COURTKUTCHEHRY SPECIAL REPORT FOR INVESTORS IN IPOs
IPO investing rules in India: How to spot real offers and avoid scams
Clear disclosures, lock-ins, and SEBI oversight guide genuine IPOs
Simple checks to verify unlisted shares and prospectus filings
By Our Legal Reporter
New Deli: December 24, 2025:
India’s IPO boom has drawn record money, and with it, fake offers promising quick profits in “pre-IPO” or unlisted shares. Real IPOs follow strict rules under SEBI’s ICDR Regulations, use regulated intermediaries, and publish audited disclosures. Knowing the basics can help you avoid scams and invest safely.
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The IPO rulebook in simple words
- SEBI approval is mandatory:
A genuine public offer must file a draft red herring prospectus (DRHP) and a final red herring prospectus (RHP) with SEBI and the stock exchanges. You can read them on SEBI and exchange websites. These documents explain business, risks, price band, financials, promoters, and use of funds. - Offer document summary made easier:
SEBI has approved a concise “Offer Document Summary” to make key information easier to read, alongside tighter lock-in enforcement for certain pre-IPO shares. This helps retail investors access critical data faster. - Lock-in and supply discipline:
Non-promoter shares face tighter rules before IPO; pledged shares can be technologically marked as locked-in so they can’t be transferred to dodge restrictions. This avoids sudden supply dumps after listing. - Pricing and process:
Issues can be fixed price or book built. In book building, investor demand sets the price within a band. Categories include QIBs, NIIs, and retail, each with defined allocation percentages and rules. SEBI’s FAQs explain these clearly. - Intermediaries and payments:
Genuine IPOs are handled by SEBI-registered merchant bankers, registrars, syndicate members, and depositories. Retail investors apply via ASBA/UPI linked to their bank/demat. No one should ask you to transfer funds to personal accounts. - Post-listing obligations:
After listing, companies must comply with continuous disclosure, trading, and corporate governance norms set by SEBI and exchanges. Relaxations aim to simplify while protecting investors.
Unlisted shares and “pre-IPO” offer: rules and risks
- Unlisted share trades are not public offers:
They don’t require a prospectus but still fall under securities laws and anti-fraud provisions. Prices are opaque, liquidity is low, and disclosures are limited. SEBI stresses caution: investors must rely on audited financials and MCA filings, not WhatsApp forwards or sales pitches. - No guaranteed listings or “allocation”:
Anyone promising fixed allotment, inside access, or guaranteed returns in unlisted shares is a red flag. Real allocation happens in the IPO as per SEBI/exchange rules, not through private lists.
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How to tell real from fake: a practical checklist
- Check the prospectus on official portals:
- SEBI: Look up DRHP/RHP and issuer/intermediary details; read risk factors and financials.
- Stock exchanges (NSE/BSE): Verify issue opening dates, price bands, and notices.
- If the document isn’t on SEBI or exchange sites, treat it as fake.
Sources: SEBI FAQs and board announcements on simplified disclosures and lock-in rules.
- Verify the company on MCA:
- Use the MCA portal to confirm CIN, status (active/inactive), registered office, directors, and charges.
- Cross-check directors’ names against the prospectus and company website.
Guides: MCA verification steps outlined by public resources and practitioner guides.
- Validate all intermediaries:
- Merchant banker, registrar, and broker must be SEBI-registered.
- Confirm demat and ASBA/UPI flows; avoid direct transfers to individuals.
SEBI provides intermediary roles and process details in FAQs.
- Assess financials and business reality:
- Read audited statements in the prospectus.
- Ensure auditor details match ICAI registration; check related-party transactions and debt.
- Be sceptical of “too good to be true” growth claims without cash flows.
- Watch for pressure tactics:
- Fake offers promise guaranteed allotment, insider access, or “limited slots.”
- Real IPOs have published timelines; there’s no secret window or special retail quota beyond SEBI norms.
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Investor rules to follow for safer participation
- Apply only via official channels:
ASBA/UPI through your bank/broker linked to demat; never send money to unknown accounts or QR codes. - Read the Offer Document Summary first, then the full RHP:
SEBI’s simplified summary highlights key points; the full RHP gives depth. Use both. - Diversify and set limits:
Don’t chase hot issues blindly. Use small ticket sizes, avoid leverage, and remember IPOs can list below issue price. - Check governance track record:
Prior regulatory actions, litigations, or auditor resignations matter. The risk factors section is there for a reason. - Be patient with allotment and refunds:
Timelines are defined by exchanges and depositories. Any request to “fast-track” allotment for a fee is a scam.
Market size: how big is India’s IPO wave?
- Record fundraising:
Companies raised about ₹1.76 lakh crore in 2025, an all-time high, driven by strong domestic liquidity and a robust pipeline across sectors. The momentum is expected to carry into the New Year. - Global standing:
In Q1 2025, India ranked among the top IPO markets globally with 62 IPOs raising US$ 2.8 billion, accounting for 22% of global activity that quarter. - PSU pipeline:
Fresh listings from major PSUs are on the radar, signalling continued depth and diversity in upcoming issues.
Red flags that usually mean “fake”
- No SEBI or exchange listing for the prospectus
- Promises of guaranteed allotment or fixed premium returns
- Personal bank transfers, wallets, or crypto payments
- Unverified merchant banker/registrar claims
- Edited screenshots, unverifiable app dashboards, or WhatsApp-only communication
Use official websites and verified public databases—avoid social media forwards as a source of truth.
Final takeaway
IPO investing in India is safer when you stick to SEBI-published documents, exchange notices, and regulated brokers. For unlisted shares, slow down and verify company status on MCA, management, auditor, and real finances. If something can’t be validated on SEBI, NSE/BSE, or MCA, walk away. The boom is real—but so are the scams.
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