endorsement. SEBI’s observations on a draft prospectus are process comments, not a seal of approval on the business. It is not safer than buying the same company after listing. You often have less information about the trading price, because no market exists yet, and you take allotment risk on top.
The useful question is boring: what am I buying, at what price, with whose money leaving the business, and what has to go right for that price to make sense in three years? Listing-day movement is a separate, shorter question. Both can be asked. They should not be collapsed into a single GMP cell. The boards on the homepage keep mainboard and SME apart so that the first question at least starts in the right market, and the disclaimer is the boundary around every figure.