A company's first offer of its shares to the public, made to raise money for the company or to let existing owners sell part of their holding, after which the shares are listed on a stock exchange and any investor can buy or sell them, is called an IPO.
For an investor asking what is an IPO, a private company is selling its shares to the public for the first time. The shares may be fresh shares issued by the company, an offer for sale (OFS) by existing shareholders, or both. After the sale concludes, company lists on the NSE and BSE. SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations 2018 govern the process.
Under the SEBI (ICDR) Regulations, 2018, an initial public offer is an offer of specified securities by an unlisted issuer to the public for subscription, and it includes an offer for sale by existing shareholders.
Minimum subscription, category quotas and the retail lottery
Under the ICDR Regulations, an issue must receive applications for at least 90% of the shares offered. If this minimum subscription is not received, the issue cannot go to allotment, and the money of the applicants is refunded.
In a standard book built issue of a profitable company, the shares are divided as 50% for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs) and 35% for retail individual investors. Retail investors can bid up to Rs 2 lakh through the Application Supported by Blocked Amount (ASBA) facility, in which the bid amount stays blocked in the investor's bank account until the allotment is decided.
If the retail category is oversubscribed, the shares are allotted by a computerised lottery, with one lot for each PAN selected.
In a hypothetical issue of 1 crore shares, applications for at least 90 lakh shares are needed, and the retail part is 35 lakh shares.
Oversubscription, listing and OFS: why a bid may get no shares
For an individual investor, a bid in the retail category does not always result in shares. IPO Market data for the NSE IPO in September 2026 shows a total subscription of 5.71 times. When a retail portion is oversubscribed, some retail bids receive no shares.
In an IPO made entirely through an OFS, company receives no money, as the payment goes to the selling shareholders. An IPO can be a fresh issue, an OFS or both.