IPO Listing

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.

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:

1. Mainboard IPO Listing Date
2. SME IPO Listing Date

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:

• Bombay Stock Exchange (BSE)
• National Stock Exchange of India (NSE)

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:

• IPO Issue Price: Rs 50 per share
• IPO Listing Price: Rs 60 per share
• IPO Listing Gain = IPO Listing Price - IPO Issue Price = 60 - 50 = Rs 10 per share.

Note:

• The IPO listing gains are taxable as short-term capital gains at 15%.
• The price of IPO shares may move in any direction after 10 a.m., when regular trading begins.

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:

• IPO Issue Price: Rs 50 per share
• IPO Listing Price: Rs 40 per share
• IPO Listing Loss = IPO Issue Price - IPO Listing Price = 50 - 40 = Rs 10 per share.

Note:

• When the shares are listed at a discount, investors generally prefer to hold the stock until it breaks even or reaches the break-even position.
• Investors who have sold their IPO application in grey market usually sell in loss to settle the grey market transaction.
• The price of IPO shares may move in any direction after 10 a.m., when regular trading begins.

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:

• Market sentiment on the day of listing.
• Higher selling pressure due to short-term profit taking.
• The public issue poorly subscribed and the market doesn't have enough demand for the company's 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:

• Pre-opening orders are placed like normal orders between 9:00 and 9:45 am.
• Only limit orders are allowed in the pre-opening session. Market orders are not allowed.
• There is no price band during the pre-opening session.
• Orders can only be placed, canceled or modified until 9:45 am.
• Orders are matched at 9:46 am and compatible orders are executed.
• Remaining orders are moved to the regular trading queue where trading begins at 10:00 AM.

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

• Intraday long positions are allowed, but with full margin. This is like a delivery buy order (CNC).
• Short selling isn't allowed on the day of listing even with full margin (CNC) unless you hold IPO allocated shares in your demat account.

Listing helps a company in several ways, as listed below:

• Helps raise interest-free capital.
• Helps gain visibility.
• Increases investor confidence.
• Brings transparency and efficiency to company operations.
• Improves employee morale.

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.