From Draft Red Herring to listing: The real journey of an IPO in India

In the country's rapidly evolving capital markets, taking a company public is a big deal-and not just for the promoters

The Indian primary market has been buzzing in 2025. So far, as many as 52 companies from the mainline segment have collectively raised ₹72,017 crore through their Initial Public Offerings (IPOs), reflecting growing investor appetite and a strong pipeline of companies looking to tap the capital markets.

 

In the country's rapidly evolving capital markets, taking a company public is a big deal—and not just for the founders. From retail investors to institutional giants, everyone watches closely when an IPO is announced. But behind the scenes, the process is long, complex, and packed with moving parts. So, what really goes into launching an Initial Public Offering (IPO) in India?

 

Here's what investment bankers explained:

It all starts with the DRHP

It all begins months before the actual IPO hits the market. The first major milestone is the preparation and filing of the Draft Red Herring Prospectus (DRHP). This document includes everything investors need to know about the company: its business model, financials, risk factors, management team, and how it plans to use the funds raised. Getting the DRHP ready isn’t a quick task—it usually takes three to six months, including one to two months for detailed audits. Some auditors even follow a 135-day audit cycle to align with IPO timelines.

Sebi’s review can make or break the momentum

Once the DRHP is filed with the Securities and Exchange Board of India (Sebi), the regulatory review begins. The market regulator examines the filing for compliance. During this stage, companies often need to tweak their disclosures, financials, or even their corporate structure. Once Sebi is satisfied or provides final comments, the company is one big step closer to hitting the markets.

Investor roadshows test the market mood

While Sebi reviews the DRHP, the company and its investment bankers begin preparing for the next phase: investor outreach. This is where the roadshows come in. Bankers take the company’s promoters and top executives to meet institutional investors, mutual fund managers, and analysts, both in India and abroad. These meetings are more than just formalities. Investors offer their feedback, including the kind of valuation they would be comfortable with. Bankers then relay this information back to the promoters. Sometimes, the feedback aligns with expectations, but it can also suggest a lower or higher valuation at which the investors wish to park their money.  ALSO READ | Is GMP a good barometer for evaluating an IPO? Here's what experts suggest

RHP is filed once Sebi clears the decks

Once Sebi gives its nod and the company responds to any remaining observations, it files the final version of the offer document: the Red Herring Prospectus (RHP). Around this time, the company also announces the IPO opening and the price band. Setting the price band is not arbitrary—it is based on a mix of factors, including investor feedback, peer comparisons, and the company’s own financials and growth prospects.

Anchor investors come in first to build confidence

Just before the IPO opens to the public, bidding begins from anchor investors. These are large institutional investors who commit capital in advance and often signal confidence in the offering. Their participation usually takes place a day before the IPO opens for retail and high-net-worth investors.

Book building decides the final price

Once the IPO is live, the public can bid within the price band. The demand during this period helps determine the final issue price through a process called book-building. After the issue closes, allotments are made, refunds are processed, and shares are credited to successful applicants.

Unregulated world of grey markets

In parallel to the official IPO process, there exists an unregulated and unofficial trading space known as the grey market. This is where shares of a company are bought and sold even before they are officially listed on stock exchanges. A key feature of this market is the Grey Market Premium (GMP)—the extra amount investors are willing to pay over the IPO price, reflecting demand expectations. While GMP can serve as an informal indicator of market sentiment, it operates entirely outside the purview of regulators like Sebi. Since there are no formal rules or investor protections in the grey market, transactions are based purely on trust, making them risky and legally non-binding.

The listing day can be a hit or a miss

Then comes the big day—the listing. The stock debuts on the stock exchanges, including the BSE and National Stock Exchange (NSE), and its price is now driven entirely by market forces. Some companies, like Bajaj Housing Finance and Tata Technologies, have seen blockbuster listings. Others, like Paytm and Hyundai Motor India, have faced a bumpy ride post-listing, showing that IPOs come with their own risks.

Retail and pre-IPO investors have different timelines

For retail investors, the journey does not end at listing. Some may choose to book profits immediately, while others might hold on for long-term gains. Pre-IPO and anchor investors, however, are subject to lock-in periods. Anchor investors usually have a 30-90 day lock-in, while pre-IPO investors may face longer restrictions depending on Sebi regulations. Once the lock-in ends, these investors can choose to exit or stay invested, which often impacts the stock’s movement.