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IPO listing is a procedure by which shares offered in an initial public offering are admitted for trading on designated stock exchanges.
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IPO listing is a process by which the shares of a private company are listed on the stock exchange so that they can be publicly traded. After listing, any stock market investor can buy or sell these shares through a stock broker.
IPO listing is the final step in the IPO process. It occurs after the IPO shares have been allocated and credited to the investor's demat account. The issuing company decides on which stock exchange to list the IPO shares. A mainboard IPO can be listed on one or both stock exchanges, i.e., the NSE and the BSE, while a SME IPO can be listed on only one stock exchange.
An IPO is an offering on the primary market. However, once the issuing company's shares are listed on the exchange(s), they become part of the secondary market.
IPO Listing Date is the date on which a company's shares are admitted to trading on a recognized stock exchange. It is the first day on which investors can buy/sell shares of that company on the stock exchanges.
The IPO listing date is tentatively scheduled for six* business days after the closing date of the IPO. Once the Company determines the final listing date, it is announced through a notice on the Exchange's website. An investor can find the IPO listing date and details at Chittorgarh.com .
* Note: Effective December 1, 2023, the listing timeline for all public issues will be reduced to three working days post the issue closure.
The IPO listing is a process through which shares of a company get onboard on stock exchanges for public trading. Listing occurs toward the end of the IPO process.
An issuing company must go through several steps (known as IPO process ) before it is listed on the stock exchange.
The listing day begins with an IPO listing ceremony. The listing of the IPO takes place with the opening of the market at 9:00 a.m. on the listing day. The trading session on the listing day is divided into two parts, Pre-Open Session and Regular Session.
For better price discovery, exchanges conduct a special pre-open session for IPO shares on the day of listing (first trading day only). The duration of the Pre-Open Session is one hour from 9:00 am to 10:00 am. The Pre-Open Session is conducted in three parts:
Equilibrium price
IPO Shares Pre-Open Session Equilibrium price is the price at which total demand equals total supply.
To handle the difference in equilibrium price at BSE and NSE for an IPO share, exchanges take common equilibrium price (CEP) to derive the Listing Price. For example, If BSE's equilibrium price is at ₹120 each for 300 shares and the NSE's is at ₹100 each for 500 shares, the CEP will be the average of the two. [(120*300+100*500)/800 = ₹107.50].
Further, the lower and upper price band on both exchanges would be 5 per cent around the CEP (₹107.50). So, the CEP would be the volume-weighted average of equilibrium prices on individual exchanges as determined by the call auction.
IPO Listing Pre-Open Session Activities
|
Duration |
Session |
|---|---|
|
9:00 AM - 9:45 AM |
For entering, changing and canceling orders. |
|
9:45 AM - 9:55 AM |
For order matching and trade confirmation. |
|
9:55 AM - 10:00 AM |
Buffer time for transition from pre-open session to regular session (normal trading session). |
Steps to buy/sell IPO shares in pre-open market on the day of listing
Let us take a simple example to understand the pre-market order execution if the lPO gets listed at Rs 510.
Pre-market order execution example
|
Buy/Sell |
Limit Order Price |
Order Gets Executed (Y/N) |
|---|---|---|
|
Buy |
505 |
N |
|
Buy |
510 |
Y |
|
Buy |
515 |
Y (@ 510) |
|
Sell |
505 |
Y (@ 510) |
|
Sell |
510 |
Y |
|
Sell |
515 |
N |
Note: The above is a simple example to clarify the limit order execution based on price. The extent of order execution depends on the demand and supply of shares.
Pre-Open IPO shares trading rules
The regular session is the normal trading session in which IPO shares are traded like any other stock. Based on the stock's listing price, the stock exchange sets an upper and lower price range
The IPO listing price is the opening price of the IPO share on the day of listing. The listing price determination takes place in the Pre-Open Session within the 10-minute window from 9:45 a.m. to 9:55 a.m. Although there are no circuit limits in the Pre-Open Session to facilitate price discovery, there is generally a 25% floor and a 75% ceiling (based on some recent IPOs). However, it can be more than that.
Stock exchanges set a circuit limit (upper and lower limits) for IPO stocks on the day of listing to control sudden price movements. The circuit limit is a percentage of the listing price set by the exchange in the pre-opening session. Below are the rules for setting a price limit for IPO shares:
When listing an IPO, stock exchanges also specify the listing group of the stock along with other listing details such as ISIN, BSE and NSE codes. The listing group of the stock determines the mode of settlement and also whether intra-day trading is allowed for these stocks or not.
The newly listed companies are categorized according to their issue volume. Both the NSE and the BSE have their own group codes or series to identify the listing group of the stock.
The newly listed BSE equity stocks get classified into A,B or T groups as per below
|
BSE Group Code |
Basis of grouping |
Settlement Type |
Intraday Trading Allowed |
|---|---|---|---|
|
A |
Market capitalization of Rs. 1 lakh crore and more |
Rolling |
Yes |
|
B |
Issue size more than Rs. 250 crores |
Rolling |
Yes |
|
T |
Issue size up to Rs. 250 crores |
Trade for trade |
No |
The investment trusts viz. REIT (Real Estate Investment Trust) and InvIT (Infrastructure Investment Trust) get listed in 'IF' group.
NSE groupings are known as NSE series. The newly listed IPO stocks are classified into EQ and BE series as per below.
|
NSE Series |
Basis of grouping |
Settlement Type |
Intraday Trading Allowed |
|---|---|---|---|
|
EQ |
Issue size more than Rs. 250 crores |
Rolling |
Yes |
|
BE |
Issue size upto Rs. 250 crores |
Trade for trade |
No |
Investment Trusts (InvIT) NSE Listing Groups
|
Exchange |
Security |
Series/Group |
Segment |
|---|---|---|---|
|
NSE |
InvITs |
IV |
Rolling |
|
NSE |
InvITs |
ID |
Trade for Trade |
|
NSE |
REITs |
RR |
Rolling |
|
NSE |
REITs |
RT |
Trade for Trade |
Points to note:
|
IPO Listing Price |
IPO Current Price |
|---|---|
|
The price at which the IPO opens for trading on the day of listing. Exchange determines the listing price as equilibrium price based on the demand and supply of IPO shares in Pre-Open session. |
The price at which the stock trades in the normal trading window after listing. |
|
The listing price is announced on the day of listing. |
The current price is the market price of the share, which changes constantly during trading sessions. |
|
Issue Price |
Listing Price |
|
|---|---|---|
|
Meaning |
The price at which a company sells its stock. |
The opening price of the share on the listing day. |
|
Pricing factor |
An issuer sets the issue price based on various factors such as company valuation and company prospects. |
Stock exchanges set the listing price based on orders in the pre-open market trading session for IPO. |
|
Announcement |
Announced before the start of the subscription period. |
Announced at 9:55 am on the day of listing. |
The IPO listing price is the price set by the exchange based on orders in pre-open trading session for an IPO. Trading in the IPO shares begins at 10 a.m. on the day of listing at the listing price. The listing price is also referred to as the opening price of an IPO share on the day of listing.
The listing in an IPO is the phase in which the IPO shares are admitted to trading on the stock exchange. Once the shares are listed on the stock exchange, the company is available for public trading and becomes part of the secondary market.
Listing is the final step of the IPO process. The entire IPO process can take anywhere from 6 months to several years. The listing of an IPO takes place six* business days after the end of the subscription period for the IPO.
Note: *The listing timelines will reduce to three business days from 1st December 2023.
IPO listing is the process by which the shares of the privately held company are admitted on stock exchanges for public trading for the first time through Initial Public Offer (IPO).
In order to be listed on the stock exchange, a company must meet certain eligibility criteria as per the guidelines of the NSE and BSE. Once the listing is completed, the company's shares become available for public trading.
A mainboard IPO is listed on the NSE and BSE. A SME IPO may be listed on one of the SME platforms of the NSE or BSE known as NSE Emerge or BSE SME.
The IPO listing date is the date on which the IPO shares are admitted on the exchange for public to trade them.
The IPO Listing Date is *six business days after the IPO Closing Date. For example, if an IPO closes on April 6, 2023, the listing date is April 18, 2023 (considering weekends, April 7 and April 14 as holidays).
For IPO investors who apply in an IPO for listing day gain or sell their IPO application in grey market, the IPO listing date is an important date.
The exchanges conduct a special one-hour trading session, called the pre-open session, to allow for better pricing of IPO shares. This session begins at 9 a.m. and ends at 10 a.m. on the day of listing.
*Note: It is mandatory for all public issues opening on or after 1st December 2023 to reduce the listing timeline to three business days of issue closure. The issues opening on or after 1st September 2023 have an voluntary option in reference to timeline reduction.
The IPO listing takes place at 9:00 a.m. on the listing day with a listing ceremony. The exchanges conduct a special one-hour trading session, called the pre-open session between 9 a.m. to 10 a.m. for newly listed IPO shares. The regular trading in IPO shares starts at 10 a.m.
On the IPO listing day, there will be one-hour pre-open session from 9:00 a.m. to 10:00 a.m. followed by normal trading.
|
Session |
Duration |
Detail |
|---|---|---|
|
Order Placement Session |
9:00 AM - 9:45 AM |
For entering, changing and canceling orders in IPO shares. |
|
Order Matching and Execution Session |
9:45 AM - 9:55 AM |
For order matching and trade confirmation. |
|
Buffer Period |
9:55 AM - 10:00 AM |
Buffer time for transition from pre-open session to regular session. |
|
Regular Trading Session |
10:00 AM onwards |
Normal trading session starts. |
An IPO is listed at 9:00 a.m. on the day of listing.
A one-hour pre-open trading session will be held from 9:00 a.m. to 10:00 a.m. on the day of listing. Normal trading for the IPO shares will begin at 10:00 a.m. on the day of listing.
Price fixing will take place during the pre-open session. An investor cannot place market orders during the pre-open session.
Stock exchanges set the listing price of IPO shares on the day they are admitted to trading. To determine the listing price, the exchanges conduct a special one-hour trading session (pre-open trading session). The pre-open trading session takes place between 9:00 and 10:00 a.m. in three parts. At 10:00 a.m., the exchanges announce the listing price, and upper and lower limits are also set in order to control the price movement on the first day.
In pre-open trading sessions, exchanges collect buy and sell orders in the first 45 minutes. Based on these orders, an equilibrium price is determined, i.e., the price at which most orders match. This price is called the listing price. The orders that meet the price criteria are executed in pre-open trading session at 9:45 a.m., and the remaining orders are moved to the regular trading session, which starts at 10 am.
The IPO listing date can be checked on Chittorgarh.com using the following links:
The IPO listing takes place *six business days after the IPO closing window.
*Note: After 1st December 2023, the listing timeline for all issues will mandatorily get reduced to three business days from existing six business days.
In India, IPO shares are listed on the following stock exchanges:
A mainboard company may list on one or both stock exchanges. An SME can only be listed on one stock exchange.
The IPO listing price is the opening price of the IPO share on the day of listing at stock exchanges. It is determined in the pre-opening session conducted by the stock exchanges on the day of listing based on the buy and sell orders placed at different price levels. The special pre-open session is held for newly listed IPO shares from 9:00 a.m. to 10:00 a.m. to determine the IPO listing price.
The IPO listing price is different from the IPO issue price and current price.
For example:
A company announces an IPO with a price range of Rs 100 to Rs 105. Based on the bids received and the subscription status, the issue price may be set at Rs 105. Later, on the day of listing, the stock may be listed at a price of Rs 110 based on supply and demand.
In the above example, Rs 105 is the issue price and Rs 108 is the listing price, so the IPO was listed at a premium.
The IPO listing gain is the positive difference between the IPO issue price and the IPO listing price.
The IPO Issue Price is the price of the IPO share decided by the Issuing Company at the time of the IPO Offering. The IPO listing price is the price determined by the stock exchange in the pre-open trading session of an IPO on the day of the listing between 9:00 and 10:00 am.
For example, suppose a company issues 10,000 shares at a price of Rs 50 in an initial public offering. Due to high demand in pre-open trading session, the stock exchanges set the price of the stock at Rs 60.
In this case:
Note:
IPO listing loss is the negative difference between the IPO issue price and the IPO listing price.
The IPO listing loss occurs when shares are listed at a lower price than the issue price. In such cases, the listing of the shares is referred to at a discount.
The IPO Issue Price is the price of the IPO share decided by the Issuing Company at the time of the IPO Offering. The IPO listing price is the price determined by the stock exchange in the pre-open trading session of an IPO on the day of the listing between 9:00 and 10:00 am.
For example, suppose a company issues 10,000 shares at a price of Rs 50 in an initial public offering. Due to high supply and less demand in pre-open trading session, the stock exchanges set the price of the stock at Rs 40.
In this case:
Note:
Yes, you can sell IPO shares after the listing. Regular trading in IPO shares begins at 10:00 a.m. on the day of listing.
Only anchor investors have a lock-up period for IPO shares. Retail investors, QIB, HNI and employees can sell IPO shares at any time once they are listed on the stock exchange.
An investor may also place a sell order for its IPO shares during the pre-open session (9:00 to 9:45 a.m.) at a price determined by the investor. The pre-open orders will be executed at 9:45 a.m. based on the discovered IPO listing price established by the Exchange. If your order does not find a matching order, your unexecuted order will be carried over into the normal trading session. Based on the listing price, you can decide whether to leave the order open or cancel it and hold the shares until you achieve the expected return.
Yes, an IPO can list below the issue price (also known as an IPO listed at a discount). The IPO listing price is mainly the result of supply and demand for IPO shares in the market.
There are many factors that can lead to a negative listing of IPO shares:
Yes, you can sell IPO shares on the day of listing.
A retail investor who has received an allocation in the IPO may sell his shares at any time on or after the listing date. Based on the established listing price and market fluctuations that may occur during the day, an investor may decide whether to sell or hold his or her shares.
In the case of IPOs with high price gains, investors usually exit on the same day as the listing. In the case of an IPO listed at a premium, investors can assess the further price movement and decide accordingly. In an IPO listed at a discount, many investors hold the shares and wait until the price recovers.
The normal trading in IPO shares begins at 10 a.m. on the day the shares are listed on the stock exchange. The IPO is listed on the stock exchange *six business days after the closing of the issue.
The exchanges conduct a special pre-opening session for IPOs from 9:00 to 10:00 am. This session helps determine the listing price based on the demand for the IPO shares.
*Note: After 1st December 2023, the listing timeline for all issues will mandatorily get reduced to three business days from existing six business days.
It is difficult to predict the IPO listing price because the listing price depends on certain factors that cannot be controlled and are related to investor sentiment.
Investors estimate the listing price based on the demand and supply of shares and the grey market premium. If the demand for shares exceeds the supply and the grey market premium is higher, investors predict that listing will happen at premium.
If negative news about the company is disseminated in the market, the listing may happen at a discount.
An investor may sell IPO shares after 10 a.m. on the day of listing, just as he may sell any other stock on the exchange. IPO shares are traded as normal shares after 10 a.m. on the day of listing.
Note that exchanges hold a special pre-opening trading session for newly listed companies between 9:00 and 10:00. The purpose of this session is to discover the IPO listing price. If you place an order during the pre-opening session, please note the following:
You can make listing gains in an IPO if the stock is listed at a higher price than the IPO's issue price. An investor can sell the IPO shares on the day of listing to realise listing gains if the IPO is listed at a premium.
For example, if the IPO issue price is Rs 500 and the listing happens at Rs 550, you can gain Rs 50 per share if you exit at that price.
You can place a buy order at desired price for the IPO shares on the listing day after 10 AM.
Once the shares are listed, you can buy or sell the IPO shares just like normal trading. With the listing the shares become part of the secondary market and can be bought or sold publicly through the exchange platform.
If you place a buy order during the pre-open session, you need to remember that you can place only limit orders.
Yes, you can trade intraday on the day of the IPO listing, but with some limitations. Due to higher volatility on the day of listing, there may be margin constraints on intraday trading of IPO stocks. This varies from broker to broker.
Zerodha broker intraday trading strategy on the day of listing
Listing helps a company in several ways, as listed below:
The IPO is listed at 9:00 a.m. on the listing day. Stock exchanges held a special Pre-Open Trading Session for first 60 minutes for better price discovery. At 10 a.m. the regular trading starts in IPO shares.
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