--- title: "IPOs and New Listings | RupeeCase Learn" description: "IPO mechanics, book building, cut-off price, grey market premium, lock-in periods, and what the evidence says about IPO performance in Indian markets." source_url: "https://www.rupeecase.com/learn/path-6/module-6-2-ipos-new-listings" --- Skip to main content [Learn](/learn)›[Path 6: Product Universe](/learn/path-6)›Module 6.2 # IPOs and New Listings Every IPO cycle brings a wave of excitement | and a wave of investors who don't understand what they're actually participating in. This module covers how IPOs work and what the data says about investing in them. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · QC Alpha ⏱ 13 min read ⟳ Updated 14 Jun 2026 ◆ Intermediate Between 2020 and 2022, India saw a record IPO boom. Paytm, Zomato, Nykaa, Delhivery, LIC | hundreds of companies listed. Retail investors poured billions into IPO subscriptions. The grey market premium (GMP) became a household number. And then many of these listings underperformed dramatically. Understanding IPOs isn't just interesting | it's directly relevant for systematic investors because new listings eventually enter the Nifty 500 universe. Knowing how the IPO process works, what drives pricing, and what the evidence says about post-listing performance changes how you think about newly listed stocks in your strategy universe. Indian IPO market scale and the retail pain trade 342 Mainboard IPOs, 2020 to 2024 NSE plus BSE listings 167000 Cr raised in 2024 Prime Database estimate 75 Pct QIB quota mandated SEBI ICDR profitable issue 53 Pct IPOs below issue in 12M 2020 to 2023 cohort SEBI ICDR NSE BSE NSDL ASBA ## How the book building process works Almost all mainboard IPOs in India use the **book building** method. Here's the process step by step: 1 Price band announced The company and its merchant bankers set a price band | e.g., ₹875 to ₹920. The lower end is the floor price, the upper end is the cap price. Bidders can bid at any price within the band or at the cut-off price. 2 Subscription window (3 days) The IPO is open for 3 days. Investors bid via their demat-linked bank account (ASBA | Application Supported by Blocked Amount). QIBs, NIIs, and retail investors each have reserved quotas. 3 Cut-off price determined After the window closes, the company determines the final issue price at or below the cap price, based on the demand curve built from all bids. Most retail investors bid at "cut-off price" | they'll accept whatever final price is set. 4 Allotment If oversubscribed, allotment is by lottery for retail (minimum lot basis). Pro-rata for QIBs. ASBA ensures the money was only blocked, not deducted | so money is returned if you don't get allotment. 5 Listing on NSE/BSE Typically 6 trading days after close of subscription. Listing price determined by pre-open session. Promoter, pre-IPO investor, and anchor investor shares have lock-in periods before they can be sold. [SEBI ICDR Regulations | governing IPO process in India](https://www.sebi.gov.in/legal/regulations/aug-2009/sebi-issue-of-capital-and-disclosure-requirements-regulations-2009_13973.html) Book building process: T minus 14 days to listing day T minus 7 RHP + price band SEBI approved, anchor list Day 1 to 3 Subscription via ASBA Money blocked, not debited T plus 1 Allotment Lottery retail, pro-rata QIB T plus 3 Demat credit NSDL or CDSL T plus 6 Listing on NSE BSE Pre open discovery price ## The investor categories and their quotas 75% QIB quota (Qualified Institutional Buyers | FIIs, mutual funds, insurance companies) 15% NII quota (Non-Institutional Investors | HNIs bidding above ₹2L) 10% Retail quota (Individual investors bidding up to ₹2L per IPO) 6 days Typical time from subscription close to listing on NSE/BSE Where the shares go: profitable IPO quota split under SEBI ICDR QIB non anchor (MF, insurance, FII)50% Anchor investors (pre day 1)25% NII / HNI (above 2 lakh)15% Retail (up to 2 lakh)10% Retail gets 10 percent. If retail oversubscribes 50x in a hot IPO, maximum 1 in 50 applicants gets 1 lot. The odds of meaningful retail wealth creation from IPO allotments alone is structurally poor. ## Grey market premium (GMP) | what it is and isn't The grey market is an unofficial, unregulated market where IPO shares are bought and sold before listing. The grey market premium (GMP) is the price at which allotted shares trade in this unofficial market above the IPO price. If an IPO is priced at ₹500 and the GMP is ₹150, shares are changing hands at ₹650 in the grey market. GMP is widely followed by retail investors as a predictor of listing gains. It's often self-fulfilling | high GMP creates excitement that drives listing day buying. But it's an unreliable signal for long-term investors because: * GMP reflects short-term speculative demand, not fundamental value * It can change dramatically in the days before listing based on market conditions * Grey market participants are often HNI/NII applicants who want to flip allotted shares quickly | their motivation is day-one gain, not multi-year ownership **GMP is not investment advice.** Many IPOs with high GMP on day one have significantly underperformed over 12 to 24 months. Don't confuse listing day speculation with investment merit. ## Lock-in periods and the overhang problem After a company lists, not all shares are immediately tradeable. SEBI mandates lock-in periods: * **Promoters:** 18 months for minimum promoter contribution (20% of post-issue capital); 6 months for the rest * **Pre-IPO investors (PE/VC):** 6 months post-listing * **Anchor investors:** 30 days for 50% of their allocation, 90 days for the rest When lock-ins expire, large volumes of shares held by promoters and institutional investors can come to market | this is called the **lock-in expiry overhang**. It's one reason why many IPOs face selling pressure 6 months after listing. **For systematic investors:** Be aware that a stock newly added to the Nifty 500 may have a lock-in expiry approaching. A factor screen that selects this stock might face headwinds from institutional selling around the lock-in expiry date. Big Indian IPOs: 24 month return vs issue price Paytm (issued Nov 2021) -63% LIC (issued May 2022) -27% Nykaa (issued Nov 2021) -38% Zomato (issued Jul 2021) +22% Mankind Pharma (issued May 2023) +68% Tata Tech (issued Nov 2023) +38% Approximate returns 24 months after issue date, excluding dividends. Listing day pop is not the same as investment return. The Nifty 500 TRI rose 48 percent over the same broad window. ## What the evidence says about IPO performance The academic and empirical evidence on IPO investing is fairly consistent globally and in India: * **Short-term (listing day):** On average, IPOs generate positive listing day returns | this is the "IPO underpricing" phenomenon documented by Ritter (1991) and others. But allotment is often low in oversubscribed IPOs, so the actual dollar gain for retail investors is small. * **Medium-term (1 to 3 years):** IPOs significantly underperform secondary market benchmarks on average. The long-run underperformance of IPOs is one of the most robust findings in finance | true in the US, UK, and Indian markets. * **Why:** IPOs are issued when companies (and their investment bankers) believe conditions are favourable | often at market peaks. The information asymmetry between issuer and investor is at its maximum. The "hot IPO market" phenomenon (2021 in India) typically precedes a period of poor performance for the cohort. IPOs and the RupeeCase universe RupeeCase factor strategies operate on the **Nifty 500 universe**. A newly listed company doesn't enter this universe until it meets size and trading history requirements for Nifty 500 inclusion. This provides a natural filter | by the time a company enters the RupeeCase universe, it has at least several months of trading history and its lock-in overhang has largely passed. The recency bias that makes retail investors over-allocate to hot IPOs doesn't affect systematic strategies built on Nifty 500. Access the full universe at [invest.rupeecase.com](https://invest.rupeecase.com). TK | What I learnt from the Paytm IPO In October 2021 I remember having the price band argument with 3 different friends. Everyone said Paytm at 2150 is a once in a decade chance to own a fintech super app. Grey market premium was climbing, anchor book was who's who. I did not apply. Not because I had some magic model. Because the post money valuation made zero sense versus any SaaS comparable I could pull on a professional terminal. 2 days later it listed at minus 9 percent. 24 months later it was 63 percent below issue. The lesson was not Paytm specific. The lesson was: when the QIB anchor book and the grey market are both screaming and retail has 10 percent quota, retail is the exit liquidity. Since then I have a simple rule. Wait 6 months after listing, wait for the first post IPO annual report, let the lock in overhang clear, then let the Nifty 500 screen decide. The IPO excitement tax is the most expensive tax in Indian equity. ## Glossary Key terms | Module 6.2 Book buildingPrice discovery mechanism where investors bid within a price band; the final issue price is set based on demand from bids received. Standard for mainboard IPOs in India. Cut-off priceThe final issue price set by the company after the subscription window. Retail investors who bid "cut-off" accept whatever price is determined. ASBAApplication Supported by Blocked Amount | the mechanism where IPO application money is blocked (not debited) until allotment. Unallotted money is automatically unblocked. GMPGrey Market Premium | the price at which IPO shares trade in the unofficial pre-listing market, above the IPO price. Not a reliable indicator of long-term performance. Lock-in periodThe mandatory period after listing during which promoters, pre-IPO investors, and anchor investors cannot sell their shares. IPO underperformanceThe well-documented tendency for IPOs to underperform secondary market benchmarks over 1 to 3 year horizons after listing, despite positive listing day returns on average. TK A note from the author Why this matters IPOs are where excitement meets asymmetric information. The Indian IPO market has its own rhythm | from SEBI's pricing regulations to the grey market premium culture | and understanding this machinery helps you separate genuine opportunities from hype. I wrote this so you can evaluate new listings with the same rigour you would apply to any systematic investment decision. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · 17 years systematic trading · QC Alpha RC **Want to put this into practice?** RupeeCase is the systematic investing terminal built around everything you're learning here, factor scores, strategy backtests, portfolio construction for Indian markets. [Explore the terminal →](https://invest.rupeecase.com) #### Sources & further reading * → [SEBI ICDR Regulations 2018](https://www.sebi.gov.in/legal/regulations/aug-2009/sebi-issue-of-capital-and-disclosure-requirements-regulations-2009_13973.html) * → [NSE India | IPO Information](https://www.nseindia.com/ipo/content/ipoInfo.htm) * → Ritter, J. (1991). The Long-run Performance of Initial Public Offerings. Journal of Finance. * → [NISM Series X-A | Investment Adviser (IPO chapter)](https://www.nism.ac.in/resources/study-material/) ### Quick check, Module 6.2 0 correct · 0 answered ✓ Module complete! Next module unlocked. 🎉 Module 6.2 complete 3 correct. Continue to Module 6.3 when ready. 🎓 Spread the knowledge This course is free. Help someone else learn about IPOs and New Listings, share it with one person who needs this. 📋 Suggested LinkedIn post, copy & paste Just completed Module 6.2 of Tanmay Kurtkoti's free investing course on RupeeCase. Learning about IPOs and New Listings. Completely free at rupeecase.com/learn Copy text Share on X Post on LinkedIn Copy link RupeeCase Terminal Put this into practice Factor strategies, backtesting, portfolio analytics, systematic investing for Indian markets. [Try RupeeCase Terminal →](https://invest.rupeecase.com) Research Lab Qualifier Path 6, Module 2 of 9 done, complete all 9 + path test to unlock [Explore terminal →](https://invest.rupeecase.com) ✅ 6.1 Equity → 📍 6.2 IPOs → 6.3 Mutual Funds → 6.4 ETFs → 6.5 → 6.9 [← Previous](module-6-1-equity-shares-structure-rights-corporate-actions.html) Previous, Module 6.1 Equity Shares Structure Rights Corporate Actions Calculator ### Retail IPO Allotment Probability Indian IPO retail allotment is via lottery when oversubscribed. Each application gets one chance regardless of bid size; multiple applications in the same family help. Retail subscription multipleNumber of family applicationsLot value (INR) Quick check, Module 6.2 ## 3 questions. Get 2 right to mark this module complete. 0 of 3 answered ✓ Module complete. Keep going. Up next, Module 6.3 Mutual Funds | Structure, Types and Hidden Costs AMC structure, NAV calculation, direct vs regular plans, expense ratio drag over 20 years, and SEBI's 2018 recategorisation. [Continue →](module-6-3-mutual-funds-structure-types-costs.html) PRACTICE WHAT YOU LEARNED Try systematic strategies on RupeeCase | free paper trading. 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