By ipomarket.in Editorial Team · Last reviewed: 2026-11-09
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
An Initial Public Offering (IPO) is how a privately held company sells shares to the public for the first time and gets listed on a stock exchange. In India, the process is governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and follows a fixed sequence of stages. For retail investors, understanding this sequence helps separate what is confirmed from what is still a plan.
This guide walks through each step, from the first regulatory filing to the moment shares begin trading.
Stage 1: Preparation and the DRHP filing
Before anything public happens, the company appoints Book Running Lead Managers (BRLMs). These are SEBI-registered investment banks that handle due diligence, prepare the offer document, run investor roadshows and coordinate the eventual allotment.
The first formal public step is filing the Draft Red Herring Prospectus (DRHP) with SEBI. The DRHP is a comprehensive document containing full financial disclosures, risk factors and business details. Importantly, it does not carry a price band. That comes later.
There are eligibility conditions to clear first. For a mainboard listing, a company must have at least 3 years of operational track record and minimum net tangible assets of ₹3 crore in each of the past 3 years. A practical disclosure rule also applies: under the SEBI ICDR Regulations, the financial statements in an offer document must not be older than six months from the IPO opening date, which is why issuers time their filings around fresh financials.
If you want to understand the DRHP in detail, see our explainer on what a DRHP is and how to read it.
Mainboard vs SME: who reviews the DRHP
The review authority differs by route. For mainboard IPOs, the DRHP is reviewed and approved by SEBI. For SME IPOs, the DRHP is instead reviewed by the relevant stock exchange platform (NSE Emerge or BSE SME), not SEBI directly. This is one of several structural differences between the two routes.
For market infrastructure institutions such as stock exchanges, there is an extra step: a No-Objection Certificate (NOC) from SEBI must be secured before even filing a DRHP.
Stage 2: SEBI review and the Observation Letter
A common misconception is that SEBI "approves" an IPO on merit. It does not. SEBI's review of the DRHP is a disclosure check. It confirms that the required information has been disclosed; it does not constitute approval or a recommendation of the IPO.
After the DRHP is filed, the document must remain open for public comment for a minimum of 21 days. Once the lead manager provides satisfactory clarifications and the stock exchanges grant in-principle approval, SEBI typically issues its Observation Letter within 30 days.
There is also a shelf life to this clearance. A company must complete its IPO within 12 months of receiving SEBI's initial observations on the DRHP filing. If it misses that window, it has to refile.
The confidential pre-filing route
Since November 21, 2022, SEBI has allowed a confidential pre-filing route. Under this option, an issuer can submit the DRHP confidentially for private review before any public announcement. After receiving SEBI's private observations, the issuer can decide whether to proceed based on market conditions and its own financial requirements. This is why some large companies are reported to be "preparing" an IPO long before any public document appears.
Stage 3: The RHP and the price band
Once SEBI's observations are addressed, the company files the Red Herring Prospectus (RHP). This is the stage where the price band and detailed issue terms are disclosed, which is the key difference from the DRHP. The RHP is the document retail investors should read most carefully before an issue opens.
To understand how the issue is split across investor groups, our note on QIB, NII and retail categories is a useful companion read.
Stage 4: Anchor allotment and the subscription window
Large institutional investors often come in first through the anchor book. Anchor investor allotment occurs one working day before the public IPO subscription window opens, under SEBI ICDR regulations.
The public subscription window is then open for exactly 3 working days. During this period, retail investors, non-institutional investors and qualified institutional buyers place their bids. This is the familiar "IPO open" period you see advertised.
Stage 5: Allotment and the T+3 listing
After the window closes, applications are processed and shares are allotted. The timeline from here is tightly defined. Under SEBI's mandatory T+3 rule, shares must list and begin trading within three working days of the subscription period closing. This T+3 timeline became mandatory as of December 2023, replacing the earlier T+6 schedule, which roughly halved the wait between application and listing.
On listing day, a special pre-open call auction determines the opening price. This opening price can differ significantly, up or down, from the issue price that applicants paid. The difference between issue price and opening price is what drives listing-day gains or losses.
For what to do once trading begins, see our listing-day strategy guide.
Stage 6: Post-listing obligations
Getting listed is not the end of the regulatory requirements. A mainboard company must achieve a minimum public shareholding of 25% post-listing. This ensures enough shares are in public hands for a functioning market.
How long does the whole thing take?
The full timeline depends on the route. For mainboard IPOs, the entire process from DRHP filing to listing typically takes 6 to 12 months. For SME IPOs, it is faster, usually 3 to 4 months. Market conditions, the quality of disclosures and the speed of SEBI's queries all affect where a specific company lands within that range.
FAQ
Does SEBI approve an IPO before it opens?
No, not in the way many assume. SEBI's review is a disclosure check to confirm that required information has been disclosed in the DRHP. It does not constitute approval or a recommendation of the IPO on merit. For SME IPOs, the review is handled by the stock exchange platform (NSE Emerge or BSE SME) rather than SEBI.
How long after the IPO closes do shares list?
Under SEBI's mandatory T+3 rule, shares must list and begin trading within three working days of the subscription period closing. This T+3 timeline has been mandatory since December 2023, replacing the older T+6 schedule.
What is the difference between a DRHP and an RHP?
The DRHP is the initial draft filed with SEBI containing financial disclosures, risk factors and business details, but it does not carry a price band. The RHP is filed after SEBI approval and includes the price band and detailed issue terms.
How long does the entire IPO process take in India?
For mainboard IPOs, the process from DRHP filing to listing typically takes 6 to 12 months. For SME IPOs, it usually takes 3 to 4 months. A company must also complete its IPO within 12 months of receiving SEBI's initial observations.
When are anchor investors allotted shares?
Anchor investor allotment occurs one working day before the public subscription window opens, as per SEBI ICDR regulations. The public window itself stays open for exactly 3 working days.
Last reviewed: 2026-11-09 by the ipomarket.in Editorial Team.