History of IPOs in India
India's IPO market did not arrive fully formed. It was built — slowly, painfully, and through hard lessons — over five decades. Understanding that history helps you appreciate why today's process works the way it does, and why SEBI's rules, which sometimes feel bureaucratic, exist for very good reasons.
Before SEBI: The Wild West (Pre-1992)
Before 1992, the Indian capital market was largely unregulated. The Controller of Capital Issues (CCI), established under the Capital Issues (Control) Act of 1947, determined whether a company could raise money from the public and at what price.
The CCI used a formula-based pricing system. Companies could not freely decide their IPO price — the government set it. This led to chronic underpricing, with shares trading at massive premiums the moment they listed. The beneficiaries were not ordinary investors — they were insiders and operators who had early access.
Fraud was rampant. Companies raised money with no intention of using it productively. Disclosures were minimal. Investors had little recourse.
The Birth of SEBI (1992)
The Securities and Exchange Board of India was established in 1988 but given statutory powers only in 1992, following the Harshad Mehta securities scandal — one of the largest market manipulations in Indian history.
SEBI's mandate was clear: protect investors, develop the securities market, and regulate it. The CCI was abolished. Companies were now free to price their IPOs — but with mandatory disclosures, a formal prospectus requirement, and investor protection rules.
This was the inflection point. The modern Indian IPO market begins here.
The Infosys IPO (1993) — A Defining Moment
In 1993, a Pune-based software company called Infosys Technologies filed for an IPO at ₹95 per share. The issue was undersubscribed — investors were skeptical about a software company with no physical assets.
Morgan Stanley, however, believed in the business and picked up the shortfall. Those who did apply at ₹95 and held their shares saw them grow to split-adjusted prices that delivered extraordinary returns over the following decade.
The Infosys IPO taught the market a lesson it would have to relearn many times: hype at listing is not the same as long-term value, and undersubscribed does not mean undervalued.
The Boom Years: 1994–2000
Post-liberalisation India saw a surge in IPO activity. Hundreds of companies listed between 1994 and 1996, many of them small, unknown, and of dubious quality. The market was flooded with paper.
When the bubble burst in 1995–96, thousands of companies that had raised public money simply vanished. Investors lost billions. An entire generation swore off the stock market.
SEBI responded with tighter regulations — stricter eligibility criteria, mandatory track records, and enhanced disclosure requirements. The market consolidated, and only stronger companies survived.
Book Building Introduced (1999)
Until 1999, most IPOs in India used the fixed price method — the company set a price, investors applied, shares were allotted. There was no price discovery.
SEBI introduced the book building mechanism in 1999, allowing companies to offer a price band and let market demand determine the final price. This was a significant maturation of the market.
Book building aligned the interests of the company (wanting a fair price) and investors (wanting value). It also introduced the concept of anchor investors — large institutional investors who bid before the IPO opens, providing a price signal to the market.
The Reliance Power Debacle (2008)
Few IPOs in Indian history generated as much excitement — or as much eventual disappointment — as Reliance Power in January 2008.
The IPO was for ₹11,563 crore, the largest in Indian history at the time. It was subscribed 73 times. The grey market premium was sky-high. Every broker in the country was pushing applications.
Reliance Power listed at a significant discount to its issue price and continued falling. Investors who applied purely on hype — without reading the DRHP, without analysing fundamentals, without questioning the valuation — lost money.
The Reliance Power episode became a textbook case of what not to do as an IPO investor. It reinforced a truth the market keeps forgetting: subscription numbers and GMP are sentiment indicators, not quality indicators.
The Decade of Maturation: 2010–2020
The 2010s saw steady professionalisation of the Indian IPO market. SEBI introduced:
- Mandatory grading of IPOs (later made optional)
- T+6 listing timelines (later reduced to T+6, then T+3, now moving toward T+1 in stages)
- Anchor investor lock-in requirements
- Enhanced related-party transaction disclosures
- Stricter QIB, HNI, and retail allocation rules
Companies like Coal India (2010, ₹15,475 crore — then the largest ever), Just Dial (2013), and Interglobe Aviation/IndiGo (2015) marked this era. These were businesses with real revenues, real profits, and real track records.
The Startup IPO Wave: 2021
2021 was India's most significant IPO year since liberalisation. Zomato, Nykaa, Paytm, PolicyBazaar, Freshworks, and dozens of other new-age companies listed, raising tens of thousands of crores.
The market's reaction was instructive. Zomato and Nykaa listed at strong premiums and maintained momentum. Paytm — despite being the largest IPO in Indian history at ₹18,300 crore — listed at a 27% discount and continued falling, eventually losing over 70% of its issue price.
The divergence between Zomato/Nykaa and Paytm was not random. It came down to fundamentals, path to profitability, and valuation discipline. The 2021 wave taught a new generation of investors the same lesson the 1996 bubble had taught the previous one.
LIC — India's Largest IPO (2022)
In May 2022, Life Insurance Corporation of India raised ₹20,557 crore in what became the largest IPO in Indian history. LIC's listing was below the issue price for retail investors, though policyholders who received a discount fared better.
LIC's IPO was notable not just for its size but for its reach — it brought millions of first-time investors into the equity market, many of them LIC policyholders who had never owned a stock before.
Where We Are Today
India's IPO market is now among the most active in the world. In 2023 and 2024, India consistently ranked in the top three globally for IPO volumes. SEBI has reduced listing timelines to T+3 (three days from IPO close to listing), introduced new SME exchange rules, and tightened disclosure requirements for new-age companies with no profits.
The market has matured — but it has not become foolproof. The same mistakes repeat: chasing overvalued IPOs, ignoring red flags in the DRHP, applying because of GMP rather than fundamentals.
History does not prevent errors. But knowing it makes you less likely to repeat them.