An IPO, or initial public offering, refers to the process of converting a private company to a public company. When the company is private, 100% of the company’s shares are owned by the company’s founder or the stakeholders. When the founders decide to make their business public, they will list their company on the stock exchange like the BSE or the NSE.
The founders also make some of their shares available for investors to subscribe to. Investors invest in the IPO during the subscription period and wait for the initial public offering listing. If the IPO is at a premium, they make a profit, and vice versa.
Documents Required For IPO
The company needs the following things to apply for an IPO:
- Demat Account: It is mandatory to have a Demat account before applying for an IPO online. Any SEBI-certified depository participant will allow you to open a trading account.
- UPI ID: You can create a new UPI ID or you can use an existing UPI ID that is linked to your bank account.
- Bank account: A bank account is required for the business to pay the applied shares. Earlier, the amount that was bid for the shares was debited from your bank account. But later, depending on the number of shares allotted to the shareholder, the remaining amount will be credited. SEBI formulated “Application Supported by Blocked Amount” (ASBA) to simplify the payment process. Via Application Supported by Blocked Amount (ASBA), a certain amount of cash is debited from your bank account, and if you get fewer shares than you bid for, then the rest of the amount is unblocked. Read our article to know more about shares.
Eligibility criteria for IPO in India
Investing in an IPO is easy. You just need to fulfil some specific eligibility criteria to apply for an IPO. Here are some of the eligibility criteria for an IPO application:
- You must meet the requirements of SEBI, the Securities and Exchange Board of India. As of now, only 4 types of investors can invest in an IPO – Qualifies Institutional buyers ( QIB ), Non-Institutional buyers (NII) Retails individual investors and employees.
- You must have a Demat a/c and a trading a/c with any recognized depository participants in India.
- You must have a Pan card also known as Permanent Account Number.
- Your bank current and saving account must be linked to your Demat account.
- Sufficient credit balance that can fund the application. While the application amount is not debited instantly that it will remain locked until the allotment date. If you are the allotted share, the amount will be transferred from your bank account to the company’s account.
And if in case you do not get the IPO allotment that you applied for, your blocked amount will be released and then you can use that money for other purposes.
How do I apply for an IPO online?
Yes, you can apply for an IPO allotment online, also through internet banking or a Broker. Now let’s understand the detailed process.
- Through Internet Banking:
Follow the steps to apply for an IPO seamlessly through internet banking.
- Log into your internet banking account.
- Locate the Application Supported by Blocked Amount (ASBA) tab and click on it.
- Click on Apply IPO and then select the IPO from the IPO list.
- Enter the applicant’s name, PAN number, bit quantity, and price, and then click “submit.”If you submit your bid before 2 PM on a business day, the bid will be selected on the same day, and if you place your bid after 2 PM, then your bid will be scheduled for the next day.
- Through a Broker
Follow the steps to apply for an IPO seamlessly through a Broker
- Log in to your account with the broker. If you do not have an account, you need to create one by registering with your phone number and email address.
- Locate the IPO option and go to the current IPO section and then select the IPO name from the current list of IPO.
- Enter the lot size you want to bid on, as well as the bid price. If you want to increase your chances of receiving an IPO allotment, bid at the cutoff or you can also bid at the maximum price range.
- In the following step, enter your UPI ID and press the Submit button. Your UPI will need to approve the transaction before the exchange will accept your bid.
- Wait for the notification in the UPI app. Until the allotment date, the application’s money will be blocked.
How to Apply Offline For an IPO?
If applying for an IPO online makes you uncomfortable, you can also submit your application in person at the bank or broking firm branch that is most convenient for you. You must first complete an ASBA application and provide the necessary KYC information. Following the allocation of shares, your funds will be blocked, and the invested amount will be deducted.
Benefits of applying for an IPO through online mode
Here are some of the benefits of applying for an IPO online:
1. It’s a time-saving process, you can save your precious time by applying for an IPO application online and not running to the broker’s office or bank.
2. Online IPO application process is seamless and convenient.
3. The IPO application amount remains in your account and continues to earn interest until the allotment date.
4. This entire process is transparent and you have complete authority.
Conclusion
Online IPO applications are more convenient and save time. Your decision as to whether to apply online or offline is entirely up to you. To begin your IPO journey, pick a broker that has SEBI authorization, such as 5paisa. Your application will be processed smoothly and openly with the assistance of these brokers. Before investing your money, do extensive research on the company to ensure you will get the most return on your investment.
As you can clearly see from this guide, applying for IPOs is simple. So the next time you come across a promising IPO and decide to invest, just follow the instructions above and get started!
