Read the article to know how to make a successful IPO application.
An initial public offering refers to the first time a company releases its shares to be traded in the open markets. This is usually done to raise capital by the company and if you do your research and pick the correct company, IPOs can be great opportunities to make some significant profits. Today we see how you can apply for an IPO.
Things needed before applying for an IPO
1. Trading account:
A trading account is where you will be able to trade your shares from where they are allotted to you in the subscription. You can open a trading account with any brokerage firm of your preference and get it linked to your DEMAT account
2. DEMAT Account:
A demat account is where all your shares are stored after their ownership has been transferred to you. Think of this as a digital vault where your digital possession (shares) are stored. Demat account services in India are provided by depositories like NSDL and CDSL through banking or brokerage firms.
3. A bank account with Net banking or UPI:
Net banking or UPI activated accounts that support ASBA are needed in order for you to auction and apply for an IPO in India.
What is ASBA?
ASBA (abbreviation for Application supported by Blocked Amount) is a simple and straightforward tool that comes in handy while applying for IPOs in India. ASBA is provided along with Net Banking services by your bank and allows for the blocking of a set amount of funds by a third party with your permission.
This comes in handy in the IPO application process as when you authorise payment for your bid, the amount is blocked in your account to ensure that the payment is successful once you are allotted your block of shares. This minimises the possibility of people defaulting on paying for their bids and has been made mandatory by SEBI for IPO bidding process.
If in case you do not get the block of shares on the day of allotment, the funds blocked in your account are released instantly and you can start using them again.
How to Apply for IPO using net banking?
– The first step is to complete your entire research and be sure of the Scrip and the amount you want to invest in the IPO. IPOs are highly risky financial investments and should always be supported by strong information about both the news and the financials of the company.
– Log into your net banking account, look for the option to apply for ipo/e-ipo.
– Pick the IPO you wish to apply for from the list given there
– Fill in all the information that is asked. Keep your pan and aadhaar numbers ready as the application form might need these.
– Then bid for the IPO in the range that is given, also decide the number of lots you want to buy.
– Proceed to pay, an amount equal to your bid x the number of lots x number of shares in a lot is what will be blocked out from your account for the ASBA.
How to apply for IPO using UPI?
The initial steps are the same as those as net banking stated above.
– Use the IPO option on your UPI app or the option to fill an IPO application on your trading platform.
– Pick the IPO you wish to apply for from the list.
– Fill in the form, place your bids, then fill in your UPI ID in the form
– Accept the mandate for blocking of funds on your UPI app. Post this the funds will be blocked in your account following a similar process like Net Banking.
Can you modify an IPO bid?
Once funds have been blocked from your account, it is not possible to modify your bid. However, if bidding is still active for the IPO, you can cancel the current bid and place another one. In case of ASBA i.e. net banking, you can cancel the bid from your net banking account directly.
However you cannot cancel your bids from the app if you have used UPI. You will have to go to the client you have used to place your order and cancel your IPO application directly from there.
How to maximise chances of allotment?
To maximise the chance of your allotment in an IPO, place bids from multiple accounts within the family instead of placing multiple bids from a single account.
Also try and bid for the upper price ceiling if possible as it shows that you are willing to pay the highest price that the stock will get listed for and magnifies your interest.
Bonus: Make sure the name on the DEMAT account matches the name on the PAN Card. Many IPO applications do not make it to bidding process because of discrepancy in records on DEMAT account.
How to Apply for IPO? – Frequently Asked Questions (FAQs)
1. What is needed to subscribe to an IPO?
To subscribe to an IPO, you need to have a pan card, active DEMAT account and capital for the number of shares you want to buy. This capital is blocked from the day shares are allotted to you till the day the company finally goes public.
2. What is ‘minimum lot size’ for an IPO?
Shares are sold in lots during the subscription of an IPO, and investors can only buy shares in multiples of these lots. For example if the minimum lot size is 100, then you can only auction for shares in the multiples of 100.