5.1 – Overview

This chapter was updated on 15th November 2022. A few comments in the query section may seem out of place. Kindly ignore those comments. The essence of the chapter remains the same.

The previous chapter gave us perspective on how a company evolves from the idea generation stage until it decides to file for an IPO. The idea behind creating the fictional story in the previous chapter was to give you a sense of how a business matures over time. Of course, many nuances were intentionally overlooked to drive the point across, and I hope that helped. The emphasis was on the different stages of business and funding options available at various stages of business.


Circumstances leading to an IPO are extremely important to understand because the IPO market, also called the Primary market, sometimes attracts many new first-time stock market investors. In this chapter, we will understand the IPO process and the many different aspects of a company’s IPO.

5.2 – Why do companies go public?

We closed the previous chapter with a few unanswered questions: Why did the company decide to file for an IPO, and in general, why do companies go public?

When a company decides to file for an IPO, one of the main reasons is to raise funds to fuel its CAPEX requirement. Apart from this, there are several other reasons for an IPO, sometimes, a company raises funds via IPO to reduce a high-cost debt, or sometimes a company can IPO to give an exit for an early-stage investor. Here is something interesting you can do. Think about a company that went IPO recently, and google for the IPO reason, and you’ll know why the company went public.

The promoter has three advantages in taking his company public –

    1. Raise  funds to meet CAPEX requirement
    2. Avoid the need to raise debt which means there are no finance charges to pay, which further translates to better profitability.
    3. The promoter can spread the risk amongst a large group of investors instead of one large investor. 100s and thousands of retail investors are better than one large private equity investor.

There are other advantages as well in filing for an IPO –

    1. Provide an exit for early investors – Once the company goes public, the shares of the company start trading publicly. Any existing company shareholders– promoters, angel investors, venture capitalists, or PE funds; can use this opportunity to sell their shares in the open market. By selling their shares, they get an exit on their initial investment in the company. Of course, there is a lock-in period before which early investors cant exit, but that is beside the point.
    2. Reward employees –Employees, working for the company would have shares allotted to them as an incentive. This arrangement between the employee and the company is called the “Employee Stock Option” or ESOPS. The shares are allotted at a discount to the employees. Once the company goes public, the employees can see capital appreciation in the shares. A few examples where the employee benefited from ESOP would be Google, Infosys, Twitter, Facebook, Amazon, etc
    3. Improve visibility – Going public increases visibility as the company is publicly held and traded. There is a greater chance of people’s interest in the company, consequently impacting its growth.

5.3 – Merchant Bankers

Having decided to go public, the company must do a series of things to ensure a successful initial public offering. The first and foremost step would be to appoint a merchant banker. Merchant bankers are called Book Running Lead Managers (BRLM)/Lead Managers (LM). The job of a merchant banker is to assist the company with various aspects of the IPO process, including:

    • Conduct due diligence on the company filing for an IPO, ensure their legal compliance and issue a due diligence certificate.
    • Work closely with the company and prepare their listing documents, including Draft Red Herring Prospectus (DRHP). We will discuss this in a bit more detail at a later stage.
    • Underwriting shares – In underwriting shares, merchant bankers agree to take up the unsubscribed portion of an IPO. The underwriting is taken up for fresh shares issued during the IPO. The merchant banker takes up the remaining shares if the subscription is above a defined threshold but is not subscribed fully. If the subscription is below the threshold, the IPO is deemed to have failed. All investor money is unblocked in the investors’ accounts. In March 2020, Anthony Waste Limited IPO’s subscription was below the threshold.
    • Help the company arrive at the price band for the IPO. A price band is the lower and upper limit of the share price within which the company will sell its shares to IPO applicants. For example, the current IPO of Keystone Realtors Limited has a price band of Rs.514 to Rs.541.
    • Help the company with the roadshows. The roadshow is like a promotional/marketing activity for the company’s IPO
    • Appointment of other intermediaries, namely, registrars, bankers, advertising agencies, etc. The Lead manager also makes various marketing strategies for the issue.

Once the company partners with the merchant banker, they will work towards taking the company public.

5.4 – IPO sequence of events

Every step in the IPO sequence must happen under the SEBI guidelines. In general, the following is the sequence of steps involved.

    • Appoint a merchant banker. In case of a large public issue, the company can appoint more than one merchant banker
    • Apply to SEBI with a registration statement – The registration statement contains details on what the company does, why the company plans to go public, and the financial health of the company
    • Getting a nod from SEBI – Once SEBI receives the registration statement, SEBI takes a call on whether to issue a go-ahead or a ‘no go’ to the IPO
    • DRHP – If the company gets the initial SEBI nod, then the company needs to prepare the DRHP. A DRHP is a document that gets circulated to the public. Along with a lot of information, DRHP should contain the following details:
      • The estimated size of the IPO
      • The estimated number of shares being offered to the public
      • Why the company wants to go public, and how does the company plan to utilize the funds along with the timeline projection of fund utilization
      • Business description including the revenue model, expenditure details
      • Complete financial statements
      • Management Discussion and Analysis – how the company perceives future business operations to emerge
      • Risks involved in the business
      • Management details and their background
    • Market the IPO – This would involve TV and print advertisements to build awareness about the company and its IPO offering. This process is also called the IPO roadshow.
    • Fix the price band – Decide the price band between which the company would like to go public. Of course, this can’t be way off the general perception. If it is, then the public will not subscribe to the IPO
    • Book Building – Once the roadshow is done and the price band fixed, the company has to officially open the window during which the public can subscribe for shares. For example, if the price band is between Rs.100 and Rs.120, the public can choose a price they think is fair enough for the IPO issue. The process of collecting all these price points and the respective quantities is called Book Building. Book building is perceived as an effective price discovery method.
    • Closure – After the book building window is closed (generally open for a few days), the price point at which the issue gets listed is decided. This price point is usually the price at which maximum bids have been received.
    • Listing Day – This is the day when the company gets listed on the stock exchange. The listing price is the price decided based on market demand and supply on that day and the stock is listed at a premium, par, or discount of the cut-off price.

5.5 – What happens after the IPO?

During the bidding process, investors can bid for shares at a particular price within the specified price band.  This whole system is referred to as the Primary Market around the date of the issue where one bids for shares. The moment the stock gets listed and debuts on the stock exchange, the stock starts to trade publicly. This is called the secondary market.

Once the stock transitions from primary to secondary markets, the stock gets traded daily on the stock exchange. People transact (buy or sell) these listed shares regularly.

Why do people trade? Why does the stock price fluctuate? We will answer all these questions and more in the subsequent chapters.

5.6 – Few key IPO jargon

Before we wrap up the chapter on IPOs, let us review a few important IPO jargons.

glossaryUnder subscription – Let’s say the company wants to offer 100,000 shares to the public. During the book-building process, it was discovered that only 90,000 bids were received, then the issue is said to be under-subscribed. This is not a great situation, as it indicates negative public sentiment.

glossary Oversubscription – If there are 200,000 bids for 100,000 shares on offer, then the issue is said to be oversubscribed two times (2x)

glossary Green Shoe OptionPart of the issue document that allows the issuer to authorize additional shares (typically 15 percent) to be distributed in the event of oversubscription. This is also called the overallotment option.

glossary Fixed Price IPOSometimes, the companies fix the price of the IPO and do not opt for a price band. Such issues are called fixed-price IPO

glossary Price Band and Cut off priceA price band is a price range between which the stock gets listed. For example, if the price band is between Rs.100 and Rs.130, then the issue can list within the range. Let’s say it gets listed at 125; 125 is the cut-off price.

5.6 – Recent IPOs in India

Here is a look at a few recent IPOs in India. With all the background information you now have, reading this table should be easy.

Sl No Name of Issue IPO Size (INR Crs) BRLM Listing date Price Band (INR)
01 Adani Wilmar Limited 3600 Kotak, JP Morgan, ICIC 8th Feb 2022 218 – 230
02 Delhivery Limited 5235 Kotak, BoFA, Citi 24th May 2022 462 – 487
03 Ethos India 472 Emkay, InCred Capital 30th May 2022 468-472
04 Aether Industries Limited 808 HDFC, Kotak 3rd June 2022 610 – 642
05 Tracxn Technologies Limited 310 IIFL Securities 20th Oct 2022 75 – 80

I hope the last two chapters gave you a sense of why a company files for an IPO and what happens during an IPO. In the next chapter, we focus on understanding the secondary markets and all the nuances around the secondary market.

Key takeaways from this chapter

    1. Companies go public to raise funds, provide an exit for early investors, reward employees and gain visibility.
    2. Merchant banker acts as a key partner with the company during the IPO process.
    3. SEBI regulates the  IPO market and has the  final word on whether a company can go public or not
    4. As an investor in the IPO, you should read through the DRHP to know everything about the company.
    5. Most of the IPOs in India follow a book-building process.


  1. Praveen says:

    How do underwriters sell there shares? Do they sell in normal market through stock exchange/bulk deal/private placement/offer for sale?

  2. AastroGuru says:

    Never seen any such educational content clear and lucid.
    Could you add a fictional case of IPO, about prices of book building issue price, bid price range, price discovery, listing price in secondary market?
    I am getting confused with Book Building and issue.
    The content may be clear but the problem could be with me.
    For Eg, an IPO in primary market is set a range for 100-120, for retailers to bid.
    Assume Many people bid 120.
    Then will the issue price will be 120, what will be listing price in the secondary market, will it be same or different?

    • Karthik Rangappa says:

      That is a good idea, maybe we will create additional chapter detailing this.

      In the example you have suggested, bidders will have to bid for a price between 100 to 120…and lets say the price gets fixed to 118. 118 will be the issue price.

      • AastroGuru says:

        Yeah got it, but when it gets listed in the second market, what price it will get listed.
        Example, I bought IPO of 10000 qty (already issued to me), then at what price this will get listed on NSE, on listing day?
        Is it same as 118.

        • Karthik Rangappa says:

          The listing price will depend on how people perceive the stock. For example in the recent Snowman Logistic IPO, the issue price was fixed around 45 but once it debuted on the exchange the price went up all the way to 75.

          • AastroGuru says:

            Oh you mean the opening price on listing day is 75 because market sentiment was good. Cool!

          • akrsrivastava says:

            So you mean that the first tick on the price can be different from 45?

          • Karthik Rangappa says:


          • Prashant Agarwal says:

            Karthik – I am still confused pertaining if the issue price in case of the snowman was decided at 45 than how did it jump to 75 at the 1st tick.

            As the normal investor is not allowed to invest at that time. So, is this fluctuation is being conducted by PE firm or Merchant Bankers?

          • Karthik Rangappa says:

            45 was the issued price, but the demand was so much that people were ready to pay a higher price on the day of listing, hence the price increased. Once the stock hits the exchange, anyone can buy or sell the stock.

      • suman says:

        i hav to say ZERODHA/VERSITY is the BEST simple,learning,useful,interactive stuff i come across ever.
        the moto of ZERODHA …….”ZERO RUDDH”…is nice

        i hav 2 qustions
        1st, is the “primary market” bidding through live system(as we see in TRADING TERMINAL) where everyone can see bidding price, bidding quantity,etc? or it just goes offline where we can`t see those?

        2nd, above you mentioned a average amount “bidders will have to bid for a price between 100 to 120…and lets say the price gets fixed to 118. 118 will be the issue price.”…….how this 118(issued price) fixed? how it fix?….is it like…..30no. share @ 115, 40 no.shr @110, 10no. shr@ 118 after issue the company getes it as a average………or……..within book binding process the rate is fixed…..or any other process?

        • Karthik Rangappa says:

          Good to know you like the content here 🙂

          1) NSE updates this information, check this – http://www.nseindia.com/products/content/equities/ipos/ipo_current_precam.htm?cat=A

          2) The rates are fixed based on the book building process, where in the price point which attracts the maximum amounts of bids is considered for the bidding price.

          • Akshay Ajay says:

            Say if the Maximum bids were received at a stock price of 118, then is it like only those people will be issued stocks on the listing day.

            What happens to the people who had placed the bids at 115 or say 122 like that….

            Will the person who placed a bit at 122 be issued the stocks at 118 value and 115 be rejected?

          • Karthik Rangappa says:

            Yes, listing price is at maximum bids. 122 will get it at 118, but 115 will be rejected. Hence, for this reason, its always best to bid at the highest price.

    • Laxman says:

      Yes, I agree. The way Karthik explains is very clear an simple that layman can understand very easily and take interest to read further.
      Thank you friend Karthik.

    • Laxman says:

      Yes, I agree. The way Karthik explains is a very clear and simple, that layman person like me can also understand very easily and develops interest to read it further.
      Thank you very much Karthik, for such a nice articles .

  3. akrsrivastava says:

    How does an increase or decrease in share price of a company impact the company. Suppose XYZ listed at 100/- The company received 100/- from its each of its new shareholders and proceeded to invest this into its business. Does the future increase or decrease in the price affect in any way, the functioning of the company? If price rises to 120/- in the secondary market, this does not imply that there will be a further inflow of 20/- per share into the company. Hope I made my question clear. The company’s reputation may be at stake, but what apart from that?

    • Karthik Rangappa says:

      After the issue, the increase and decrease of prices do not matter much to the company. Hence there is no additional inflow to the company. However do remember, the promoter (also the business owner) is also a shareholder of the company. If the share price increase/decrease his personal net worth increases/decreases.

      • Akshay Ajay says:

        When the VCs were investing in the coming the valutations were based on the price they were paying for the certain percentage of the equity in the company. Now once the company is publicaly traded if the promoter shareholding will vary based on the stock market price, will the valuations done during funding stage not be valid??

        • Karthik Rangappa says:

          The shareholding will not change…what will change is just the stock price and therefore the valuation. No, once the stock is listed, there is no official valuation of the stock. In fact, the valuation is supposed to happen in the market, which is also called the ‘price discovery’, by the markets.

  4. kashish shambhwani says:

    i have a doubt in book building segment
    say price band is 100-110..now i want to apply for the shares,then at what price should i apply?

    • Karthik Rangappa says:

      Well, this is the whole idea of book building. You can apply at a price you think is fair…for example 107. I could apply at maybe 105..someone else could apply at 110…so on and so forth.

      However to increase the likelihood of allotment, especially for a popular issues, I would recommend applying at the higher cut off, in the example you have suggested it would be 110.

  5. adithyau says:

    Nice explanation .

    Can you please also explain how share are allocated if its over subscribed . Some say they distribute such that atleast one lot we will get and hence its always better to apply just for one lot in case of popular stocks

    And also can you please explain about the price protection if some company offers like 15% price protection . How it works

    • Venu Madhav says:

      Yes, in the recent times SEBI did make such amendements mandating that all issuing companies shall ensure that each retail participant gets a minimum bid lot irrespective of his application size. However this is subject to the availablity of shares.

      So this means, that if the issue is a popular one which is most likely to get oversubscribed, its best to apply for just one lot rather than for multiple lots because the odds of getting allotment of more than the minimum lot is really low.

      This was done with the intention to encourage participation from investors who stay away from IPO’s thinking they won’t get allotment any shares.However the downside to it was those who apply for the full amount are likely to get fewer shares.

  6. kamaleshnair says:

    If the Green Shoe option is exercised, does it not dilute the shareholding of the existing investors (Angel Investors, Promoter, VCs, PEs etc) ?

    • Karthik Rangappa says:

      Green shoe option obligates the company to issue additional shares, so yes, there would be some amount of equity dilution.

  7. Janardhan Reddy says:

    Hi Karthik,

    in case of over subscription how will the shares gets distributed. will it be from higher price to lower price or all the subscription get allotted.

    for Example the price band is 100-120. the overall shares to be issued is 1000. there is a 2x subscription at different prices with in the price band as below.
    price – shares subscribed
    100 – 600
    110 – 600
    120 – 800.
    So, the highest subscription was @120, 120 would be the cut off price right?

    now how the 1000 shares allotted in the above case, will be like 800@ 120 and 200 @ 110 ?

    • Karthik Rangappa says:

      The cut off would be a single price point and all the shares would be allocated at that price. However in the example you have stated the distribution is quite even, hence I’m, speculating that the price point would be estimated on a weighted average basis.

      • Janardhan Reddy says:

        you mean to say, all the shares will be allotted at cutoff price only. in that case the shares which were subscribed below cutoff price has to pay the remaining amount if they get allotted? and in case of over subscription will the shares will be allotted on first come first serve basis?


  8. shiladitya says:

    regarding ur reply to AASTROGURU on November 7, 2014 at 6:57 am
    if the market sentiment was good then why the issue price was 45 whether opening price on listing day was 75 ?????

    • Karthik Rangappa says:

      What I mean is – The sentiment was so strong that the issue price was fixed at the upper price band of Rs.45 and upon listing on the exchange the stock price opened @ 75.

      • Prashanth Aigal says:

        what exactly is meant by ‘the stock price opened @ 75’? who fixes this number? how public sentiment works in deciding Rs 75(above example)? Thanks.

        • Karthik Rangappa says:

          It purely depends on the demand and supply situation. In simpler terms (just for the sake of an analogy) think of it as the built up pressure in a pressure pressure cooker..there is so much demand for the stock that it traders are willing to pay any price moment it gets listed on the exchange.

  9. shiladitya says:

    for over subscription share does the higher bidder bidding higher than cut off price get preference ?????

    • Karthik Rangappa says:

      No, in fact you can bid at any price between the lower and higher cut off price and not beyond the specified limits.

  10. Adarsh Saraff says:

    Dear Karthik,

    I think the BRLM of Power Grid Corporation of India Ltd. is UBS Securities and not USB. just wanted to point it out 🙂


  11. Aditya Biyani says:

    Hello Karthik, Sucheta and Team Zerodha,
    First of all – these articles are amazing, easy to understand, in layman language(as needed for people with not so finance background)

    Coming to my query:
    1.Can you please elaborate more about Primary and Secondary markets.
    2.Date-of-issue and Listing-day are same thing or not?
    3.The book-building process and primary market – are they related ?

    • Karthik Rangappa says:

      Thanks Aditya for acknowledging the whole team. The team take extra efforts to ensure Varsity delivers what best is expected out of it. Hope we live up to the expectation.

      1) The IPO market (wherein companies come to list their companies, mainly to raise capital) is also called the Primary market. We have tried the explain the same in this and the previous chapter. From the time the company decides to go public, till the time they get listed on the exchange is the ‘Primary Market Stage’. Once the company gets listed, it graduates out of primary market to enter the secondary market, which is popularly called the Stock Market. The whole of Varsity is dedicated to explain many different aspects of this market (stock market) 🙂

      2) I need to clarify this myself, but as far I know both are the same (listing date and issue date)

      3) Yes, both are related. Book building process is an integral part of the primary market. In simple terms – book building process involves people to bid for shares (quantity and price) within the stipulated bidding window.

      • Aditya Biyani says:

        Hello Karthik,
        Actually it’s my confusion which is taking me to some misconceptions – please provide your views/answers over the following queries so that I get a clear view and start with next articles:

        IPO markets part 01: “When a company files for an IPO, they have to offer their shares to the general public. The general public will subscribe to the shares (i.e if they want to) by paying a certain price. Now, because the company is offering the shares for the first time to the public, it is called the “Initial Public Offer’.”

        So according to the above statements and your previous reply:
        Book Building process is part of — Initial Public Offer – right?
        And IPO and Primary markets are one and the same thing?
        P.S.: IPO means – only the company is about to be listed and people can only subscribe through book-building but cannot trade as of now – right?

        IPO Markets Part 2:
        What happens after the IPO?
        During the bidding process (also called the date of issue) “investors can bid for shares” at a particular price within the specified price band.

        –Here investors means a]normal people subscribing for shares or b]business tycoons or companies taking stake?
        if b] If some other company or businessman buys the complete stake or remaining authorised shares then what?

        Green Shoe Option:
        If a company has 100 shares then it gives the Merchant banker authority to distribute 115 shares (in case of over-subscription)- is it like that?
        So from where the extra 15 shares came in and how does it change the company valuation?

        • Karthik Rangappa says:

          My answers in the same sequence –

          1) Yes book building is an integral part of the IPO process. All things related to IPO is referred to as “Primary markets”. Yes, IPO means people can only participate by bidding and they cannot trade since the company is not listed yet. Primary Market = IPO Market. Secondary Market = Public listed Market where stocks get traded regularly.

          2) Investors mean both in this context. It can be normal small investors like me or it could a large business enterprise or a very rich investor (HNI). For each type of investor there will be a quota. For example you can apply through the HNI quota if you feel you are eligible for it. Last time I checked a HNI is any person who has more than 5 lac to invest in the IPO (I need to confirm this statement, but this is just to give you a perspective). Likewise for business entities. So basically anyone can bid during the book building process. Also, there are quotas and limits, hence 1 investor (business entities) cant lap up all shares for himself.

          3) These extra shares comes from the reserves. When extra shares hits the market, the valuation kind of dilutes.

  12. Nilesh says:

    Hello Sir,

    I referred to the question and corresponding answer about Green Shoe option above. But, still could not get correctly. You said extra shares comes from reserves, but is it not like company issues all remaining authorized shares to public and there are no reserve shares available anymore. Would you please, explain.

    • Karthik Rangappa says:

      Consider this…a company has total of 100 shares…out of which 20 shares are made available for public via IPO. Out of the balance 80 shares, 60 are held with promoter and promoter group and 20 in company reserves. Company files for IPO…response is good..and there is excess demand. Hence company releases additional 5 shares from the reserves. This means 20+5 shares for IPO, 60 with promoters, and 15 in reserves.

      • Nilesh says:

        Thank you very much Sir,

        I now understand this. Suppose, company do not have more shares in reserves, is it possible for Promoter to provide his shares to public? Also, what is the concept of block/bulk deal? Is it approved by SEBI?

        • Karthik Rangappa says:

          Block/Bulk deals is basically a window for anyone who wishes to buy sell large chunk of shares in a particular company. These are off mkt transactions hence they wont affect the market price.

          Yes, the promoter can choose to divest his stake whenever he wishes to.

          • Nilesh says:

            Thank you very much Sir…

          • Karthik Rangappa says:


          • Karan chaurasia says:

            Hi to all dedicated team members of ZERODHA.
            I would like to thank you all for providing us such an amazing platform for understanding the Finance domain.I am loving it learning the things in such a simple and easy way. I wanted to learn before also but couldn’t because no platform assisted or encouraged me but ZERODHA is awesome and helping me out learn the things.Thanks once again.

          • Karthik Rangappa says:

            Thanks for the shout out and kind words Karan. Happy learning!

      • Milan says:

        Hello karthik ,
        I have few question about IPO process.
        1. Here company has reserve 15%. Now when company again want to distribute those shares, then again it is called as IPO ? Because company is already listed on exchange?
        2. If cutoff price is 107 on listing day. And If i apply with highest price then , what is my chance to get ipo ?
        3. Bulk/block deal is possible before company listed on exchange ?
        4. Suppose promoters want to sell their 50 % before company goes to initial public offer , how they can sell ?

        • Karthik Rangappa says:

          1) Any issue after the company goes public is not called an IPO…it could be in the form of Rights, Follow on Issue, etc.

          2) Depends on the subcription level, if the issue is oversubscribed then its a tough chance, else you do have a chance.

          3) They can dilute via private placement, dilution to PE/VC funds etc… as long as there are takers for it.

  13. Ashwin says:

    this may be the wrong area to ask this but, i want to know
    1. How in the first place does the promoter decide the number of shares to allocate?
    2. Assuming everyone is rational, why would they not bid the lowest so that everyone wins?

    Apologies if the questions sound stupid.

    • Suchetha says:

      Thank you for your query. The promoters, directors and the advisory board of an IPO have the authority to decide the number of shares to allocate to the public.

      In response to the second query – there is always a fear of not getting an allotment, hence people tend to bid at different rates. Do remember, different opinions is what makes the market!

  14. Chris says:

    Is there any particular website or link that will give the latest uptodates about upcoming IPO’s?

  15. debesh8888 says:

    If company have no share in reserve then where the 15 % share allotted in oversubscribed

  16. Meraj Ahmed says:

    Hi Karthik,

    This is an absolutely amazing material that you have put down over here. I was a novice and it is all due to this article that I know what I know. I have a question for you. What is the time difference between the closing of IPO bidding dates and the listing dates? What can we speculate about VRL logistics IPO in this regard?

    • Karthik Rangappa says:

      Glad you liked it Meraj! As far as i know the company has to list within 12 days from the day the close the IPO closes.

  17. Ganesh says:

    A question
    Can a foreign company file for an IPO in India?

  18. Ganesh says:

    After buying a stock in the IPO, when can I sell it? A day later, a week later or only after the stock gets listed on the exchange?

  19. Kamalaganesh says:

    Need download material starting from Module 3 till the last module. Could you please help me here?

  20. Sumeet Nagar says:

    Hats off to yoy guys.. Zerodha team rocks..
    Coming to the queries..
    1. The job of a merchant banker is to assist the company with various aspects of the IPO process ..
    How does merchant banker benefit from this? Is it only the one time fees that they will be paid for their work? Or they will have some other additional benefits from the company?
    2. Underwrite shares – By underwriting shares, merchant bankers essentially agree to buy all or part of the IPO shares and resell the same to public..
    Who is going to decide the price of the shares that merchant bankers buy? They can resell them in public.. When.. In primary markets or secondary markets?
    3. You mentioned that there is a limit for everyone to buy shares.. Then how can merchant bankers buy the entire shares??
    If they can buy the entire shares, then IPO does not make any sense as shares are not going public..
    Hope i am not asking stupid questions..
    Waiting for reply.. Thanks in advance..

    • Karthik Rangappa says:

      Sumeet – here are the answers –

      1) Merchant banker charges a fee against the IPO services they render. Besides merchant banking is just 1 of the divisions of an investment bank. Merchant Banking is one of the services they provide to the corporate, once the relationship is established they can up sell many other services.

      2) When a merchant banker underwrites the IPO, they it is perceived that the merchant banker will subscribe to a part of the shares offered in the IPO provided the IPO is under subscribed. Hence it makes sense for the merchant banker to market the IPO well and ensure the IPO is well subscribed. One of the keys to ensure full subscription is a fair price for the IPO. After all, who would buy the IPO if the IPO is ridiculously priced (although I must confess it has happened in the past Ex: Reliance Power)

      3) The price of the stock is determined by the valuation team in a typical Investment bank. The sale happens in secondary market

      4) I’m not sure about the limits imposed on merchant banker..but I know they can mop up a large % of shares…but not fully. If they do, then it becomes a private placement and not really an IPO of sorts.

  21. Ravi says:

    In your example, only 16% of the alloted shares are offered via IPO to public.
    So how come all the shares of previous shareholders (promoters, VC’s , PE’s) which are not public get to be traded publicly ?

  22. prakash kumar says:

    i am really very thankful to zerodha varisity and specially karthik sir as i m being here trading for 2 years and recently joined zerodha before 6 months but i had never got anything means any material on stock market and its strategies like this and because of lack of knowledge i have also lost money in the market but now on i am little bit secure after reading these article .

  23. NIKHIL POWELL says:

    I have a question that how the company’s value increases due to increases in the share price ,because all the shares of the company are distributed among the public any change in share price will benefit the shareholder not the company ,how company get money if the share price increases?

    • Karthik Rangappa says:

      The company’s shareholders benefit…do note even the promoters of the company are shareholders. So they too benefit.

  24. aehsan4004 says:

    can you share a little more about primary market trade of debt. instruments like govt.security , corporate bonds etc ?
    lets say there are 4 govt. securities A,B,C,D of 1000 face value each & all have same maturity at 2040 .
    coupon rates as follows :- A = 6 % , B= 8% , C = 10 % , D = 12%

    1) which will be offered in primary market at price less than , equal to , more than “FACE VALUE” ?

    2) what will be the scenario in secondary market ? in the secondary market which security will be trading lower / higher than its price in primary market ?

    • Karthik Rangappa says:

      This is really a vast topic to discuss. The module on “Currency, Commodities, and Interest Rate Futures” will address all these topics.

      • aehsan4004 says:

        awaiting eagerly 🙂 🙂 🙂

        • aehsan4004 says:

          i assume reaching module 8 may take months , can you give an idea in short , if possible ?

          is it a good strategy to buy in primary market and immediately sell in secondary market ? ( this is for both fixed income instruments & stock IPOs )

        • Karthik Rangappa says:

          Soon 🙂

          • aehsan4004 says:

            we can find bonds issue date and current price on NSE site , is it possible to check the listing day price of all the bonds alongwith volumes. kindly guide how ?

            i will gather the data myself and try to reach at a conclusion , will share it with you & then you give me an expert advise .

            is it a good idea to have a portfolio based on holding only bonds / debt. instruments and simple futures trading ?

            you have been tremendous help since the beginning , thank you 🙂

          • Karthik Rangappa says:

            I’m sure NSE has this information as well 🙂

            Holding just bonds in the portfolio can be a bit tricky! Will try and give as many inputs as I can.

  25. Aiko says:

    Great stuff!
    I am absolutely understood each and every word in the article. Thanks for this!
    By the way, can merchant banking also be known as corporate banking? Or are they different?

  26. Sai Sreedhar says:

    Can we know and buy a company shares before they go public?

    • Karthik Rangappa says:

      Yes, provided you get hold of these in an off market transaction.

      • Sai Sreedhar says:

        Could you please elaborate – like where this information can be obtained? Is it possible for public to act as investor before the IPO is issued?

        • Karthik Rangappa says:

          Like for example when Sasken Communications was about to IPO, I knew someone working there. He dint want to hold Sasken shares as he wanted money urgently…I bought these shares from him (off market via DP to DP transfer). Shortly after this Sasken went public and I was able to exit the shares. By the way, this is the only IPO I ever participated in 🙂

          • NareshS says:

            Hi, What is DP to DP transfer? Basically you became venture capitalist and sold it as a trader? Is it?
            Also what are the powers as a shareholder of company before it going public?
            Can VCs take day to day business decision or you are a silent investor who have shown faith in their business?
            Pardon if it sounds stupid.

          • Karthik Rangappa says:

            Transfering shares from one broker’s DEMAT account to another is called DP to DP trf. For example from ICIC’s DP to Zerodha’s DP. The powers of the shareholder depends on the the % shareholding.

            Its best if VCs do not involve in day to day operations…they usually don’t. Their input is required from the strategic perspective.

  27. Sai Sreedhar says:

    Hi Karthik!
    I have an understanding now what Market Capitalisation means from your modules, and I understand that there is no benchmark parameter to define which range is Large Cap, Mid Cap or Small Cap. [Please let me know if I am correct 🙂 ]

    Can I know what is your consideration for a range to categorise Large, Mid & Small Caps?

    • Karthik Rangappa says:

      Here is what I personally follow…

      < 1000Cr - Micro cap 1000 Cr to 10K Cr - Small Cap 10K to 25K Cr - Mid cap 25K Cr and above - large cap

  28. harsh says:

    listing day is the day when the company gets listed in stock exchange ,but then how do people/public decide the face value of share before it?
    like where do these price gets decided if not in stock exchange ,i mean how do they know where it’s happening?

    • Karthik Rangappa says:

      Face value is decided by the company before it goes public. The share price before listing is decided by how much the business is valued.

  29. Vishal Saini says:

    Few days back i had no idea about Stock market but the way you explained everything made it easy for me to understand……:)
    My question is:
    What if all the shares get sold in primary market itself, will there be Secondary market sale or not…if yes how would that be possible since all
    shares have already been sold, public will have nothing to buy……I am novice this could be a stupid question..:)

    • Karthik Rangappa says:

      Glad to know that Vishal 🙂

      In fact the objective of an IPO is to successfully sell (allot) shares to public….once they are sold, people have to come to secondary market to sell it or trade it.

  30. deepender singh dev` says:

    where i can DRHP details of a company?

  31. Abhishek says:

    How IPO is allotted?what is the best lot size to bid? Do we always need to bid highest?

    • Karthik Rangappa says:

      Its always best to bid at the highest cut off level, especially for an issue which has a lot of demand. Allotment happens mostly on a lucky draw basis!

  32. Suja says:

    Hi Karthik, I am really confused with the term face value. what is the difference between face value and issue price. How is face value determined? And why is dividend a % of FV and not the issue price? Also, in the link that you have given https://www.nseindia.com/products/content/equities/ipos/ipo_current_advenzymes.htm ,the face value INR 10, while the Price range is Rs 880 to Rs 896. Why such vast difference?

    • Karthik Rangappa says:

      Face value is a nominal value the company assigns for their shares. Usually companies in India have FV as 10 or 100.

      Issue price is the price at which the company issues the shares to the public when they go IPO.

      For example the FV of a company could be 10, but when the go public, they can issue the share at 225. The price at which they will issue is dependent on the valuation of the company.

      Tricky question as to why dividends are given as % of FV, if I were to guess…Issue price is market driven and not really a constant, where as FV is…and perhaps this is the reason why its that way.

  33. Sivakumar says:

    Hi Karthik,

    When i saw shareholding pattern for infosys in money control, i have found only promoters and (FII & DII) holding the stocks. I could not find any series A,B or C. Is there any other place where i can find more details about shareholding pattern?

    • Karthik Rangappa says:

      The list contains the shareholding of people who hold more than 1% of the company….and also the shareholding of directors/independent directors. Suggest you look at the Annual Report as well.

  34. Sai Sreedhar says:

    After the company is listed, does the share price, in secondary market, directly effect the company in anyways? I mean it might decrease or increase the market capital and also the valuation, but does it really effect the company, because they have raised the money required for the operational (or other) purpose through the IPO.

    • Karthik Rangappa says:

      It does to the extent of impacting the valuations and therefore the shareholder’s wealth, but nothing besides this.

  35. AbhiSach says:

    Why does the company and its management care about their share price after the IPO when they have already recieved the capex?

  36. Raj says:

    Hi karthik,
    i have a small doubt. What should be the minimum time gap between establishing a company by the promoter AND going for a public issue(IPO)???

    • Karthik Rangappa says:

      Going IPO is largely a function of capital requirement, if companies do not need capital then there is no need to go IPO. Usually companies take about 6-8 (or maybe even more) years before going IPO.

  37. Unaided I says:

    Hello buddy,
    Is book building like a subset of Primary Market?
    thank you

  38. Ravi says:

    Hi Karthik,

    2 questions.

    1. In a scenario where a promoter wants to divest his shares in IPO, will the money generated through IPO goes to him ?
    2. How is the extra money shown in balance sheet. I have seen that equity share capital remains the same even after the IPO.


  39. Abhinav Singh says:

    While listing for IPO company has put 16% of its share 16%(8lakhs) shares suppose for 125Crs. will the valuation of the company become 781.25 crore(i.e 125^8*50=781.25 crore). If so how to know about real valuation and how to judge whether is stock costly or Cheap?

    • Karthik Rangappa says:

      This is where your valuation and business skills come into play. There is no right or wrong valuation, it is an opinion built on how you foresee the future business potential and how much you are willing to pay for it.

  40. Manjinder singh says:

    If price of IPO ranges from 100 to 500 and have offered 500 price and value decided for that IPO is 200 in that situation what will be price of that IPO??

  41. Vijay says:

    Hi, I am new to share market. i have two questions.
    1. What happens if a company’s IPO goes Under Subscription? Will it try to sell it in the subsequent trading days?

    2. Let’s say i do intraday trading. what happens if there is no buyer at the end of the day, will my shares go to the stock exchange?
    if so how it will be brought to the market again(at what price).

  42. Sushil says:

    Hey, I don’t quite understand this part, “Underwrite shares – By underwriting shares, merchant bankers essentially agree to buy all or part of the IPO shares and resell the same to public”
    Does this mean merchant bankers buy all/part of the shares from the promoter and sell them? And is underwriting a compulsory step of this IPO process?

    • Karthik Rangappa says:

      Sushil – I’m not sure if underwriting is mandatory. However, every IPO these days have one…it kind of gives a safety net to the company going IPO.

  43. Richa Sinha says:

    I am having a question suppose if i have a face value 100 share of ultratech chem co limited of face value of rupess 10..does this mean the price at which it is trading now would be the value of my shares as well

    • Karthik Rangappa says:

      Yes, the price changes based on how it gets traded in the market. So you need to check its market price, to find out its latest share price.

  44. vijaysinh says:

    pls guide me how i should apply for upcomming dmart ipo through zerodha, i am new here

  45. jinto says:

    good work

  46. archanam says:


    I am wondering to know once the company goes for IPO and shares are alloted to investors. After that it starts trading in secondary market. So, my question is when share goes up or down does it make any profit or loss to the company ?

  47. Ajit says:

    Let Suppose, when the window opens for subscribing shares and given the band is between 100-150 and i bid at 150 and stocks get allocated to me for 150inr. Now the day it gets listed in NSE, is there a chance that after getting listed, the price might fall below 150 inr? or it will always go above 150inr?

    • Karthik Rangappa says:

      The share can trade at any value, cut off does not really matter for markets.

      • Ajit says:

        Ok. So in this case you are saying that the price might go above 150inr or below 150inr after getting listed?

        • Karthik Rangappa says:

          Yes sir, it really depends on the quality of the stock you are dealing with. Quality attracts investor demand, demand helps in lifting the prices up and vice versa with not so quality stock.

  48. Richa sinha says:

    Hii i am having some physical share in the name of my mother Madhu Sinh..but the demat is in the name of Madhu Sinha…there is a difference of A..so couls you please suggest how these share can be transfered to her accoubt?

  49. Sana says:

    Great Content!

    One question though you mentioned when a company goes in for an IPO it gives SEC a DRHP which lets gives investors the necessary information to decide if they want to invest in a company. (Did I get that right?)

    Who can invest in an IPO and how do they do that?

    • Karthik Rangappa says:

      SEC is applicable for US securities. Its equivalent in India is SEBI.

      Yes, DRHP contains information on business and finances, which helps you take an informed decision. Any resident India with a PAN card can apply for an IPO, suggest you give a call to your broker for further information on the logistics involved.

  50. James says:

    Respected Sir,
    1)Does listed price on stock exchange=issue price=cut off price=first tick/transaction/trade on stock exchange?
    2)As per new valuation of company after PE steps in, company have per share value 1562 to 1875/- …(125Cr/8Lakh). Why company does not fix this as price band?
    3)Would the price band of 100 to 120/- not affect overall valuation of the company? Or, number of shares would change to keep the value (and valuation) same?


    • Karthik Rangappa says:

      Issue price is the price at which the IPO value us set, it could be at the cut off price. The price at which the stock gets listed in the first traded price.

      Please dont get into the share price calculation for this example – it is a loosely constructed example, to just push the concept across 🙂

      • James says:

        Thanks a lot, it is clear now{all price terms}!!!
        intention is not share price calculation, but just a conceptual clarification to bridge gap.
        I understand it is just loose example, but I’m sorry it is creating a big crack in my understanding mainly I have reached now on Module 3 & I have to look back a little here to fill the gap.
        I just wanna know if it would have been practical scenario, would company have listed at –

        a) 1562 to 1875/- …(125Cr/8Lakh) (as per real valuation of company till now, before IPO)
        b) 100 to 120/- (there are some accounting methods to set this band even if it affects valuation of company)
        c) 100 to 120/- (there are some accounting methods to set a mid point band where it suits public opinion & also doesn’t affect valuation of company, at least not to a greater extend)
        d) any other case/reason – if yes, please clarify

        please clarify which is correct, conceptually in real world.
        Thanks a lot, sorry for my weird ways of asking conceptual understandings !!!

  51. tikeshwar says:

    D-Mart and MUSIC BROADCAST LIMITED IPO is coming soon, Can I purchase it via Zerodha ? If so how? if not , then how can I ?

  52. Sumit says:

    I have a question , in india most of the big companies listed in NSE and BSE both, So do they raise money Individually in each exchange. For example if a company XYZ decided to go for an IPO in NSE and raises suppose 100cr, so if they also want to list in BSE also do they go for a seperate IPO for BSE . I dont know the procedure , Could you clarify the procedure for me please.
    Thank you

    • Karthik Rangappa says:

      The amount raised is fixed and it is done with a one time IPO. The shares are distributed across the exchanges.

  53. surendiran says:

    how to place IPO through zerodha account

  54. Akash says:

    Zerodha Varasity has the best content so far. I have one query.
    Suppose a company brings out its IPO at a price band of 120 – 150 and the stock gets listed at 130. So the investors who quoted the price above 130 (say 140 or 150) will be able to get shares or not? If ‘NO’ then why to penalise those bidders who are aspiring to have shares at higher price?

    • Karthik Rangappa says:

      Thanks Akash.

      Yes, if the shares are not over subscribed, then folks who have bid at higher than 130 are likely to get the allotment.

  55. Mohit says:

    Hi Karthik,
    I have one question that i applied for 100 shares of recent D-Mart IPO at upper band through online SBI Banking But the shares were not issued to me. Can you please tell me what could be the reason.

  56. Adithya Ram says:

    Hi, I have the following queries
    1. When we are bidding are we paying the amount before hand or the amount is taken after the allotment.
    2. Secondly how many shares can a person bid u is their a limit?
    3.In an earlier query asked about the bid in book building , if I bid for a amount lesser than cut off I would not be getting the share allotted to me but would I get the refund??

    • Karthik Rangappa says:

      1) Its called Application Supported by Blocked Amount (ASBA). Only the required amount is debited from your account based on allotment
      2) Depends on the issue – each issuer will suggest the maximum number of shares you can bid for
      3) Yes

  57. Nihal oturkar says:

    Hi Karthik ,

    i have Tradding / Dmat ac with Zerodha , but just i come to know that i can not invest in IPO through Zerodha.
    Why zerodha not provide IPO ? now how i can go for Investment in IPO ?

  58. Nish says:

    Hello Zerodha Team
    The content here is very wonderful and very easy to understand.Thanks.
    Few queries i have here.
    1) You have mentioned in the story that the company Goes for the IPO with 16% of the company’s share.So once the company gets listed on the exchange these 16% shares will start trading on the exchange . Now the company is listed and if promotor wants to offload his holding how will he do that post IPO as his shares were not part of the IPO process i.e his holding was part of the remaining 86% of the shares which was not up for IPOs process.
    2) Is there any way by which he can make his holding part of the shares which are currently trading .

    Thanks .

    • Karthik Rangappa says:

      Glad to know that 🙂

      1) Once any part of the shares gets listed on the exchanges, then all shares gets a value. For example – if there are 100 shares and I do IPO for only 5, then the IPO share price for these 5 shares is the same as the balance 95.

      2) Yes, by transacting in the secondary market.

      • Nish says:

        Hello Karthik
        Thanks for the reply.
        I got the point that after the IPO the promoter shares will have same value as IPO shares which are trading in market currently.
        However my question is like in the example you gave where out of 100 , 5 went for the IPOs so in this case the 95 share which were not part of the IPO how will they enter the secondary market .

        Thanks .

        • Karthik Rangappa says:

          They are held with the promoter, which the promoter can choose to sell anytime in the market.

          • Nish says:

            Hello Karthik
            Thanks For the consistent replies.
            So based on your replies please verify if my understanding is right or not.
            If a company has a total of 100 shares and it goes for the IPO for 20 shares i.e these 20 shares are there for bidding to the public. so once the IPO is done and shares starts trading in the stock market , then along with the 20 shares which were part of the IPO the remaining 80 shares which were held by promoters also starts getting traded on the exchanges on a daily basis i.e all 100 shares of the company will be traded on a daily basis on the exchange irrespective of how many shares of the company went for the IPO.


          • Karthik Rangappa says:


  59. Arpit Gupta says:

    What is benefit for merchant banks and how its decided

    • Karthik Rangappa says:

      Merchant banks help you in taking the company public…this includes building prospectus, marketing IPO, underwriting etc.

      • Arpit Gupta says:

        trying to be more specific – what merchant banks get? any % or money for doing IPO on behalf of company.

  60. Arpit Gupta says:

    Can you please enlighten major diffrence/discloser/obligation between listed and unlisted company

    • Karthik Rangappa says:

      Biggest difference – listed companies are required to explain why they sneezed and the unlisted aren’t.

  61. Ramakant Baldawa says:

    Hello Zerodha Team,

    Thanks For sharing the wonderful knowledge that you guys have 🙂

    I want to know the procedure to buy IPOs, can we buy IPOs through zerodha?


  62. Ritesh Lakra says:

    Dear kartik Sir,
    Before going public, company had 16% or 800,000 shares to its own. When raising new Capex of 200 cr, company values its 16% share as 125cr. So if this is a case price band of shares is Rs 1562-Rs 1875.
    Now my question is, when company issues an IPO, price band is only 100-125. Does this mean company has to increase the number of shares to reach the value of shares, that is Rs 125cr ?

  63. Hitendra says:

    So, any company’s Stock listing price is dependent on how much time is has been subscribed…??? or any other…??

  64. Hi Karthik,

    First, I congratulate and thank you and Zerodha team for creating this wonderful platform to learn and share.

    I have a question:

    1. What are the steps to follow for a retail investor to buy shares in the primary market ( or book building process)?
    2. Can I bid through Zerodha in book building process?

  65. Hi Karthik,

    Thanks for the reply.
    Another question:
    What is the difference between Equity IPO and Debt IPO?

    • Karthik Rangappa says:

      Nothing like a Debt IPO…at least, I have not heard of it. Can you share the context or link if you have? Thanks.

  66. MANISH says:

    sir , i want to ask if there is oversubscription of an IPO in retail investors section , say 200 times subscription , then what will be basis of allotment of share is first come first rule or any draw . pls clarify this.

  67. Ramith says:

    Hi Karthik,
    Would you please help me in understand the book building where the bidding range is set for bid for the public..

    1. Public here means normal investor like us or any stock market expects??
    2.In case if the bidder is normal investors, Will not everyone bid for the minimum amount ??
    3.What does offer price mean in the table? (As I see the bid range also present in the last column)

    Thanks in Advance

    • Karthik Rangappa says:

      1) Yes, they are normal investors like you and I
      2) It really depends – bidding at upper cut off and minimum lot gives a higher probability of getting allotted
      3) Offer price is the range within which the stock is likely to get listed at

  68. Nikhil Dixit says:

    I would like to appreciate your tremendous efforts for providing such a valuable resource to the rookies.

  69. Pankaj Kumar Prasad says:

    Date of issue price for Power Grid Coporation of India Ltd is from November 9, 2010 to November 11, 2010 for all QIB Bidders and November 12, 2010 for all other bidders as opposed to 03/12/2013 to 06/12/2013 in the table.
    P.S. if u ever come across this comment then please update the table with new stellar IPO’s in 2017. E.g Avenue Supermarkets (DMART), CDSL, HUDCO etc..

  70. shishir sonekar says:

    does company has to offer all unallocated shares in the IPO?

  71. DJ says:

    What is the book building process?

  72. Narendra says:

    Can you share a few more details about how and when a company can decide to go public (legally)? How will SEBI decide to say no to a company? If SEBI decides to say no and the company’s investors/promoters think that it’s wrong, what can they do?

  73. anant says:


    Can you please throw some more light on Book Building process and issuing shares in the primary market during an IPO?

  74. P.s.perumal says:

    The difference between the bonus of shares split of shares and dividends of share

  75. Rahul says:

    Suppose in the IPO company issued 100 shares at Rs.200 each and suppose if there are 5000 bids for these 100 shares, then how these 100 shares are allocated to the bidders? Assume no Green Shoe Option or if used, still couldn’t overcome the number of bids.

  76. vinay doki says:

    Hi ,
    If i want to buy an IPO on listing day with listing price and place a request for the market price ,will it be allotted for sure??or if i wanted to quote for lower price how do I come to know at what price I have to put the request ?

    Pls Clarify

    • Karthik Rangappa says:

      On the day it gets listed on the exchange, you can buy…and yes, you will get the shares. However, this is like any other transaction in the secondary market. This is not considered an allotment.

  77. kunal says:

    what is drhp??

  78. Nikhil Verma says:

    Why are the Rs:10 Face Value share issued at very high priced in IPO Market. How is that possible?.

  79. P.s.perumal says:

    If I have a 2% of share at ABC company which I have been bought through a nse at IPO now the company has a debt and it has been bankruptcy did I will become the responsibility for that loan
    If the share holders are not responsible means who r responsible

  80. santosh patidar says:

    Few months back 1 IPO got under subscription in first 2 days, on 3rd day they decided to reduce the price, How they decided the valuation letter ? Why merchant bankers were agreed to reduce the price ?

    • santosh patidar says:

      It is about prabhat dairy, they extended the time and also reduced price. why SEBI agreed and what happened to the people who subscribed at higher price ?

      • Karthik Rangappa says:

        People who bid at higher prices will get the shares at the price of the issue, could very well be much lower…there is no problem with this.

    • Karthik Rangappa says:

      The price gets fixed to the rate at which there is maximum subscription. This is in fact how the book building option works.

  81. Sachin Singh says:

    Hey! Apologies if these queries seem trivial but please answer them-

    1) You mentioned somewhere that if the IPO is getting oversubscribed, then it’s better to bid for only 1 lot since only that would be allotted-
    a) I am guessing you mentioned that from the money liquidity POV (means that since the IPO money is blocked, one can’t reuse it until it’s refunded)?
    b) Because if one applies on the first day itself, then you can’t know whether it’s getting oversubscribed or not. Is that why most people wait till the third day to apply? To see which way the IPO is heading and whether it’s worth applying for only one lot on the basis of the subscription level.

    2) If it gets oversubscribed, is the allotment totally random? Or is there some higher probability of getting allotment if you had applied on a certain day?

    3) Suppose if the issue is oversubscribed and I had bid for two lots, and I get allotted only one. The money for the second lot will be refunded, right?

    Thanks in advance.

    • Karthik Rangappa says:

      1a) No, I said so because the chances of getting an allotment for more than 1 lot is low. So you are better off with just 1 allotment
      1b) Yes, people tend to wait till the last minute
      2) Yes, its based on lottery system
      3) Yes.

      • Sachin Singh says:

        And is there any site or some place else where we can get live update of how much a particular IPO has gotten subscribed at that particular moment of time? If not, then how do these news channels & sites get to know that?

          • Sachin Singh says:

            In terms of bid percentage, what the NSE site is showing is comparatively less than what some of the news articles reported. Like take the example of MAS IPO, on the NSE site, the retail section is showing that only 34% has been filled as of 6th October at 11 pm, whereas multiple print websites (whose sources are also the NSE site) are currently saying that the retail section got oversubscribed (date mentioned here is also 6th, time is actually of before- 5pm). Same for other sections like QIB etc.
            Why the discrepancy?

          • Karthik Rangappa says:

            Not sure, Sachin. Maybe NSE updates at EOD. In any case, I’d stick to NSE’s data.

          • Sachin Singh says:

            Okay! Now when I went to the NSE site, the data for the MAS IPO is the same as the news sites reported ( time is also 5pm). Don’t understand why an hour earlier the data was all wrong on their site (even took a screenshot for both occasions).
            Any idea why? Just some technical glitch?

          • Karthik Rangappa says:

            I guess the data gets updated on an EOD basis, not really real time.

  82. Debjyoti says:

    Are the cut-off price and issue-price same?
    In that case I have a doubt. If the cut off price is within the price band of IPO, how come IPO investor will gain any profit when the company is listed in the market ?

    • Karthik Rangappa says:

      Not really. Cut off price could be the upper level, but the maximum bids could be at a lower level which will reduce the issue price.

  83. SAGAR KUMAR says:

    Hello Kartik,
    Its a well explained and beautifully organised content. First of all thanks for that.
    I recently started investing in Share Market by Zerodha. And I have a basic query that how one should know or analyse if he/she should invest in the IPO or not. Basic words, what should I look for in an offering; how analysts get to know if its a Good Deal or not.

    (If you have answered that already, you can direct me there.)


  84. Harsh says:

    I wanted to know if for a IPO price band is between Rs 500 and Rs 550. And given the fact that there are quotas for various types of investors i.e QIB, NII and RII. Now, suppose IPO is oversubscribed 3 times but the Retail portion is subscribed only 0.5 times. Now if a retail investors has bid at Rs 500. Than will the retail investor get the IPO at Rs 500 or at the cut off price?

  85. Hemal Patel says:

    Can i Apply for an IPO with my ICICI bank’s Savings account ASBA and by using my Zerodha Demat account in HNI/NII category?

  86. Thangaraj M says:

    My query is all about IPO transition.
    lets say I wish to buy a stock of ‘Space X’ but, ‘Space X’ is a private organization. the company had never filed for IPO.
    1 .how can I check whether the company has already gone to public?
    2 . if the company is about to move to public, is there any terminals or any sort of articles through which I will get to know?
    3 .being a normal trader, can I participate in bidding process? if answer is yes, through which medium?

    • Karthik Rangappa says:

      1) You will have to read up on the company’s website – if its public, you will know
      2) Keep track of IPO markets in US, portals like WSJ or Bloomberg will help
      3) Not in US markets

  87. VRN says:

    Can one company release more that one time IPO ‘s? If yes then what will be the price of per share for next IPO ?

  88. Saurabh says:

    Is there any difference between merchant banks and investment banks?

    • Karthik Rangappa says:

      The investment bank is a generic term, like a ‘Hospital’, merchant banking is a super specialty within an investment bank. They help companies raise money via public issue.

  89. ARUN says:

    Hi karthik,
    What’s the difference between bulk deal and block deal?
    Thank u.

    • Karthik Rangappa says:

      Quoting this from MC –

      Block deal is a trade, with a minimum quantity of 5,00,000 shares or minimum value of Rs. 5 crores, executed through a single transaction, on the special “Block Deal window”
      The bulk deal is a trade, where total quantity bought or sold is more than 0.5% of the number of equity shares of the company.
      The orders in a block deal are not shown to the people who trade from normal trade window. Bulk orders, on the other hand, are visible to everyone.

  90. Sreejith says:

    How can I know when IPO s are announced and How do I subscribe to those IPOs? Is there any site/tool where I need to register or I can use the normal zerodha platform to find the share and Buy as usual?

  91. Tej says:

    Hi Karthik,

    Its always amazing to read the content on zerodha.
    Few q i would seek your ans on:

    1. If the cut off price for a stock, let say, is fixed at 100 and if it gets listed at a premium of 50% i.e 150. Then what & who decides this premium.
    2. How do operators play around with price

    Would be happy to have a detailed version on above q.

    • Karthik Rangappa says:

      1) The market decides the fair price – this is also called the ‘Price discovery’
      2) I quite doubt they can, or at least, I;m not sure how 🙂

  92. Bhagyashree says:

    I am so glad google popped this site when i asked how IPO works !!
    Amazing read! simple and effective!
    The sad part is I was taught this topic in college about 2 years ago. But failed to remember today at this point of time. The best part is I will always remember this now!!!! Thanks a lot Karthik! I am a fan now!!

  93. Abhi says:

    I am new to the workings of the stock market and I find your content to be of amazing help to the learning process.I have one doubt about the deciding the price or value of a share unit.In the example given, the companies price valuation consistently increased with each round of VC funding and the profits from the market after each year.Also it was said that the Merchant banker who we work with for setting up the IPO also weigh in the financials of the company to come to a reasonable price.My doubt are:
    1.If the company starts with a very low funds in the few lakhs range,but its flagship product is an Intellectual Property like a one of a kind software or an algorithm having wide range of applications but whose current value cannot be exactly measured as it is the first of its kind, how can one put a price on its share.So will the IPO share price be fixed using just the capital or funds that is available with the company? In which case wouldn’t it strongly undervalue the company?
    2.What is the exact parameters that impacts the price.Say if the company procured Series B funding which shifted the value of to say X price.But say the profits decreased from previous due to some practises like rival products or operation failures or debt settlement.What could be the exact value of the company.How will Sebi come to the decision that the price is valid and approve the IPO?
    Finally, Keep up the good work.It is nothing short of brilliance!

    • Karthik Rangappa says:

      Abhi, I’m glad you liked the content 🙂

      1) Valuation of R&D and intellect property is quite a task. However, this can be done and the merchant bankers will help in estimating the value and the markets will eventually discover the fair price.

      2) Have explained in methodology for valuation in Module 3, check the later chapters (Equity research).

  94. syam says:

    explain the two situations pls
    In an ipo if i quote lower than the cut off price in price band , how much shares are allotted to me ?
    In an ipo if i quote higher than the ut off price in price band , how much shares are allotted to me ?

    • Karthik Rangappa says:

      1) You cannot quote lower than the cutoff, has to be a price within (or at) the upper and lower range.
      2) Depends on the subscription rate

  95. Harsha says:

    Have some doubts on this point…
    (“Book Building – Once the road show is done and price band fixed the company now has to officially open the window during which the public can subscribe for shares. For example, if the price band is between Rs.100 and Rs.120, then the public can actually choose a price they think is fair enough for the IPO issue. The process of collecting all these price points along with the respective quantities is called Book Building. Book building is perceived as an effective price discovery method.”)
    If public can bid and choose a price, they would obviously choose the least i.e 100 in this case which will benefit them. So what is the point of the price band, official window opening for few days? This is the only doubt i have now, everything else is greatly explained in this chapter.

    • Karthik Rangappa says:

      Well, there are many issues where the price is way below the upper limit. So bidding is really required.

  96. Tanay Ghai says:

    If there is a price band in an IPO, then why not the all the buyers bid for the lower limit of the price band and that becomes the issue price? Making the company generate the lower limit of capex.

    • Karthik Rangappa says:

      Different opinions is what makes the market, Tanay. It is very hard for the market to reach a collective consensus.

  97. dhananjaymandole says:

    how many days does ipo lasts and after ipo can company raise more money and is their any difference between price on ipo and afterwards

  98. ADITYA JAIN says:


  99. srisri says:

    Thanks for the brilliantly explained, crispy information. I’d be grateful if uou actually put all of this into a single book. It would be great help for beginners.

  100. srisri says:

    Are there any fixed number of shares for a company? Or do they keep on increasing as the company matures?

  101. ayush says:

    is the price point at which the issue gets listed different from the price after which company gets listed on the stock exchange? does bidding means actual buying or not?

  102. Nihit says:

    In case of over subscription, how the allotment process works ?

  103. Manpreet Singh says:

    In the above example we see that company has 16% (8 lac) authorised shares that it can issue, but initially no of shares were 50 lac (which are distributed between promoter and investors). Now lets say on Secondary market 8 lac shares are there @1600 per share. Now if promoter wants to redeem its shares as he holds 20 lac shares how come this would be possible ?

    • Karthik Rangappa says:

      You mean the promoter wants to offload his shares? He can do it via normal markets or via the off-market route (block and bulk deals).

      • Manpreet Singh says:

        Q1. yes, if promoter wants to offload his shares, can he do it via normal markets ? and if yes than how ?
        Q2. Also explain off -market route ? Is it similar to Over the Counter transactions ?

        • Karthik Rangappa says:

          1) Yes, he can. Just like the way you and I sell shares via exchanges. The only thing is that he has to declare to the exchange saying so
          2) Yes, but at price decided by the market, and under the full regulatory supervision of the exchange.

  104. Madhu Sinha says:

    First of all, i would like to thank you giving the entire material for free. Each of the chapters are so easy to understand because of the simplicity of words and way of explaining. I have no prior knowledge of markets but now i have some clarity. Now i have two questions. First, in the previous chapter, you said for every transaction, there is a buyer and a seller. Whenever one is buying a share, the other one is selling. But why would anyone sell the shares at low price? I mean one party is always at loss, either by buying share at a high price or by selling it at a low price??
    My second question is why is there a need for price band? Is not an fixed issue price enough? Also, is the cutoff price and issue price same?

    • Karthik Rangappa says:

      Madhu, thanks for the kind words. Happy to note you are able to understand things easily.

      1) Different opinions are what makes a market. We both could be looking at the same stock, while I consider it cheap, you may perceive it as expensive. This difference of opinion is what moves the market
      2) The price band is there to help a price discovery. No they both are different. Issue price is the price which is discovered and the price at which the stock will let listed on the exchange.

  105. Jinal says:

    I had two queries:
    1) What does it mean when they say ‘ Scrip X is quoting at a premium of Rs xxx in the grey market’ before the listing of the share on the exchange. What is this grey market? and who are involved and how does the media get these details?

    2) Also during applying for an IPO an HNI person can apply for shares through both HNI quota as well as Retail investor quota right if he wants more shares of the IPO ?

    Thank you

    • Karthik Rangappa says:

      1) It is just a perspective of how much the trading community is willing to pay for the particular issue. Grey market is like a shadow market, sort of a grapevine. I’m really not sure who is involved here 🙂

      2) Yes, you can. I guess applications above 5L is considered HNI by default.

  106. Vijay says:

    Hello Karthik,
    So, as I understand – it is events & supply/demand ratio that drives the prices. Inorder to raise a stock price up, wouldn’t companies set up their own personnel to buy&sell stocks just to set a positive tone in the market and increase the price? Or even pay few large capital traders to do so? How does SEBI manage to track it? How can a newbie in market can recognize that and stay away?

  107. Prajwal says:

    Suppose one of the early investors wants to exit much before the IPO. Who does he sell his shares to ? If no one is wiling to buy, is the company obliged to take back his share and pay him out? Should such an investor wait for the next round of funding to put his shares to sale? How does it work?

    • Karthik Rangappa says:

      Usually, he has to wait for the next round, where he can always find a VC/PE/HNI to offload the shares i.e, of course, assuming that these parties are interested in buying.

  108. Hitendra sawant says:

    THANK’S A lot to ZERODHA for creating a great platform to acquire a wonderful knowledge about stock market.

  109. Ajay Muralidharan says:

    Hi Karthik
    I am a bit confused about the green shoe option that you had mentioned. If in an IPO situation, if the company had already issued 100% of the authorized capital to previous investors, then how can the merchant bankers issue an additional quantity of ownership to IPO investors? Please correct me if I got anything wrong and thank you for making such wonderful lessons!

    • Karthik Rangappa says:

      Ajay, companies wont issue 100% at IPO. Anyway, if they have 8 shares for IPO, upon full subscription, they may issue another 2. So there is always buffer for this in advance.

  110. Bhargava says:

    Hi…From the IPO1 and IPO2 topics I understood that VC or similar players play an important role in catapulting the share price to the next level, but I also see that it is their choice what price they would be paying to buy the stock (offcourse they are wise). My doubt is, are there anybody to impose rules on VC wrt the price they should be paying when they invest in companies during phases such as CAPEX? Because they seem to be the key game changers when it comes to stock price increase and indirectly decide what price the public should be paying when the company goes public.

    • Karthik Rangappa says:

      No not really. Remember, all the investments that a VC does is in private market, much before the company goes public.

  111. sivaprathap says:

    Hi sir,

    If promoter,angle investors,vc’s,PE’s all sold their shares to public then who can take care of company?

    • Karthik Rangappa says:

      A company cannot run without a promoter and his team 🙂

      • Madhavi Harshala says:

        As per my understanding, while the company decides to go for an IPO, that part of the authorised capital which is currently not issued is offered for public trading either partially or completely. In this context, I have a few questions as noted below:
        1)After the ipo, the shares that are issued get listed in the secondary market. Here what exactly does listing mean? Only buy and sell orders on the shares make them eligible for transaction right.
        2)And how can the V.Es, P.Es and other early investors offload their stakes when it is not their shares that are up for trading. Like, it is the remaining /leftover part of authorised capital that goes for IPO, right


        • Karthik Rangappa says:

          1) Listing means that the shares are now available in the secondary market for people to transact (both buy and sell).
          2) The shares are in DEMAT, so they can sell it in the market.

  112. sivaprathap says:

    Hi sir,
    like in our example, promoter have 40% share and angle investors have 10% share.
    if both of them offload their shares i mean 50% of shares,then who will take care of company?
    And is it possible to offload these much of shares in secondary market?

  113. Siddharth says:

    Is there any difference between Book building windows and issue date?

  114. SatheeshS says:

    Dear Karthick,
    Can you please explain what is the concept of ‘Face Value’ of share? Why do most shares have a face value of rs 10 or rs 5 ?

    • Karthik Rangappa says:

      Face value of a share is the nominal value assigned to the share on when its created. Usually, the Face value of a share is Rs.10/-, this is just a general practice for most of the listed companies. Of course, there are companies which have 100 as Face value as well.

      • SatheeshS says:

        Thank you Karthick. What is the use of this Face Value ?

        • Karthik Rangappa says:

          It’s best use comes when paying a dividend because divided paid are expressed as a percentage of face value. Also, stock splits/bonus are calculated based on Face Value.

  115. Ishan says:

    Hello karthik,
    i have one some ques. for you,
    1) can we enter the quantity of shares we need along with the bid price when bidding for ipo.
    2) this is not necessary that the quantity of shares we wish will be given to us in ipo… right..?
    3) then how the company decides to what quantity to give to which bidder,this one in detail.

    thank you

    • Karthik Rangappa says:

      1) Yes, the quantity is a multiple of the permitted lot size
      2) No, this is the multiple of lot size
      3) If the lot size is 20, then technically you can apply for 100 (5*20), you may get partial or the full quantity

  116. Raghavan says:

    Hi Karthik,

    I found that the spread of price range in recent IPO’s are too low.

    For instance:
    HDFC Asset Management Company Limited IPO (Rs 1095 – Rs 1100).
    TCNS Clothing Co. Limited IPO (Rs 714 – Rs 716).
    Varroc Engineering Limited IPO (Rs 965 – Rs 967).

    Is there is any particular reason?

    Your varsity work is amazing. Great Job!!
    Thanks for the effort.

    • Karthik Rangappa says:

      Interesting observation, Raghavan. One reason I can think of – they dont want to miss out on valuations given that the market is bullish.

  117. christo says:

    how do you subscribe to an IPO? on what basis do you get selected in an over-subscribed IPO?
    During the DMART IPO few of my colleagues had subscribed but only one got to by the share. Why?

    • Karthik Rangappa says:

      Yes, this is because of the subscription level. If the demand is too high and the number of shares to offer is too low, then there is no option but to do a lottery.

  118. Paras Jani says:

    How to buy IPO in Zerodha with ICICI Bank. Please share steps for the same.
    Paras Jani

  119. Sankari Ramana says:

    Karthik Sir,
    To be honest I started reading Varsity lately just to gain the background knowledge about stock markets. But your simple explanation skills has piqued a lot of interest in me to start trading and investing. I’m fortunate to have such a mentor. Thank you so much Sir.
    And there’s a minute mistake in the “Improve visibility” section stating the PE as “Series B” but it is actually “Series C” as mentioned by you in the previous IPO chapter. It’s a tiny mistake but still I wanted Varsity to be clean and perfect ?
    Everything here is easily understandable and I’m looking forward to learn more deeply.

    • Karthik Rangappa says:

      Sankari, thank you so much for the kind words 🙂 I’m glad you liked the content here.

      I’ll try an fix that error 🙂

  120. Sankari Ramana says:

    Hey Karthik,
    I have a small doubt here.
    There are Private Companies, Public Co.s, OPCs etc. Now, a company which decides to go for an IPO will be a public company as it is issuing shares to the public. But what will the status of the company will be before an IPO? Will it be a Public Co. or something else?
    And the details about the Co. wanting to go for an IPO should be disclosed in the MoA and AoA while registering and incorporating the company. But how can a company go for an IPO suddenly when it didn’t mention about it during incorporation? Will there be a change in the Memorandum and Articles of Association?

    • Karthik Rangappa says:

      It is usually a Public Limited or even a Private Limited before going Public. The details of the company will be published in the draft red herring prospectus, as filed with SEBI.

  121. Jibu Marks says:

    Have never seen or read such a simple way of explaining a fairly complex subject. Even a layman can comprehend and understand the way Karthik explains the concept step by step and takes you through the process. Kudos to you Karthik. You are really talented. More than that I like the way you sequence it, make the topic more interesting through simple examples like a story teller. More than all these, your clarity in keeping the profile of your readers with humility and patience.

    A real good teacher! A truly inspiring and talented educationist!!

    This country needs many more of your tribe. Especially with so much of ignorance and no formal education whatsoever imparted in our formal educational system.
    Great initiative.. Keep it up!!!

    P.S: So impressed that I am asking my wife and children to go through the Varsity module thoroughly.

    • Karthik Rangappa says:

      Hey Jibu, thank you so much for all the kind words 🙂

      Comments like these encourage us to work harder and deliver more quality content. Thanks again 🙂

  122. Mayur says:

    Really nice way to explain funding from Angel to IPO.
    One suggestion from me. Please use only one of the following numbering style
    1. 8 Lakhs and 20 thousand or 8,20,000
    2. 820 thousand or 820,000

    please do not mix both. It’s annoying

  123. Anshul Mittal says:

    Hi sir

    You said in your write up that IPO gives an option to promoters or angel investors to get out of their initial investment by selling their shares to the public


    you also said that only 16% of the company’s authorised shares which were not issued to anyone, were made available to the public via IPO.

    Doesn’t both statements contradict each other ?

    • Karthik Rangappa says:

      Anshul, maybe in this case. But in general, when a company files for IPO, the early investors do get an opportunity exit shares.

  124. Harikumar J says:

    I’m a newbie to investments and just started reading the basics here. I liked it so far, simple and elegant! One bit of suggestion if you may consider, I would like the numbers in your example are comma seperated as per our metric system and standards. I find it difficult to read when citing in lakhs and crores. Say, 10 lakh could be represented as 10,00,000 as supposed to 1,000,000. Thanks.

    • Karthik Rangappa says:

      I know Hari, I dint realize it back then, but all the chapters later on have numbers seperated by commas.

  125. Madhavi Harshala says:

    This is seeking some clarity regarding the securities contracts regulated by SEBI.

    According to SCRA, on the spot (settlement on the same or very next day) securities contracts are permitted off-the-exchange. However, offer of securities made to 50 or more persons is to be construed as public offer and has to be via public issue only as per Companies Act, 1956. (aggregate of not more than 200 persons annually)
    So this effectively means on the spot transactions should be comprehending not more than 49 members?

    • Karthik Rangappa says:

      This is more to do with PMS and Fund management I guess. I’d suggest you kindly take a legal opinion on this.

  126. Dhilipan says:

    If only PE and Merchant Bankers can bid in the primary market does that mean they can increase or decrease the value of the share as they like?

  127. SKP says:

    In your example initially the price band was Rs.1562/- and Rs.1875/-per share. I am confused how it became Rs.100 and Rs.120 per share during book building.

  128. Piyush says:

    Dear Kartik,

    I believe the explanation of green shoe option isn’t correct. It is an option available with lead merchant banker once a company has been listed and there has been an unwarranted movement in prices due to oversubscription. In this case, the lead merchant banker has option to buy 15% stake of promotors for 15 days and sell it to the public and the process goes on like this. Please re-check. Thanks. And do correct me if I’m wrong.

  129. Raj says:

    Closure – After the book building window is closed (generally open for few days) then the price point at which the issue gets listed is decided. This price point is usually that price at which maximum bids have been received.

    Karthik, I think the statement above should read as ‘ the price at which the issue gets issued’ and not ‘listed’

  130. Naveen says:

    I am a bit confused regarding issue price and listing price.
    After the book building is closed,the issue price is decided and the shares get allocated to the bidders. The shares gets listed on the listing day thereafter anyone can trade.
    Am I right??

  131. Chetan Phirke says:

    Is there any way to determine the credibility of a VC or PR firm or is it a “word of mouth” thing?

  132. Nif_ty_50 says:

    Hello karthik,

    Great work 🙂 I would like to know few basic things such as

    1. If company is listed on stock exchange and today it’s first day suppose now anyone it can be a promoter, angel investor, VC, PE if anyone want to sell their shares directly after public listing who will buy the share if there is no one available to buy.

    2. If no one is available to buy suppose (0) qty and someone promoter, angel, vc, pe sell large number of shares how it will behave on exchange.

    Thank you

    • Karthik Rangappa says:

      1) Well, a good stock will always have a good demand-supply situation. So there would be buyers, its likely that these are the guys who would have missed investing in IPO
      2) The order would be pending at the exchange and no takers for it. Just like any other order.

      • Nif_ty_50 says:

        Thank you sir for your reply 🙂

        If we go with your 1) answer i have one another question at the time promoter, angel investor, PE anyone sell the shares in the large quantity and buyers are also there to buy but if the seller quantity is very high will it take the share value down for that particular day ??? and the time come where no buyers left to buy how stock exchange handle this ?? Thank you

        • Karthik Rangappa says:

          Yes, if the sell qty is higher then, the stock can come down on the listing. But if there are no buyers, then there is nothing much the exchanges can do either. The order will be left pending.

  133. Aryan Singhal says:

    Hello karthik,

    I have 3 questions to ask you

    1. What does the promoter of a company mean? can you give a brief
    2. Why don’t the company go public after the angel investor funding only, when they need additional capital to grow
    3. and my last question is that, suppose a company XYZ wants to go public and they offer a price range of 100 to 120 and I subscribe the IPO for 100 rupees, so will I get the share at Rupees 100 at the time of listing. And in continuation if not then how does that first listing price get decided.
    Thank you Karthik in Advance.

    • Karthik Rangappa says:

      1)Promoter means the owner of the firm
      2) At some point they would need more capital for expansion, hence they tap into public markets
      3) That’s right. The first price post listing is decided by the demand and supply upon listing.

      • Aryan Singhal says:

        Hello karthik,

        1. then why are we assuming promoters’ share to be 40% and the company retained shares 50% as a separate thing in the example?\
        2. my question is like why not company go for IPO directly after angel investing rather than go thru VC series A, B, and C?
        3. Is there any formula like if 50% of people opt for price 100 range and 50% opt for 120 price range then the listing price would be 110 on the first day??

        • Karthik Rangappa says:

          Aryan, going for IPO is not an easy decision. Companies become answerable to the public when they do so. So the companies try to meet their funding requirement via these series funding. When the requirement becomes large and when the previous investors pressurize the promoters for an exit, then the company goes public.

          There is no formula as such.

  134. Vijayant says:

    Hello, i am a bit confused about green shoe option. I didn’t get what exactly it is? I read it about it here as well as on your app and got confused.

    • Karthik Rangappa says:

      What is the confusion about, Vijayant?

      • Vijayant says:

        On the app it is written that when the shares are listed and the prices suddenly began to fall then greenshoe option permits the underwriter to buy upto an additional of 15% shares at the offer price, thereby support the price fall.
        And here it is written that if the shares are oversubscribed then they can issue an additional of upto 15% shares.

        • Karthik Rangappa says:

          Thanks for pointing out Vijayant. Will make the changes.

          • Vijayant says:

            Ok, but what does it exactly mean.

          • Karthik Rangappa says:

            This is the correct version – app it is written that when the shares are listed and the prices suddenly began to fall then greenshoe option permits the underwriter to buy upto an additional of 15% shares at the offer price, thereby support the price fall.

  135. Vijayant says:

    You told that if oversubscription happens then they have green shoe option but what if they go under subscribed? What action company takes after that? Do they decrease no. of shares offered? or they decrease the band and again go for book building? or they stop going for IPO?

    • Karthik Rangappa says:

      No, there is nothing much the company can do for under subscription. This is quite logical as well right…if they need a certain amount of money from IPO, they need to raise at least so much. They cannot undercut that. This implies they cannot reduce the number of shares on offer.

      • Vijayant says:

        Can’t they again go for book building (though i don’t think it would be a nice option.) with a different price band? Or as they are not getting enough funds can’t they just stop going ipo?( This also won’t be a good option as the company would be requiring funds but is this possible?)

  136. Pratik says:

    When the company shares are allocated through IPO. How does the company benefits after the share price increase? For e.g. Suppose Stock price of company increased from 100 to 120 (here some investors bought shares at IPO at rs 100 and sold at rs 120 to other investors) Then there is benefit of investors. How does the company benefits here(assuming here no more unallocated shares with them)

    • Karthik Rangappa says:

      The company is owned by promoters, as the share price increases, the promoters wealth increases.

  137. lakshmana deepesh says:

    Hey Karthik,

    Thanks for the wonderful course.
    I had a question, it goes like this.
    Let’s say a company had 16% of it’s shares unallocated to any of the investors or the promoter. Can the company choose to do an IPO for only 8% of those shares, and keep the other 8% unallocated?

  138. Aakash Banjara says:

    Sir what is green shoe option

  139. autodidactg says:

    In the previous chapter, the valuation of the company went up each time a new investor came in and bought a chunk of shares which he/they valued at an appropriate price (with the last one being that of the PE, where total valuation was 400 crores, with 16% unallotted shares being at 64 crores valuation).

    In this chapter, here is this line:
    “For the sake of simplicity, let us assume the company is now valuing the 16% shares anywhere between 125 Crs to 150 Crs.”

    So the valuation of those 16% shares jumped up from 64 crores they were after PE investment to [125 crores, 150 crores] (hence total valuation going up from 400 crores to [781.25 crores, 937.5 crores ]) right before IPO.

    But in the previous rounds of funding when the value jumped, that was because of the evaluation of the new investor (Venture, PE).

    But this jump in evaluation from 16%-64crs to 16%-125crs/16%-150 crs, how might’ve that happened?

  140. Ashish Yadav says:

    What do u mean by listing gains in IPO? Another question is that, what will happen if the IPO is oversubscribed and I am not allotted any shares?

    • Karthik Rangappa says:

      Listing gains means the amount of money you’ll make when the stock lists. For example, if a company’s IPO price is 50, then once it gets listed it may start to trade at 80, so 30 is the listing gains in this case.

      There is nothing much that you can do if you don’t get allotment.

  141. Vikas says:

    I think the details provided about Green Shoe option are correct(being high level) and not in depth, as per my understanding the GreenShoe Option is exercised only in case of OverAllotment of shares by Merchant Banker.

    So normally the Merchant banker creates short positions upto 15% and

    1. If the share price starts falling down after listing, the Merchant banker covers the short position by buying the shares from market there by arresting the fall.
    2. If the share price starts shooting up, the Merchant banker instead of covering short positions from market, exercises Green Shoe option and buy the shorted shares from the Company at pre-determined price(usually the Issue price), there by diluting the shares available in public to arrest the shoot up

    Please correct me if i am wrong.

  142. Sandra Adam says:

    Ipo grey market price or grey market premium refers to the premium amount at which shares and IPO applications are bought and sold before they are available on the stock exchanges. Demand and supply heavily influence the grey market premium, which is either positive or negative.

  143. Arvinder Singh says:

    Hello Karthik,
    First of all, thank you for being a support in my journey to becoming a Trader.
    Please help me in understanding he following –

    1. Meaning of “The IPO comprises of a fresh issue aggregating up to Rs 90 crore and an offer for sale of up to 49,53,020 equity shares by Affle Holdings, according to a statement.” in this announcement – “https://www.moneycontrol.com/news/business/ipo/affle-india-raises-rs-206-cr-from-anchor-investors-4254141.html”

    2. Meaning of “The Rs 459-crore initial public offer (IPO) was subscribed a whopping 86.48 times last week. The quota limit for QIBs was subscribed 55.31 times, NII 198.69 times and retail 10.94 times. The issue had received approximately 2,96,561 applications across all investor segments. At the issue price, the stock was available at a P/E multiple of 38.9 times FY19 consolidated earnings. The company has no listed peers.” in this announcement – “https://economictimes.indiatimes.com/markets/stocks/news/affle-india-lists-at-25-premium-over-issue-price/articleshow/70581903.cms”

    • Karthik Rangappa says:

      1) This means the company is issuing fresh equity to the extent of 4953020 shares for the purpose of the IPO. This is fresh issue, meaning there is equity dilution
      2) The means that the IPO was in demand, they were highly subscribed. The demand was for 1 share there were 87 bids.

  144. Arvinder Singh says:

    Thank you so much Karthik.
    Both of the my doubts were from Affle India IPO. Was it a 90 cr or 459 cr IPO?? (Its written a fresh issue aggregating up to Rs 90 crore)
    1. In my first doubt – Do the companies decide X number of shares to make public or upto X? In this case its upto X, how will they decide the number of shares to make public?

    2. In the second one – what does “the stock was available at a P/E multiple of 38.9 times FY19 consolidated earnings” mean?

    • Karthik Rangappa says:

      Affle was a 450Cr IPO.

      1) This is a call that the company takes after consulting with its board
      2) P/E is price to earnings multiple. This means the price is 38.9 times more than the earnings. For example, if the earnings of the company is Rs.10, then at 38.9 PE, the stock price is close to 389. You can look at it this way, for every 1 Rupee of earning, you are paying 38.9 price.

  145. Rahul Sharma says:

    Great explanation in all modules.
    How can I know total listed shares at the time of IPO and how much are present outstanding shares(do they left unbought or subscribed).Can I know what is the present delivered or bought quantity so that one can know what is the present volume left or can also club with some technical indicator to view the stock momentum?

  146. Renuka Isaran says:

    Great material, just want to know one thing, why study material in app and in web different ?
    Thanks in advance.

  147. Robin Sethi says:

    1. In case of oversubscription, how is allotment done? Is it pro-rata or lottery ?
    2. How to check IPO valuation? As in the price band given is overvalued or undervalued?

    • Karthik Rangappa says:

      1) It is on a lottery basis for retail traders
      2) Depends on the price band. You will have to do an analysis or you can read various opinions and develop your own perspective on this.

  148. Robin Sethi says:

    Thank You!

  149. Syam says:

    Today 17.03.2020 1AM, there are 442 comments. What does it mean?
    Total 442 comments including queries and replays? or just only queries?

  150. Akshay says:

    Great material.
    I have one doubt. what is the difference between the issue price, face value and listing price?

    Also, when we say that share is issued at a premium, do we mean that the issue price > Face value or Listing price > Issue price?

    Thanks in advance.

    • Karthik Rangappa says:

      Issue price/Listing = IPO price of the stock
      Face value = Notional value attributed to the stock. This is useful for all corporate action.
      Premium is when the stock price debuts at a higher price than the listing price.

  151. Shradha says:

    This piece is so well written and explained.Great job honestly!

    Could you please elaborate further on the green-shoe option?


  152. Akshay says:

    Thanks but a little confused.

    According to you, issue price and listing price are the same. According to the below lines from your text, listing price depends on market demand and supply of the stock. And we know that issue price depends on the maximum bids at a price. So, plz clear this confusion?

    Listing Day – This is the day when the company actually gets listed on the stock exchange. The listing price is the price decided based on market demand and supply on that day and the stock is listed at a premium, par or discount of the cut-off price.

    • Karthik Rangappa says:

      Ah, Akshay Sorry for the confusion. Some of these terms are interchangeably used, especially in a casual conversational context. Please go with what’s written in the article.

  153. Rahul Singh says:

    Green Shoe Option – Part of the underwriting agreement which allows the issuer to authorize additional shares (typically 15 percent) to be distributed in the event of oversubscription. This is also called the overallotment option.
    shouldn’t it be in the event of undersubscription?

    • Karthik Rangappa says:

      Actually, it is a price stabilization mechanism. Post-IPO if the price falls, the underwriters can buy more.

  154. Karthik Palaniappan says:

    Hey, Hi there, Varsity is really super cool stuff with simple words, and it is totally helping me to understand the things,jargons crystal clear way than before. Thanks Team Zerodha.
    In the above chapter( The IPO Market – Part 2), Can you explain further about Green Shoe Option? Underwriting Shares is done by merchant banker, if I’m not wrong. do they have the authority to increase the authorise shares of a company by 15% under SEBI? I couldn’t understand that part clearly?
    You also said that merchant banker will but the underwrite shares, they buy it or they will own the shares instead of fee?
    In case over subscription how do the merchant banker could buy the underwrite shares?
    I don’t whether I’m asking the correct question. I apologize if the question is stuid.


    • Karthik Rangappa says:

      Green Shoe option is a price stability mechanism. Post IPO, if the price drops significantly, then the underwriters are obligated to can buy more shares from the secondary market to stabilize the price.

  155. Mayank says:

    Dear Karthik,
    I am confused with the working of primary market and Closure. Who is suppose to bid in primary market?
    and can a retail invester say having a rading account with HDFC or anyone can buy the shares in primary market?

  156. Aditya says:

    1. Suppose a company issues IPO in 2001, @ issue price of 100 rs. 10 yrs later the share price went upto 1000rs , so what is the advantage for the company for prices going up?
    2. In case of oversubscription why can’t the company go for pro-rata allotment?
    3. When the company is issuing 10% dividend will it issue on:
    10%* number of shares held* 100 ( in the above example) ?

    • Karthik Rangappa says:

      1) The networth of the shareholders would have gone up, creating wealth for the investors
      2) That process does not exist
      3) It will issue based on the face value of the share

  157. Aditya says:

    Thanks for the reply sir👆
    Net worth of shareholders would have gone up but , what is advantage for the company . Could you pls explain

    • Karthik Rangappa says:

      No advantage as such. Just that the company would have created great amounts of wealth to its shareholders.

  158. Mrinal says:

    Hi Kartik,
    I have a question regarding the book building process.

    What is the requirement of a bidding situation during book building ?
    If a company is offering a price band (let’s say between 100 to 150), wouldn’t everyone bid for 100 ?! As it is the lowest amount in the price band and their is a natural tendency to always want a deal at the lowest cost possible ?

    What makes people bid for a price higher than the lower cap of the price band ?

  159. Mrinal says:

    Thanks for the reply Kartik !!

    So you mean, that the bidders on whose price the issue gets listed, are allotted their shares before the company enters secondary market ?
    Please help me with understanding this clearly.

    • Karthik Rangappa says:

      The price range is set up, so bidders bid within the range. Yes, shares are allotted before the company starts to trade in the secondary market.

  160. Mrinal says:

    Okay. Understood. Thanks a tonne for the prompt replies ! Much appreciated and grateful.

  161. ishan thakur says:

    what do you mean by “series b”?

  162. Mahesh K T says:

    how can we analysis the book building process in IPO??

    • Karthik Rangappa says:

      Nothing much the analyze here, Mahesh. Oversubscription = high demand for the IPO, so mostly listing gains. No listing gains otherwise.

  163. Abhishek Anand says:

    Loved the way, everything has been written in such a simple and easy to understand ways. Thanks so much, Karthik!

  164. Aishwarya says:

    Hey Kartik! amazing content. The explanation has been done in layman’s terms. Although I have a doubt.
    1) who decides the cut off price? the stock exchange or the merchant banker?
    2) the cut off price is the final price of the share in the primary market right?

    • Karthik Rangappa says:

      1) Merchant banker, based on the company’s valuation
      2) Yes, the price band within which the shares can be listed

  165. Aniruddha Chourasia says:

    Is issue price and cut-off price the same?

    • Karthik Rangappa says:

      Issue price is the price at which the stock is issued. Cut off is the upper price of the price band.

  166. Aniruddha Chourasia says:

    That means issue price is the price at which the stock gets listed!?

    • Karthik Rangappa says:

      Yes, as soon as it hits the market, it may trade higher or lower based on the demand.

  167. Shashank Pendyala says:

    Few questions even after reading some comments.
    1. Suppose cut off price was decided to be 118 as per above. Since stock was in demand, listing price is 150. Now this increase happened during Day 1 early trade (9 – 9.07 AM) where there was surge in demand and at 9.15 the price showed up was 150. Right?
    2. In some comments I read, once company is public, price of stocks will not give any direct cash inflow to the company but if needed company can avail loan from banks having these shares as collateral, so price matters right?
    3. As per above, For a oversubscribed IPO, chances of an IPO allotment is maximum when you issue for 1 lot i.e. person who issues 10 lots has less chance than former?
    4. If Point 3 is true, then during IPO will there only be retail investors? Because there may be even other investors then how the shares will be allotted (I mean who gets the preference?) since cut off price is same for all.

    Please answer in same numbered way to avoid confusion. 🙂

    • Karthik Rangappa says:

      1) Yes, possible.
      2) As and when the price increases, the networth of the investors and promoters increase, so they reap the benefits of higher networth
      3) Not sure about this, but I do tend to agree with you
      4) There are different categories of application – retail, institutional, preferential etc. The retail price can be at a small discount.

  168. Vivek Kaplingat says:

    Hello Karthik. I must first thank you for building such a wonderful and a simplistic resource for helping anyone get started with the stock market. Thank you very much.

    Here are my questions:
    1. In the IPO process, marketing the IPO (i.e., the ‘IPO roadshow’) is done before fixing a price band. So, is the roadshow just spreading the news that the company is going public, or is it also disclosing the details of share prices, its values, etc. (which doesn’t make sense)?
    2. During book building, although the bidding is done to come to a desirable market price (for the secondary market), isn’t there a possibilty that these institutional investors could subscribe to a majority, if not all, of the remaining authorised shares and leave very less for the public?

    Thanks again, Kartik.

    • Karthik Rangappa says:

      Thanks for the kind words 🙂

      1) The roadshow is basically a pitch to sell the IPO to institutional investors. It is always good to have strong institutional money invested in the company
      2) SEBI mandates the minimum number of public holding. Companies should comply with this.

  169. Vivek Kaplingat says:

    The reason why I’m asking the second question is because, in the example for under subscription, although “the company wants to offer 100,000 shares to the public. During the book-building process, it is discovered that only 90,000 bids were received” – doesn’t that mean only 10,000 shares are left for the public? Why not list a price without consulting these investors?

  170. Jeeson says:

    Hi Karthik, from our story, PE invested in series C, right? It is mentioned in section 5.2 as ‘The last valuation of these shares when the PE firm invested in Series B was 64Crs.’ Shouldn’t it be Series C? Am I confused?

    • Karthik Rangappa says:

      No, it should be Series C. Anyway, don’t bother too much about the nuances, the objective is to get the flow right.

  171. Rahul Singh Devda says:

    Hello Karthik you are really doing a great job by providing this knowledge publicly that to at free of cost. I came to know about Varsity when i opened my Zerodha account. I found this platform perfect for building the base which will really help us in learning and growing further.

    Thanks alot to you and your team 🙂

    Keep it up !!

  172. Prajwal J says:

    Hey guys, I’m really confused between choosing the Varsity mobile application and the website for learning as some of the information on the website seems to be missing on the mobile application but the mobile application seems to be an updated version. Please help me pick one

    • Karthik Rangappa says:

      The content is largely the same, Prajwal. Web had the advantage of the comments section while mobile is so much more reader-friendly. It is hard to select one over the other 🙂

  173. charanaraja g says:

    I need description on answer for a question ” HDFC AMC filed an IPO with 25457555 shares on offer with a price band of 1095 to 1100 per share. What is the approximate size of the issue, in INR crs?

  174. Amith says:

    Hey Karthik,

    I can’t say this enough, amazing content. You drive the points home clearly. I love the way this entire module is designed, so simple and effective.
    Amazing work. Kudos to you.

    However can you update the content such as India’s latest IPO’s as the data being displayed right now is 6 years old.

    Thank you for the amazing content. Cheers 🙂

    • Karthik Rangappa says:

      Amit, the idea of the content here was to provide an overview of the concept and not really work as a data source. That would be hard to do 🙂

  175. vinay says:

    hi,if i got alloted the shares in the ipo,can i sell the minute it listed in the stock exchange, or there is any lock in period.

  176. Swati says:


    I have just started reading Zerodha Varsity and am absolutely loving it … The explanations are so simple and easy to understand.

  177. Jaipal says:

    1.What is the difference between face value and price range?
    2. When they say minimum order for 27 shares, do they mean 27× price range or 27× face value?

    • Karthik Rangappa says:

      1) They are not connected, FV is the nominal value of the share and price range is the arrange within which the stock fluctuates.
      2) Minimum of 27 * price.

  178. anmol sharma says:

    what is the benefit of esop in Pvt ltd company?
    can you please elaborate on green shoes options?

    • Karthik Rangappa says:

      ESOP in any company is a way of rewarding the employees for the hard work they do. Employees benefit when the shares are listed. Greenshoe options I’ve explained in the module itself.

  179. Prince Gandhi says:

    Can a company eliminate the merchant banker and manage all the process required for an IPO by themselves?

    • Karthik Rangappa says:

      Nope, the job of the company is to focus on its core operations right? They are better off doing that as a business and let the merchant bankers do theirs.

  180. Arun says:

    How does Over allotment happens ? Is it taken from promoters share or somebody else’s shares ?

  181. Navpreet says:

    Hi Karthik,

    First of all, thanks for providing such a great resource to people free of cost.

    I’m a beginner actually. So, Could you please help me with the procedure that I should follow while carrying out Fundamental analysis. What things/aspects should i look into. What are the sources of that info. How to understand those things and project them into future to decide to buy or not.

  182. Nagarajan says:

    Thanks for helping beginners with wonderful resources..
    Its just a suggestion for novice readers like me.. I am seeing lot of scenarios/Questions in comments section which is very helpful. I feel if there is some LIKE button for the questions and sorting comments based on number of LIKES then it would help me ( all ) to get all info’s without scrolling a lot of comments.

  183. Chandu says:

    Sir price band means lower band and upper band for ex 100 and 130 the public should apply for 100 or 130, and what is cutoff price.. Is it the price at which stock get listed.. And closure is decided by stock exchange not the company
    Am I correct sir

  184. aarti says:

    sir can the shares of a company ever be floated in the primary market without an underwriter taking a guarantee for them? as in if the company wishes to reduce its cost of listing

  185. Chinmay says:

    If I read all the varsity topics will i be ready to invest and make profits? AND
    Can you suggest some more information to be gone through before investing?

  186. Prince Kumar says:

    What happens to Promoters, Angels, VCs and PEs, if they don’t exit at the time of IPO? Where do they falls in the shareholding pattern details?

  187. Chinmay says:

    Karthik can you please explain what do you actually mean by “understading the market”

  188. Sujit says:

    “The listing price will depend on how people perceive the stock. For example in the recent Snowman Logistic IPO, the issue price was fixed around 45 but once it debuted on the exchange the price went up all the way to 75.” Karthik i have a question about this. Like on which platform can we bid. Like how can we buy the shares even before its listed. Where do we do this? Secondly, the website you had put up in the comments section(nse india) to look at ipos is no longer available karthik. Can you please name another website. Thirdly, where do i go through the DRHP? Amazing content. Super simplified. Thanks a ton ❤️

    • Karthik Rangappa says:

      1) Investing in unisted securities is not possible (easily) for retail, Sujit. You will have to buy only during IPO. Your broker should have the facility for you to bid for IPOs. If you are with Zerodha, then check this – https://zerodha.com/ipo/
      2) Check the link posted above
      3) Easiest is to google the company name + DHRP 🙂

  189. Sujit says:

    Thank you, Karthik😇

  190. Sujit says:

    One more thing, can we get notified when you reply to our comment because i have to scroll all the way down. Like we have to give our mail id right so can we get notified on our mails. Thank you and regards!

    • Karthik Rangappa says:

      Unfortunately, you will keep getting notified for all further comments, which can be annoying 🙂

  191. Franklin Loyola says:

    Hii Sir,
    Who and all can bid on issue date
    I mean in primary market??
    And also please tell what really underwriting shares means or what does underwriters do??

    • Karthik Rangappa says:

      Everybody can bid, Franklin. Underwriters are the people who help in taking the company public i.e. from primary to secondary.

  192. Ameya Deshmukh says:

    In the case of oversubscription, is time the main factor (i.e., first come, first serve) or the number of shares bid by an individual used for an allotment?

  193. Pawan says:

    Why those value of share rises? If people are willing to buy share at higher rate then who will increase the value of share and why?

    • Karthik Rangappa says:

      That’s the nature of the markets, Pawan. At any given point there are buyers and sellers whose actions impact the share price, and the share prices moves.

  194. Shreyas Taware says:

    Is it the case that the content in Varsity app and on the website have significant differences?

  195. Yaduvardhan Bansal says:

    what is the condition for where SEBI regulates the IPO market and has the final word??

  196. amit says:

    what about the subscribers who have underbid the price ?

  197. shashi says:

    hello karthik i just loved the way you explain these topic in very simple manner.my doubt was suppose xyz companies registered with ipo then where do xyz will get their bid and the bit which bid gets decides the shares will be allocated to those people and rest bid people , what’s happen with them . and the most important thing to take away as investor from this topic.

  198. Sergio guera says:

    How bidding process takes place in primary market , like what is the predefined procedure investors have to follow to bid a particular number of shares.

    • Karthik Rangappa says:

      The process involves you to apply for shares at the cut off price. That is considered your bid.

  199. Raj says:

    Hi Karthik, is it possible for a listed company to have zero promoter holdings (100% public holdings)? Does it mean the promoters have exited after listing?

    • Karthik Rangappa says:

      Yeah, there are companies that are run by the board, in which case the board is the promoter. I think ITC is an example.

  200. Himanshu Wagh says:

    Dear Sir,
    1) If the cut off price is decided @ 130 in the price band of 125-135 and one of the applicants had bid at 132, then will the company allot shares to him?
    if the answer is yes then what will happen Rupees 2 (132-130), will it be refunded or the company will keep that 2 rupees?
    2) Is it compulsory for the company to keep cut off price at highest bid price. Because it can be possible that the company has to face the problem of under subscription if the company keeps the highest bid price.
    Exemplifying Question 2
    Price Band 125-135
    Number of Shares: 1000
    Bidding Scenario
    Rupees 132- 100 bids
    Rupees 130- 600 bids
    Rupees 127- 500 bids
    As the company has received the highest number of bids at 130 it will be considered as the cut off price. But if it keeps cut off price at that level then it will have to face the problem of under subscription as the total acceptable share will be 700 shares only.

    • Mohit Mehra says:

      Hi Himanshu,

      1. Yes, the applicant who has applied at Rs. 132 will get an allotment at Rs. 130. The additional Rs. 2 will be released to the investor.
      2. Its not compulsory for the company to issue shares at the highest price. Let’s take a scenario when it won’t.
      Price band – 125 to 135
      Number of shares offered – 1000
      Rs. 132 – 100
      Rs. 130 – 600
      Rs. 128 – 200
      Rs. 127 – 100
      Rs. 126 – 500

      The company may keep the cut-off as 128 or 127, to get 90% or 100% subscription respectively. In most cases, the issue is underwritten for any portion above 90% subscription which the merchant banker will take up. If the company sets 130 as the cut-off, the issue would have failed at 70% subscription unless they have it underwritten to that extent. In a failed issue, funds will be released back to the applicants.

  201. Priyanka says:


  202. Monika singh says:

    Very nice way to explain sir .
    But I have confusion about underwriters and green shoe option so I request please help me to understand

  203. Monika singh says:

    Problem solved sir, but very thanks for your response.

  204. Raghu says:

    Hey, I am relatively new but I have a doubt here.

    At present, the company has 8,00,000 shares and the company went to IPO and offered 1,00,000 shares to the public (Secondary market). So, the public bought these shares at 125/- and the company received the amount they want.
    1) Now in the open market, if the share value increased to 145/- will the company gets any amount from the increase in each share value ??
    2) In the open market, it’s all about buying or selling those 8,00,000 shares only right. they cant increase the shares until any of the promoters/ VC/ PE sell his shares in the market?

    Please clarify if anything is wrong (pardon my grammar)

  205. Owais says:

    How long one investor should hold the lot?

  206. Kratik Jain says:

    ….. and the stock is listed at a premium, par or discount of the cut-off price.
    (I didn’t got this, section 5.4 last paragraph)

    • Karthik Rangappa says:

      Basically it indicates the difference between the cut off price and the price at which it actually gets traded.

  207. Sunil Kumar A says:

    Hi Karthik, With the IPO the company would have got the money that they are expecting.
    Further with the increase/decrease in the share price in open market, how the company be impacted ?? Will they lose/Gain anything with the price movements ?

  208. Sunil Kumar A says:

    Hi Karthik, With the IPO the company would have got the money that they are expecting.
    Further with the increase/decrease in the share price in open market, how the company be impacted ??
    Will they lose/Gain anything with the price movements ?

    • Karthik Rangappa says:

      Increase/decrease will only change the shareholder wealth post the IPO, nothing else.

  209. Vivek Karthik says:

    Hey Mr. Karthik! Thanks for putting together this quality content for free.
    My Doubt – In case the CAPEX of the company is Rs. 2000 and the number of shares to be issued for IPO is 200 and the nature of the IPO is a fixed price IPO (at Rs. 10). Lets say, the company is oblivious to the market sentiment (for the sake of driving my point across) and that the market sentiment is pretty positive. Now if the merchant bankers underwrite all the shares for Rs. 10 and make sure the shares aren’t oversubscribed (for the sake of driving my point across) and when the stocks get traded, the shares sell for Rs. 100.

    Now my question is – Are merchant bankers legally obligated to inform that the companies can anticipate a much better equity capital or are they just required to meet the CAPEX needs?

  210. slw287r says:

    when market price raises in secondary market because of traders, will the company gets any profit in this ?

  211. Shafeer Hameed says:

    Sorry to ask to below stupid question but hope you can clarify.

    Assume company A issue 1000 shares with face value of INR 100.
    Company A can get fund of INR 100,000( 100*1000) – assume there might be some charges deducted.
    Down the line 5 years assume face value increase to 300 and share value on secondary market increase to 600.
    Question is does the Company A get any benefit from share trading in share market after 5 years.
    If not who will be beneficiary of this difference in amount..just end customer who hold the shares.
    Kindly do not neglect this question.

    • Karthik Rangappa says:

      I guess the question you want to ask is will the company benefit if the share value increases in the secondary market. No, it does not have a direct benefit. However, with the increase in share value, the share holder’s wealth increases.

  212. Shafeer Hameed says:

    Ignore my question as you answered similar question a while ago.

  213. Jaya prakash says:

    Can’t get this point sir,

    For the sake of simplicity, let us assume the company is now valuing the 16% shares anywhere between 125 Crs to 150 Crs. This translates to a per-share value, anywhere between Rs.1562 to Rs.1875/-…(125Crs/8lakh).

    • Karthik Rangappa says:

      Jaya, we have discussed these points several times in the query section. Request you to please check the same. Thansk.

  214. Jaya prakash says:

    okey, sure sir

  215. Pranav Mishra says:

    Hi! Great resource. Thanks so much. I just had a small doubt. In section 5.4, in the point ‘Closure’, it says that ‘the price point at which the issue gets listed is decided. This price point is usually the price at which maximum bids have been received.’ Is this price point listing price or the cutoff price? If it is cutoff
    price then how is listing price determined? Could you please differentiate between issue price, cutoff price and listing price?
    Also how come some IPOs which were oversubscribed list at discount? Thanks.

  216. S. CHOPRA says:

    Hello sir, thanks for your great efforts.

    I have a question regarding IPO allotment probability calculation.
    Suppose, there are 1 lakhs lot available for retail investors in an IPO and the applications received are 20 lakhs (assuming 1 lot is applied for in each application). Now I have made application for 1 lot. Then the probability of me receiving allotment is 1/20 or 5%. But suppose I have made 4 applications from different accounts (different PAN Cards).
    Then what is the probabilty of me receiving –
    1- One lot
    2- At least one lot
    3- Two lots
    4 – At least two lots
    5- Three lots
    6- At least three lots
    7-All four lots .

    It would be greatly helpful if you can briefly help me understand these calculations.

    • Karthik Rangappa says:

      This is a fairly complicated calculation and the exact math is available with the RTAs. However, higher the number of applicants (friends and family), higher is the probability of allotment 🙂

  217. Karthik Palaniappan says:

    I have doubt in computerized lottery allotment of IPO, whether the lottery is carried on a list of PAN card number or based on the demat accounts from different brokers?

    I’m subscribing for Zomato IPO through Zerodha and Groww, using same PAN, will my probability of allotment increases or is it same?

    Thanks in Advance!

    • Karthik Rangappa says:

      I guess its PAN-based, hence people usually apply across different family members to enhance the odds of getting allotted.

  218. Subramanian says:

    Hello Karthick,

    Can you please explain how this Green shoe option works? What is the advantages and disadvantages for the company to choose this option.

  219. Dr. Uday Kumar says:

    Hi, I congratulate you on the wonderful and very lucid explanation!

    Could you please also explain the difference between a ‘Rights issue’ and IPO please?

    Thank you

    • Karthik Rangappa says:

      IPO is a fresh issue, Rights issue is raising funds from the existing investors. We have content around this in this module.

  220. Geeta says:

    From whose quota is the additional 15% shares allowed to be distributed in case of an oversubscription?

  221. ruchita chandrakant rathod says:

    please elaborate more about Green Shoe Option either with example or something.

  222. Shubh says:

    What is mean by bids… Where i can read details about bids

  223. Shubh says:

    1 how they decide the cut off Price

    2 if company’s no. Of shares going to over.. Company will split shares… Is it true statement.

    Thank you

  224. Sricharan says:

    Can you please add the next chapter hyperlink. Else we have to go back and select the next chapter. Which will be easy for page navigation. Thanks in advance.

  225. Kartik Chandna says:

    You mentioned that one of the advantage for filing for IPO is that the promoter is actually spreading his risk amongst a large group of people. I didn’t get what you meant by this? How is this an advantage because the promotor’s shares will remain constant, so his risk will remain same. If in case, he has sold some of this shares, then his risk will reduce and that is an advantage. But, in the above case, you mentioned that risk will spread after filing for IPO and that is an advantage, can you please explain that?

    • Karthik Rangappa says:

      Risk in terms of who controls the company. Having a large investor base (with minor shareholdings) is better compared to having few investors who control the large position of your company.

  226. Vipul shah says:

    This is my registered email id with zerodha. My PAN no. AACPS5354F is linked with my zerodha account. Whenever I check my ipo allotment I get d revert PAN not found. Kindly solve the issue as soon as possible.
    Image has been attached for your reference.

  227. Ayush Kumar says:

    Hello Sir,
    I liked the content but since this content is about 7 years old,can it be used for the present time?
    I mean since we are in 2021 and this content is pretty old,can I use this knowledge to start my journey now?

  228. krutuparna says:

    hi karthik sir,
    I am a CA student and intrested to learn abt investing,the content is really worth reading, so lucid and easy representation of comlex concepts and we have an option to ask any doubt, really well.
    sir I request you to please throw some light on green shoe option, I know how it works (actually I learnt it from other platforms) but for the deep understanding of others it will be a good idea.
    keep posting such worthy content.

    • Karthik Rangappa says:

      Krutuparana, we have discussed quite a bit on that in the comments section, can you check that once? Also, do post the link of other platforms from where you learnt so that others can benefit as well.

  229. Satya Prakash says:

    Really an amazing way of writing, explaining and providing content.

  230. Satya Prakash says:

    Amazing way of delivering content and it’s discriptions.

  231. Gunjit Mittal says:

    What happens when a company just overprices its stock value (even the lower bound ) too much. For ex. in this case (cotton t-shirts industry) instead of pricing them between Rs.1562 to Rs.1875/- the company prices them arbitrarily like between 15000/- to 17000/-. And there is just not enough sale as no one is comfortable with such a high price and back off??

  232. Chandra says:

    What is the answer for ” why did they not file for the IPO when they were in Series A, B and C situation ? ” which you said at the end of 4th chapter that will be explained in the next chapter.

    • Karthik Rangappa says:

      It’s because the valuations were not good enough for the IPO. Anyway, I’d suggest you concentrate on just the flow of events and not the specifics 🙂

  233. Pushkar says:

    Whose shares do the employees get from the “Employee Stock Plan Option”?

  234. Rupam says:

    What is the purpose of bidding in the primary market? Isn’t it the same as buying the shares from the secondary market?

    • Karthik Rangappa says:

      The price at which you buy is known in the primary market (bid price), but the same price can be very different (higher in case of oversubscription) when you try and buy it from the secondary market.

  235. TEJVEER SINGH says:

    Hey Kartik, thank you for the valuable content
    I had one question, what if the initial shareholders deny to give their shares?

  236. Kritika says:

    While going through the test I came across this question-
    HDFC AMC filed for an IPO with 25,457,555 shares on offer with a price band of Rs.1095 to Rs.1100 per share. What is the approximate size of the issue, in INR Crs?
    Can anyone tell how to solve this?

    • Karthik Rangappa says:

      IPO size = Number of shares * the share price. When you consider both the share prices, you will get the range of the size.

  237. Kritika says:

    While going through test I came across this question-
    HDFC AMC filed for an IPO with 25,457,555 shares on offer with a price band of Rs.1095 to Rs.1100 per share. What is the approximate size of the issue, in INR Crs?
    Can anyone tell how to solve this?

  238. Aman says:

    A big thanks to the Zerodha Team for creating this great content.I’m loving it 🙂
    Here are the questions:
    1.Will the underwriter buy shares only if the IPO is undersubscribed?
    2.Where can the underwriter sell those shares-on stock market or in an off market deal?
    3.In case of oversubscription,will all the subscribers who bid equal or greater than the bidding price ,get the min. lot of shares or can they miss out?
    4.I know that listing price and issued price can be different but are issued price and bidding price the same thing?
    4.Suppose the company wants to sell 1000 shares nd the price range is 80-100 nd the bidding goes like this:
    800 shares are bid for 100
    200 for 97
    then in this case what will be the issued price?

    • Karthik Rangappa says:

      1) Depends on the scheme of arrangements with the underwriters
      2) Stock market
      3) Allotment is not certain
      4) Nope, bid price is the price at which you’ve applied, which can be different than the bid price.
      5) Its mostly in the range of 100

  239. Abdul Raheem K says:

    Thank you for the awesome content.
    I had a doubt in calculating the returns part. While the time period is less than 1 year, we use the absolute method and scale up it linearly to get on an annual basis. But when the time period is more than 1 year, CAGR is used. Why don’t we simply use the absolute method and scale down linearly to get on an annual basis?
    Sorry if the question is a foolish one. Thanks in advance

    • Karthik Rangappa says:

      Abdul, that will give flawed results. If its more than 1 year, we look at the growth rate.

  240. Rohit says:

    First of all, amazing content.

    I think there is a minor typo. Just want to bring it to your notice. Right before the section on Merchant Bankers, there is a paragraph that reads as follows:
    “Do recollect that the company still has 16% of authorized capital translating to 800,000 shares which are not allotted. The last valuation of these shares when the PE firm invested in Series B was 64Crs. The company has progressed really well ever since the PE firm has invested and naturally the valuation of these shares would have gone up.”
    Should it not read “The last valuation of these shares when the PE firm invested in Series C (and not Series B) was 64Crs”.

    • Karthik Rangappa says:

      Perhpase, let me correct that. But ROhit, as I have pointed out in the comments, this entire thing is fictional, created with the purpose of illustrating how the chain of events work in the event of an IPO. Dont read too much into the specifics.

  241. Vinayaka Prabhu says:

    Say xyz company listed in market today.
    It has 10Lakh shares at 1000Rs each. = total 10Cr Rs valuation.

    when does xyz company get this money, and how much?
    XYZ company basically came to Stock market to fulfil its fund requirement right.

    elobarating my Question.
    XYZ company listed say for ex : Rs100. in exchange ,on day 1 itself it started trading at 90Rs.
    How much and When money would company have received funds after listing on Exchange?
    Thank you team Zerodha

  242. Vinayaka Prabhu says:

    Can a foreign company file for an IPO in India?
    Answer was : Its Indian subsidiary can – for example Glaxo, Nestle, Bosch etc.

    Say Nestle In its origin country is listed in their stock market. It has issued shares there. It took their investors money in their country to expand to India.
    So profits should also be distributed there to their invetors in original country right?
    How can Nestle issue shares in its Indian subsidaries to then?

    elobarating my Question.
    Infosys is listed in Indian Market.
    I invested in infosys stock.
    Infosys is now thinking of expansion say in XYZ country. (It took our money to expand in that country right)
    Can Infosys create a new subsidary and issue shares there? (Its will be loss of my profit right)
    Thank you team Zerodha

    • Karthik Rangappa says:

      So Nestle India will pay royalties to its parent company. YOu can check the annual report of any such company and you will notice either royalties paid to the parent company or share to the parent company paid.

  243. Vinayaka Prabhu says:

    Why does the company and its management care about their share price after the IPO when they have already recieved the capex?
    So, does it mean company gets money only 1 time during IPO and then its waste in terms of companies point of view? other than promoters wealth change.
    why do companyies try to split stock or buy back shares then, it has already gotten its share of money right?

    And who is liable to get Dividend ? (If I own 1 share today and sell tomorrow, will I be liable to get dividend? if company decided to pay dividend)
    Thank you team Zerodha

    • Karthik Rangappa says:

      Once the shares are listed, the wealth of all shareholders, including the promoters, is now tied to that share price. The higher the share price, the higher the wealth for the shareholders. That’s why the share price matters. Share split increases the number of shares in circulation just to ensure more investors invest in the stock. The dividend is paid to all shareholders as on the record date. I have explained this later in the module.

  244. Lifetime Learner says:

    Issue Size mentions the units as ‘Lakh Shares’. However I think the numbers mentioned are absolute number of shares and we don’t need to multiple 10^5.

    Thanks for such lucid and free dissemination of financial knowledge

  245. Dhiraj Chandra says:

    It’s really a nicely elaborated material on stock market learnings.
    Have a request, can you please mention some reference/books on the same to get more detailed knowledge.

  246. venkatesh says:

    is book building period and date of issue period same or not

  247. venkatesh says:

    1. Also when the company is listed, do the shares of the promoters etc also become available to public to buy(of course if the promoter bids to sell). i mean are their shares in demat form in nse,bse or in paper form
    2.Do the promoters just recieve part of profit for their shares and some relative executive power

  248. Jay says:

    Hi sir,
    I have question like during IPO, if a company over subscribed and for suppose some user bids for it less than cut off price of that IPO means will that user entry also considered for lucky draw for the allotment of shares process.

  249. gokulkrishnan says:

    who is deciding the number of shares to be in the ipo

  250. Rama says:

    What is the purpose of providing early exit to the investors?

    • Karthik Rangappa says:

      You make real wealth only when you exit an investment; else, it’s national wealth. IPO provides an opportunity to exit and creates wealth (assuming its a good IPO).

  251. Alan says:

    Hi Karthick,
    How does the price band revision happen while the bidding process is open?
    If the offer is already oversubscribed can the company raise the price band or is revision allowed only to reduce the price band as the company forecast an under-subscription analyzing the demands on the first or second day?
    Also are there any instances of price band revisions in the Indian capital market?

    • Karthik Rangappa says:

      I have only seen price band revisions when an IPO is undersubscribed. In all of these, the lower price is reduced further. But let me check this again for oversubscription cases.

  252. Nikita says:

    What is a lot size?

  253. manoj kumar says:

    Hello Karthik
    thanks for wonderful writing , earlier i have posted a few question but i have not got the reply to them
    request if you could you reply to this question
    my question is :
    in the Balance sheet the Share holder equity = no of outstanding shares * Face value of share
    but in the IPO market the company gets the amount per on the basis of it subscription value
    so where is the difference amount accounted ?
    like , if the face value is Rs 10 and subscription value is Rs 100 , then where is the Rs 90 accounted ?

    • Karthik Rangappa says:

      Shareholder equity = Reserves + Surplus+Equity share capital. The difference amount is stated in the ‘Security Premium Reserve’, in balance sheet.

  254. Bharath K says:

    Check if my understanding is correct. Primary market is the source for the company to raise money. Once the bidding process is over and the price is fixed ,whoever offered the price ( also less than that) would get their shares alloted. This could be FII,DII,Retail Investors. This way the company raises funds from IPO. Once the IPO is over then it enters the secondary market in which the stocks are traded on a day to day basis.

    if this understanding is correct ,then do explain me how the transition between primary market and secondary market happens.

    • Karthik Rangappa says:

      Thats correct, Bharath (but I’m not sure what you means by whoever offered the price, less than that). The transition is an exchange process, from the day it transitions, the stocks will start trading in the market and anyone can buy and sell.

  255. Sarvesh says:

    Do companies always provide a final prospectus before listing their securities on the stock exchange? If not, is it advisable to invest in their shares based solely on the DRHP they provide to the public?

  256. Deepan Chakraborty says:

    Hello Kartik,
    Great initiative and content !!
    I have one doubt- During the listing day, the bidding process is already closed. So how does the company know if its shares are in high demand, so they change the listing price? or is it just looking at whether the IPOs are over, under, or fairly subscribed that the listing price is decided? Is there any other way of knowing the demand of the market on the listing day?

    • Karthik Rangappa says:

      Deepan, basically, the subscription rate gives you a sense of how hot the issue is. If the subscription is beyond 100%, you know there is quite a bit of demand for the stock and you can expect a bumper issues.

  257. Lakshman says:

    Can anyone explain greenshoe option clearly

  258. Akshat Jain says:

    This is the content which I have been Looking & researching for last 3 Months. I have read few books over the knowledge of the Market but I haven’t found such content from the scratch. I appreciate that you provide such valuable content and depth of content is amazing.

  259. Alok sharma says:

    Is IPO size equals to CAPEX or are these different terms?

    • Karthik Rangappa says:

      It can be a very different number than this, Alok. As explained, there could be multiple reasons for IPO.

  260. Swayanshu Mallick says:

    Hey, I completed this chapter and got a few questions…

    1. What exactly are underwriting shares?
    2. How to know the threshold value?
    3. Is closure the opening price on the listing day?
    4. What is the listing price and how does it differ from the opening price?
    5. Can you explain the ‘Green Shoe Option’ with an example?

    • Karthik Rangappa says:

      1) Underwritig is ensuring that the merchant banker subscribes for the shares provided the shares are not fully subscribed
      2) Threshold in the context of?
      3) Not necessary
      4) This, I think is explained in the chapter

  261. Saurab says:

    Hi Karthik,
    Great explanation, thanks for the content. I have the following questions:
    Q1. Existing company shareholders– promoters, angel investors, venture capitalists, or PE funds can exit the company once the company files for IPO. Can the existing shareholders exit the company even when it is privately held? If ‘yes’, how and to whom they are going to sell shares?
    Q2. Similarly, can the employees sell their ESOPs even when the company is privately held? If ‘yes’, how and to whom they are going to sell their ESOPs?

    • Karthik Rangappa says:

      1) Yes, they can. And they can sell it to people interested in investing in the company.
      2) Yes, they can too, provided the ESOPS are vested and the company has no issues in such secondary sales.

  262. Saurab says:

    Okay…thanks a lot Karthik!

  263. Himanshu says:

    I am learning a lot from this complete resource. Thank you so much for sharing and keeping it free.

  264. Rakesh K says:

    All investor money is unblocked in the investors’ accounts.
    Not able to understand above statement mentioned in 5.2 Merchant bankers.

  265. Alok says:

    Hello Karthik,

    Woah! Did not expect so many comments about the Green Shoe option. I can totally understand your frustration 🙂 For some additional context its so called because of the successful IPO of the Green Shoe company (now called Stride Rite) where this was clause, also called the over-allotment clause, was first used by the merchant bankers.

    It would be useful if you can answer the questions by Piyush (the lead merchant banker has option to buy 15% stake of promotors for 15 days and sell it to the public and the process goes on like this) & Vikas (normally the Merchant banker creates short positions upto 15%) in the comments. They are probably in the SEBI DIP Guidelines.

    Would be useful if you can cite the SEBI or other normal references which discuss this in more detail.
    see: https://www.sebi.gov.in/sebi_data/attachdocs/1289796570043.pdf pg.194 under CHAPTER VIII-A

  266. Alok says:

    It sure would!

  267. Raveena says:

    Reopening this forum – Thanks to the author for really informative content in simplified language. Have a question on IPO – If an IPO is directly listed on stock exchange, how is it different from the IPO first floated in primary market and then listed on secondary market?

    • Karthik Rangappa says:

      When a compnay intends to list and solicits bids for its IPO, that activity is considered to happen in the ‘Primary market’. Once the company lists, its in the secondary market.

  268. Vishal Shroff says:

    Query: Why are there multiple BRLM ? How are the responsibilities divided between these ?

    Comment: Point 2) US companies generally issuer RSU( Restricted Stock Units) and not ESOPs as mentioned.

  269. yashwanth says:

    based on what reasons does sebi nod yes to an ipo, does it feels that this company will make profits in future as well?

  270. Chirag says:

    Hi Karthik

    Appreciate your swift response and drive for sharing valuable knowledge. I have ambiguity for below points.

    1. When a Venture Capitalist (VC) becomes part of a company, how is their ownership stake (share %) determined? How does this impact the ownership of Angel investors?

    2. In the event that an organization goes public through the primary market, how is the number of shares offered and the specific price range determined?

    3. Could you pls explain how the ownership distribution changes for Angel investors, Venture Capitalists (VCs), and Private Equity (PE) investors after the company’s initial public offering (IPO)?

    • Karthik Rangappa says:

      1) This depends on the quantum of money invested by the VC. Lets say a company is valued at 1000 Rupees. If a VC invests 100/-, then the VC own 10% of the company.

      2) Depends on how much money the company wants to liquidate.

      3) Again, it depends on the valuation of the company and the kind of investments they have made in the company.

  271. bagad billa says:

    Life is a simulation, and this comment is a test.

  272. vanshaj says:

    how is the subscription and threshold decided ?

  273. vanshaj says:

    what is par , premium and dicount?

  274. Snandan Sharma says:

    Hey! My question is that whether or not Stock Exchanges [BSE,NSE] play any part in the IPO Process like the way they do in secondary markets OR IPO process is, as we say, a direct* transaction between Company & Public Only.

  275. Nandkishor C says:

    Hello teeam,
    Thanks for the nice article. One doubt though, how does a company ensure that a price after the listing will not go erratic?

  276. Myilvendhan says:

    Sir, ..I have read the fundamental analysis chapter ,… I didn’t get a clear idea about how to read a DRHP sheet before buying an ipo….
    Is there any chapter for that ,, can u guide me

  277. Daksh Agarwal says:

    Sorry, I am new to finance and might be asking a silly doubt, but can someone please explain the following paragraph in simple words? (Preferably with the help of an example)

    “Underwriting shares – In underwriting shares, merchant bankers agree to take up the unsubscribed portion of an IPO. The underwriting is taken up for fresh shares issued during the IPO. The merchant banker takes up the remaining shares if the subscription is above a defined threshold but is not subscribed fully. If the subscription is below the threshold, the IPO is deemed to have failed. All investor money is unblocked in the investors’ accounts. In March 2020, Anthony Waste Limited IPO’s subscription was below the threshold.”

    • Karthik Rangappa says:

      It mainly means how many shares were subscibred by the investors, Daksh. For an IPO to do well, all the shares on offer should be lapped up by investors, else it would not be a very successful IPO in terms of fund raise by the company.

  278. Daksh Agarwal says:

    Thank you very much sir……:)

  279. Skfss says:

    How can we know,the percentage of company that has been liquidated and being issued as shares ?

  280. Mahesh says:

    This page is outdated, would be helpful if you share recent examples of IPOs to explain the terms like over subscription, Failed IPO’s etc..

  281. Bharath Patel says:

    Thank Karthik, Prateek, and the entire varsity team.

    The content is helpful and easy to understand. Kudos to Pratik, for the presentation and the visuals.

    I have one query, What is the impact of secondary market transactions on the company that went public?

    If the IPO/primary market transaction is over, the company gets the amount, then whether the stocks shoot up or plummet, it will NOT have any impact on the company. Am I correct?

    • Karthik Rangappa says:

      The price at which the stock gets traded is what determines the networth of shareholders. This is one of the biggest impacts. Also, operationally stock price movement does not matter for the company, but it does impact the sentiment of the shareholders and people working at the company:)

  282. Amrita Tripathi says:

    Sir where does the process of book building and closure happens!? As in on which platform price for the shares get fixed!?

  283. Amrita Tripathi says:

    Where does book building process happens!?

  284. Franklin says:

    1.merchant bankers agree to take up the unsubscribed portion of an IPO,take up the remaining shares-does that mean they will buy those shares?
    2.investor money is unblocked in the investors’ accounts,unblocked means credited or debited?
    3.How does the price band for IPO works,what price will the public apply for , won’t they always go for the lowest price in the price band,is it common that the lowest price among the price band gets the max bidding?

    4.In ‘Green Shoe Option or overallotment option’ how are additional shares distributed in case of oversubscription,is it distributed as bonus/free shares,or how does it work?

    • Karthik Rangappa says:

      1) Yes
      2) Unblock = money is released or freed up in your account.
      3) In most IPOs ppl bid at the highest rate to ensure allotment of shares.
      4) Lottery based, as far as I understand.

  285. Franklin Loyola says:

    3.in case the lower price among the price range gets selected,people who bid for the higher price gets the balance unblocked in their accounts,right?
    4.Sir,how does the lottery based distribution work?

    • Karthik Rangappa says:

      1) Yes, that is right.
      2) Just as any lottery system would work – based on the individual’s luck 🙂

  286. Prashant says:

    If a company wants to go public, it only applies to SEBI? Doesn’t it apply at BSE/NSE as well? And one more silly question, after an IPO is mandatory to get listed in a stock exchange?

    • Karthik Rangappa says:

      Company has to comply mainly with SEBI and exchange norms, and yes, mandatory to be on exchange.

  287. Prashant says:

    Thanks a ton Sir !

  288. Udit Pandey says:

    is block deal make changes in price of stock in secondary market? if yes so after how much time it takes to record in secondary market

    • Karthik Rangappa says:

      Not really, block and bulk deals are off market and does not really impact the prices.

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