How Does an IPO Work? | Fortune Wealth Academy

How Does an IPO Work? | Fortune Wealth Academy

The IPO process begins with the filing of the Draft Red Herring Prospectus (DRHP).

Ends with the listing of the stock on the stock exchanges.

Major steps include: determining issue size, setting a price band, marketing the issue, pricing, and allotment.

Appoint Book Running Lead Managers (BRLMs)—typically investment banks.

BRLMs handle DRHP filing, coordination with SEBI, and strategic planning.

After DRHP approval, planning begins: pricing strategy, investor outreach, and marketing.

Company files the Draft Red Herring Prospectus with SEBI.

After SEBI’s approval, BRLMs move ahead with:

Printing forms

Planning marketing campaigns

Gauging investor interest

Tailored outreach for:

HNIs & Institutions: through roadshows in cities like New York, London, Singapore

Retail Investors: via broker networks, media, and ads

Purpose: create demand and visibility across investor segments.

IPO price range is set after demand assessment.

A balance is struck:

Attract investor interest

Leave some upside for listing gains

Happens while the issue is open for subscription.

BRLMs monitor demand and work to build oversubscription.

Final price is discovered based on investor bids—often at the upper end of the price band.

Listing is marked by the bell-ringing ceremony on the exchange.

Once listed, the stock begins trading in the secondary market.

Post-listing performance affects the reputation of the company and BRLMs.

Includes brokers, sub-brokers, agents, and distributors.

Operate on commission but are essential to build retail investor demand.

Examples: Karvy, In-Time.

Roles include:

Allotment of shares

Transferring shares to investor DP accounts

Generating MIS reports for the company and BRLMs

Ensures legal compliance and manages regulatory documentation.

Prevents future issues with SEBI or stock exchanges.