What is IPO Cycle? Complete Process,
Stages & Timeline (2026 Guide)

Bonvista Financial Services Pvt. Ltd.

24 Sep, 2026

The term IPO frequently dominates financial headlines, especially when well-known companies like Zomato, Paytm, or LIC announce plans to "go public." While most investors know that an IPO offers a chance to buy shares of a growing company, fewer understand the complex mechanism driving it behind the scenes.

What exactly is an IPO, and what does the entire IPO cycle look like from the boardroom to the stock exchange? Let us break it down into straightforward, practical language.

What is an IPO Cycle? (Quick Definition)

An IPO cycle is the end-to-end regulatory and operational journey a private company undertakes to list its shares on a stock exchange for public trading. The cycle starts with internal board approvals, hiring merchant bankers, and filing the Draft Red Herring Prospectus (DRHP) with SEBI. It moves through investor roadshows and a 3-day bidding window, concluding with share allotment and listing on stock exchanges like the NSE and BSE under the standardized T+3 timeline.

What is an IPO?

IPO stands for Initial Public Offering.

It is the formal financial process through which an unlisted, privately owned firm sells a portion of its shares to institutional and retail investors for the first time. By doing so, the business transitions from a privately held entity into a publicly listed enterprise.

For companies, it is a proven way to raise massive growth capital without taking on high-interest loans. For investors, it represents an opportunity to participate in a company's equity growth from its earliest public trading days.

Why Do Companies Choose to Go Public?

A private business typically launches an IPO for one or more of the following strategic reasons:

Raising Growth Capital: To fund large-scale expansions, open new facilities, or invest in research and development.
Debt Reduction: To repay existing bank loans and eliminate balance-sheet debt, saving significantly on interest costs.
Providing an Exit for Early Investors: To allow venture capital (VC) funds, private equity (PE) partners, or founding team members to sell their stakes through an Offer for Sale (OFS).
Boosting Brand Visibility & Trust: Publicly listed companies face rigorous disclosure norms, which naturally enhances their credibility among customers, suppliers, and lenders.
Currency for Acquisitions: Listed shares can be used as currency to acquire other businesses or offer attractive Employee Stock Ownership Plans (ESOPs).

The Step-by-Step Stages of the IPO Cycle

The IPO cycle is a heavily regulated, multi-month undertaking. In India, it moves through several distinct phases under the oversight of market regulator SEBI.

Board Decision ──> Hire Bankers ──> DRHP to SEBI ──> Roadshows & RHP ──> Public Bidding ──> Allotment (T+1) ──> Listing (T+3)

1. The Decision to Go Public

The journey begins in the boardroom. Top management and the board of directors evaluate whether the company is ready for public scrutiny, financial transparency, and quarterly earnings pressures. Once approved, the business begins restructuring its internal accounting to align with public compliance requirements.

2. Appointing Merchant Bankers and Underwriters

The company selects Book Running Lead Managers (BRLMs), also known as merchant bankers or underwriters. These financial experts manage the logistics of the issue, help determine the price band, handle legal requirements, and ensure the shares find institutional buyers.

3. Due Diligence and Drafting the DRHP

The bankers and legal teams conduct exhaustive audits of the company's financial history, operational risks, litigations, and management background.

All this information is compiled into a detailed legal filing called the Draft Red Herring Prospectus (DRHP). This document explains the company's business model, revenue streams, operational risks, and exactly how the raised funds will be deployed.

4. SEBI Scrutiny and In-Principle Approvals

The DRHP is submitted to the Securities and Exchange Board of India (SEBI) and made public for at least 21 days for review. SEBI reviews the filings thoroughly to protect retail investor interests. If the regulator flags discrepancies, the company must provide clarifications. Once cleared, SEBI issues its observation letter, and stock exchanges (NSE and BSE) provide in-principle approval.

5. Roadshows, Price Band, and the Final RHP

Once cleared, the management team conducts "roadshows" to present the business to institutional investors (Mutual Funds, Foreign Institutional Investors, Insurance Funds).

The company then announces the price band (floor price and cap price), fixes the issue dates, and files the updated Red Herring Prospectus (RHP) with the Registrar of Companies (RoC).

6. The Public Bidding Window

The IPO officially opens for bidding, typically lasting 3 working days. Investors apply through their stock brokers or net banking portals using ASBA (Application Supported by Blocked Amount) or a UPI mandate.

Important note on investor safety: During the bidding phase, money does not immediately leave your bank account. Instead, the bid amount is temporarily blocked (lien marked). Funds are only debited if you are successfully allotted shares.

7. Share Allotment and Refunds

Once the issue closes, the registrar (such as Link Intime or KFintech) finalizes the Basis of Allotment.

If oversubscribed: A computerized lottery system allocates shares fairly among retail categories.
If you receive allotment: The corresponding amount is deducted from your bank, and the shares are credited directly into your Demat account (CDSL or NSDL).
If you do not receive allotment: The lien on your bank account is released, and your funds are instantly unblocked.

8. Official Stock Exchange Listing

The final milestone of the cycle is Listing Day. The company rings the bell at the exchange, shares undergo a 45-minute price discovery call auction, and secondary market trading commences at 10:00 AM on the NSE and BSE. At this point, the IPO cycle is complete.

The Modern Indian IPO Timeline: The SEBI T+3 Cycle

In India, SEBI has made the T+3 listing timeline standard practice for all mainboard and SME offerings. Here, T denotes the issue closing date:

Day T (Issue Closes): Bidding closes for retail, HNI, and QIB investors at 5:00 PM.
Day T+1 (Basis of Allotment): The registrar finalizes the allotment status and resolves UPI mandate mismatches.
Day T+2 (Funds Unblocked & Demat Credit): Bank mandates for unsuccessful applicants are unblocked, and shares are credited to successful bidders' Demat accounts.
Day T+3 (Listing Day): Shares officially debut and trade on the stock exchanges.

Stage	Phase	Key Actions & Responsibilities	Timeline
Stage 1	Pre-Issue	Board approval, financial restructuring, appointing merchant bankers	6 to 12 months before
Stage 2	Regulatory Review	Filing DRHP with SEBI; resolving observations and public comments	2 to 4 months before
Stage 3	Marketing	Investor roadshows, establishing the price band, filing final RHP	2 to 3 weeks before
Stage 4	Bidding (T)	Issue opens for 3 days; applications placed via ASBA / UPI	3 trading days
Stage 5	Allotment (T+1 to T+2)	Finalizing share allotment; unblocking non-allotted bank funds	1 to 2 days after close
Stage 6	Listing (T+3)	Shares credited to Demat; active trading begins on NSE & BSE	3rd day after close

What Every Investor Should Review Before Applying

An IPO generates plenty of buzz, but going public does not guarantee future profitability. Before blocking funds in any new issue, keep these fundamentals in mind:

Offer for Sale (OFS) vs. Fresh Issue: Check whether the company is raising fresh funds for future business expansion or if existing promoters are simply offloading their personal stakes.
Promoter Integrity and Track Record: Strong, transparent corporate leadership is critical for navigating post-listing market scrutiny.
Valuation Multiples: Compare the company's Price-to-Earnings (P/E) ratio against established listed peers in the same industry to determine if the issue is overpriced.
Subscription Levels: Monitor Qualified Institutional Buyer (QIB) demand on days 2 and 3; institutional interest is a reliable indicator of professional market conviction.

Frequently Asked Questions (FAQs)

Q1: How long does the entire IPO cycle take?

The full cycle from boardroom approval and DRHP drafting to the listing bell typically takes 6 to 12 months. However, the public-facing phase, from the price band announcement to stock listing, takes roughly 2 to 3 weeks, with the final subscription-to-listing window completing in just 3 working days (T+3).

Q2: What is the main difference between a DRHP and an RHP?

The DRHP (Draft Red Herring Prospectus) is an initial document submitted to SEBI for regulatory checks; it deliberately excludes the share price and the exact opening dates. The RHP (Red Herring Prospectus) is the finalized, approved prospectus that includes the complete price band, issue dates, and updated financial disclosures right before public bidding begins.

Q3: What happens if an IPO fails to get enough bids?

Under SEBI regulations, an issue must achieve a minimum subscription threshold of 90% of the net offer. If an IPO fails to cross this minimum requirement, the entire cycle is canceled, and all blocked application funds must be released back to investors immediately.

Q4: Can retail investors lose money on an IPO?

Yes. An IPO can list at a discount to its issue price if broader market conditions sour or if the issue was aggressively overvalued. Retail investors should evaluate companies based on sustainable business models rather than relying purely on short-term listing gains.

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Disclaimer: This article is for educational and informational purposes only and does not constitute financial or investment advice. Investors should consult with their certified financial planner or wealth manager before making any investment decisions. Mutual fund and gold investments are subject to market risks.

Mr. Unmesh Deshmukh

Founder & Director, Bonvista Financial Services | AMFI ARN: 136656

With over 24 years of elite experience in the financial services industry, Unmesh is a seasoned investment expert. He acts with a strict fiduciary mindset, leveraging data-backed strategies to help individuals and families create sustainable, generational wealth.