NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

Role of Depository in Public Offerings (IPO/FPO)

Updated 11 October 2026 · Fact-checked

In an IPO or FPO, the issuer signs agreements with both depositories and the RTA. The depository admits the security, allots an ISIN and activates it. After allotment, the issuer gives credit details and the depository credits shares to investors' demat accounts through their DPs. This lets investors hold and trade shares electronically.

Understand Depository Role in Public Offerings (IPO/FPO)

A public offering is when a company offers securities to the public for the first time (IPO, initial public offer) or again after listing (FPO, further public offer). Today, public issues are made in dematerialised form. Investors apply with their demat account details, and shares are allotted straight into that account.

The depository makes this possible. The issuer first enters into tripartite agreements: one with NSDL and one with CDSL, each also involving the Registrar and Transfer Agent (RTA). These agreements let the issuer's securities be held and transferred in electronic form at either depository. Investors can then choose either depository through their DP.

The depository then admits the security to its system and assigns an ISIN (International Securities Identification Number). An ISIN is a unique 12-character code that identifies the security. The same ISIN is used at both depositories, so the security is fungible and can move between them. The ISIN is activated for the issue so that credits can be made.

After the issue closes, the issuer and RTA finalise the basis of allotment. The RTA gives the depository the allotment details through electronic files: the beneficial owner (BO) ID and the number of securities for each allottee. The depository credits the securities to each BO account through the DP. Those who are not allotted shares get their money back, and those allotted see the shares in their demat account before listing and trading begin.

The depository does not decide the price, allot shares or run the bidding. These tasks belong to the issuer, lead managers, RTA and stock exchanges. The depository's job is the electronic holding and credit of the securities. Keep this split of roles clear, because the exam tests it.

Key formulas to remember

Agreements needed: Issuer + RTA + depository (NSDL and CDSL) → tripartite agreements; Without these agreements the security cannot be admitted and the issue cannot be made in demat form.
ISIN: ISIN = unique 12-character code per security; One ISIN per security, common to both depositories. It is activated before credit of allotment.
Allotment credit flow: Basis of allotment → RTA sends credit file → depository credits BO accounts via DPs; Credit goes only to the BO ID given in the application. A wrong or inactive demat account causes failure.
Investor requirement: Demat account (BO ID) needed to apply for allotment in electronic form; Details are taken from the application and matched with depository records.
Roles split: Depository = admission, ISIN, credit | Issuer/RTA = allotment decision | Exchange = listing and trading; Use this to eliminate options that give the depository allotment or pricing duties.

How to solve Depository Role in Public Offerings (IPO/FPO) questions

Use the same sequence for any question on depositories in public offers. Place the question at the right stage, then check who does what.

1Identify the stage: pre-issue (agreements), ISIN activation, application, allotment, credit or listing.
2Name the actors involved: issuer, RTA, lead manager, depository, DP, exchange and investor.
3Recall the depository's task at that stage: admission, ISIN allotment and activation, or electronic credit.
4Check whether the option gives the depository a task that really belongs to the issuer, RTA or exchange (pricing, allotment decision, listing).
5Check the order of events: agreements first, then ISIN, then allotment and credit, then trading.
6Pick the option that fits both the stage and the actor. Reject absolute words like 'always' unless the rule is absolute.

Quickest way: Stage and actor match

When to use it: Use it for one-line MCQs asking who does what, or what comes first, in an IPO or FPO.

Remember the chain: agreements → admission → ISIN → allotment → credit → listing.
Ask: is this task about holding or crediting electronically? If yes, it is the depository or DP.
If it is about price, bidding, basis of allotment or refund, it is the issuer, RTA or merchant banker.
If it is about trading, it is the exchange.

Common mistakes in Depository Role in Public Offerings (IPO/FPO)

Saying the depository allots shares to applicants.
Students see 'allotment' and 'credit' as the same step.
Fix: The issuer decides allotment with the RTA and registrar. The depository only credits the securities to BO accounts.
Thinking an issuer must deal with only one depository.
Mixing up with account opening, where an investor can hold accounts at either depository.
Fix: Issuers sign agreements with both NSDL and CDSL so investors can choose either one.
Treating the ISIN as different at NSDL and CDSL.
Because there are two depositories, students assume two codes.
Fix: A security has one ISIN, common to both depositories. That makes it freely transferable between them.
Mixing up ISIN activation with listing.
Both happen near the issue and sound like one approval.
Fix: ISIN activation is a depository action enabling electronic credit. Listing is done by the stock exchange and enables trading.
Assuming allotment can be credited to any demat account of the investor.
Students ignore that the BO ID in the application is used.
Fix: Credit is made to the demat account details given in the application. Wrong or inactive details cause problems.

Worked examples

Example 1

Which of the following is the depository's role in an IPO? (a) Fixing the issue price (b) Deciding the basis of allotment (c) Admitting the security and allotting an ISIN (d) Listing the shares on the exchange

Show the solution

Place the stage: pre-issue and issue support.
Issue price is set by the issuer with lead managers, so (a) is out.
Basis of allotment is decided by the issuer with the RTA and exchange, so (b) is out.
Listing is done by the stock exchange, so (d) is out.
Admission of the security and ISIN allotment are depository tasks, so (c) fits.

Answer: (c) Admitting the security and allotting an ISIN

Example 2

Put these in the correct order for an IPO in demat form: (1) Credit of shares to BO accounts (2) Tripartite agreements signed (3) Basis of allotment finalised (4) ISIN activated. Which order is right? (a) 2, 4, 3, 1 (b) 4, 2, 1, 3 (c) 2, 3, 4, 1 (d) 3, 2, 4, 1

Show the solution

Agreements come first because they enable admission to the depository system.
ISIN is then activated so the security can be held and credited electronically.
After the issue closes, the basis of allotment is finalised.
Only then are shares credited to BO accounts through DPs.
The order is 2, 4, 3, 1.

Answer: (a) 2, 4, 3, 1

Exam tips

Link each action to its actor: depository (admission, ISIN, credit), issuer and RTA (allotment), exchange (listing and trading).
Expect order-of-events questions. Memorise: agreements, ISIN, allotment, credit, listing.
Watch for options saying the depository fixes price or decides allotment. They are wrong.
Remember that a demat account is required to receive allotment in electronic form, and the ISIN is common to both depositories.
Under negative marking, skip only when two options both fit the stage and the actor. Otherwise use elimination and answer.

Practice questions from Special Services - Public Offering / Corporate Actions

Depository Role in Public Offerings (IPO/FPO): frequently asked questions

What is the role of a depository in an IPO?

The depository admits the issuer's security into its system, allots and activates the ISIN, and credits allotted shares to investors' demat accounts through DPs. It does not price the issue or decide allotment.

How are IPO shares credited to a demat account?

After the basis of allotment is finalised, the issuer's RTA gives allotment details to the depository. The depository credits the securities to each allottee's BO account through the DP, using the demat details given in the application.

Is the ISIN the same at NSDL and CDSL?

Yes. A security has one ISIN, common to both depositories. This lets the security move between NSDL and CDSL.

Is the depository role different for an FPO?

The role is essentially the same. The security is already admitted and has an ISIN, so the depository supports the further issue by crediting the new securities in demat form.