IPO Lock-In Periods Explained: Who Can't Sell, and When

That date has a name. It is the day a lock-in period expires.

Every Indian IPO comes with a set of these invisible deadlines, fixed before the stock ever trades. Most retail investors never look at them — and then get blindsided when the price moves for a reason that was sitting in the offer document the whole time.

This article fixes that. By the end you will know exactly who is locked in, for how long, why our regulator insists on it, and why those expiry dates sometimes matter more than listing day itself.

What a lock-in period actually is

A lock-in period is a stretch of time after a company lists during which certain shareholders are not allowed to sell their shares in the open market.

Think of it like a fixed deposit you cannot break early. The shares exist, they have a value, but the holder is frozen out of selling them until the clock runs down.

The freeze is not a gentleman's promise. The shares sit tagged as "locked-in" inside the holder's demat account — the electronic account that holds your shares — and the depository that runs those accounts simply refuses any sale request until the date arrives.

Here is the part that surprises most beginners. Lock-ins do not apply to you. If you are a retail investor who got shares in the IPO, you can sell from the first second of listing day. Lock-ins are aimed entirely at the people who already owned shares before the public did.

And the rulebook behind all of it is one document: the SEBI ICDR Regulations. SEBI is the Securities and Exchange Board of India — our stock-market regulator — and "ICDR" stands for Issue of Capital and Disclosure Requirements, the rules that govern how every Indian IPO is run.

Who is locked in — and for how long

There is no single lock-in number. Different groups of shareholders get different windows, set by how close they are to the company and how big a risk their selling poses.

For a mainboard IPO — the big-company main market, as opposed to the separate SME (small and medium enterprises) platform that lists smaller firms — here is the whole picture on one screen.

Let us walk through the three locked groups one at a time, because each tells you something different about the company.

Promoters — the longest leash

Promoters are the founders and controlling owners. SEBI watches them most closely, because they usually hold the largest blocks and know the business better than anyone.

The rule starts with the minimum promoters' contribution. Promoters must hold at least 20% of the company's post-issue capital — the total shares after the IPO — and that 20% is the heart of the lock-in.

That core 20% is locked in for 18 months from the date of allotment. There is one big exception: if the majority of the fresh money raised is going to be spent on capital expenditure — building a factory, a plant, a real project — the lock-in stretches to 3 years instead. The logic is fair: if you are raising public money to build something, you should stay committed while you build it.

Any promoter shares above that 20% floor are locked for only 6 months.

Anchor investors — the 30 and 90 day split

Anchor investors are the big institutions — mutual funds, insurers, foreign funds — that SEBI lets bid one working day before the public issue opens. Their job is to put serious money down early and signal confidence. (We cover them in full in anchor investors in an IPO.)

Because they got in first, they accept a lock-in that ordinary institutional buyers do not. And since IPOs opening on or after 1 April 2022, that lock-in comes in two pieces.

Before this rule, the entire anchor allocation came off lock-in on one day — exactly 30 days after allotment. The result was an ugly, predictable cliff: a wall of anchor selling at the one-month mark that often dragged the stock down and hurt retail holders.

Splitting it 50-50 spreads that pressure across a wider window. It is one of the quieter, smarter pieces of Indian market plumbing.

Pre-IPO investors — the six-month wall

This is the group that catches retail investors out the most. "Pre-IPO investors" means everyone who is not a promoter but owned shares before the company went public — early venture-capital funds, private backers, sometimes employees.

For a mainboard IPO today, their pre-issue shares are locked in for 6 months from allotment. Like the promoter numbers, this was cut from a full year by the August 2021 amendment.

Now here is why this matters so much for the big new-age listings. Companies like Zomato, Paytm and Nykaa had no single promoter — they were owned by a crowd of early investors. The bulk of their shares sat with those pre-IPO backers, locked under the older one-year rule that governed those 2021 issues.

So when that one-year wall lifted, an enormous slice of each company's shares became sellable on a single, well-known date. Those expiry days became famous — and painful. More on what actually happened in a moment.

You are not locked in — so use the calendar

Worth repeating, because it flips how you should think about all of this. A retail investor who gets an allotment has zero lock-in. You can sell on listing day, the next day, or hold for ten years. Your choice.

So a lock-in expiry is not a rule that limits you. It is a piece of free information about other people's selling.

Every expiry date marks the moment a fresh batch of shares — promoter, anchor or pre-IPO — becomes free to sell. If you know those dates, you know when supply could suddenly jump. That is the whole reason a beginner should care.

What happens when a lock-in expires

The mechanism is simple. On the expiry day, the depository unlocks the shares. Suddenly a large block that could not be sold yesterday can be sold today. Traders call this a supply overhang — the market knows a lot of new shares may be coming.

If those holders decide to sell, the extra supply can push the price down, sometimes hard. The clearest case is Zomato.

1. July 2021

   Zomato lists

   Zomato lists on the exchanges. Its pre-IPO investors — the early backers who owned most of the company — are locked in for one year under the rules of the day.

2. 25 July 2022

   The one-year wall lifts

   The lock-in expires and roughly six billion shares — the bulk of the company — become free to sell. The stock falls about 11% in a single session to a then-record low of around ₹47.55, having dropped as much as 14% intraday.

The market saw it coming for months. It still fell, because enough holders wanted the exit and buyers stepped back to wait for a better price.

Anchor expiries can sting too. When the first half of LIC's anchor shares came off their 30-day lock-in on 13 June 2022, the stock fell nearly 6% that day — already trading close to 30% below its ₹949 issue price — and a weak overall market that month made the fall worse.

How to see an expiry coming

The good news: none of this is hidden. Every lock-in date is published before you ever buy a share. Here is where to look.