Listing day, and the lock-ins

The issue closes, and three working days later the shares trade. What happens on that day gets all the attention. What happens on four later dates is more predictable and less discussed.

T+3

SEBI compressed the timeline in 2023. The circular's own title states it: reduction of the timeline for listing of shares in a public issue from the existing T+6 days to T+3 days, where T is the date the issue closes.

Three working days from closure to trading. In that window the basis of allotment is finalised, shares are credited to the demat accounts of successful applicants, and money is unblocked for everyone else.

Shorter is better for you in a specific, unglamorous way: your money is blocked for three days rather than six, and if you were not allotted, you have it back that much sooner.

What the listing price is

It is whatever the first trades establish. Not a valuation, not a verdict — the opening price of the special pre-open session, produced by the same order matching as any other price. Chapter 2 of the markets subject covers the mechanism.

Three things it is not.

Not related to the grey market. Whatever premium was quoted before listing was an unregulated, unrecorded expectation. Sometimes it is roughly right and sometimes it is nowhere near, and it is never a price you could have dealt at. SEBI's own advice to investors, in the material this subject has cited throughout, is blunt: do not deal in the grey market.

Not a function of subscription. A 60x subscribed issue can list below its issue price. Subscription measures demand at or below the band from people who had to commit before knowing the price; the listing price is set afterwards by anyone with a demat account.

Not the end of price discovery. Listing day is usually the most volatile day the share will have, with the widest spreads. Chapter 7 of the markets subject is what that costs you if you trade into it.

The supply calendar

This is the part worth building for any IPO you hold.

At listing, only a fraction of the company's shares can actually be sold — the ones allotted in the issue. Everything else is locked in, on a schedule fixed by regulation and published in the offer document. Every expiry is a date on which shares that could not be sold become sellable.

Anchor investors: 30 and 90 days from allotment. Half and half, from chapter 10.

Other pre-issue capital: six months from listing. Under Regulation 17, the entire pre-issue capital held by persons other than the promoters is locked in for six months, with some exemptions including employee stock options. This covers early investors, venture funds and private equity holders who did not sell in the IPO — and in a company that was privately funded for years, it is often the largest block of all.

The promoters' minimum contribution: eighteen months. SEBI:

In a public issue by an unlisted issuer, the promoters shall contribute not less than 20% of the post issue capital which should be locked in for a period of 1.5 years.

With a longer period in one case: if the majority of the issue proceeds excluding the offer for sale portion is for capital expenditure, that lock-in is three years from the date of allotment.

The promoters' remaining shares: six months from listing, or one year in the same capital expenditure case.

SEBI's stated reason for all of it: the provision "ensures that promoters of the company have some minimum stake in the company for a minimum period after the issue or after the project for which funds have been raised from the public is commenced."

Using the calendar

Four observations, in rough order of usefulness.

The dates are knowable before you apply. The allotment and listing dates are in the offer document, the percentages are in the capital structure section, and every lock-in runs from one of those two dates. You can write the calendar down in advance.

A price move near an expiry is usually supply. Nothing needs to have happened to the business. More shares can be sold than could be sold last week, and if some holders want out, that is enough.

Expiry is permission, not obligation. Most lock-in expiries pass without a large sale. A holder with a good position and a long horizon does not sell because they became able to. The calendar tells you where supply can arrive, not where it will.

The six-month date is the big one. Anchors are limited to a share of the institutional portion. Pre-issue non-promoter capital, in a company that raised private rounds for a decade, can be a majority of the shares outstanding.

The point

Listing is T+3 from the close, and the first price is just the first price — unrelated to the grey market and to the subscription figure. After that, anchor shares free up at 30 and 90 days, other pre-issue capital at six months, and the promoters' 20 per cent contribution at eighteen months. All four dates are published before you apply.