IPO or Initial Public Offering is when the shares of a private companies are opened up to the public for the very first time. It is the first sale of the company’s stock to the public to raise funds or capital. IPOs are very attractive for investors as there is a high chance of the stock price multiplying from its initial offer.
An initial public offering (IPO) is one way to Buy shares of a company that is going public. It is a popular mode of investment because it has the potential to grow manifold in a short period of time.
- Decision
The first step is to choose the right company’s IPO for investment and understand the past performance of companies & underlying companies before applying for IPO. Gain knowledge about the company through the prospectus of the company. You can find the prospectus of the company on Securities & Exchange Board of India (SEBI) website. The prospectus gives a fair idea about the company’s business plan & its purpose.
- Funding
The next & second step is to arrange for the funding. You can use your savings to invest in an IPO. But worry not if you don’t have funds, several nationalized banks & private banks like ICICI, HDFC & popular stockbrokers, offer the facility to apply for loans to invest in IPO. So inquire about the Interest before you take a loan.
- Demat-cum-trading account
The next step is a Demat account is a prerequisite to apply for an IPO. Demat accounts provide facilities to store your stocks or buying & selling stocks online. A Demat account can be opened by submitting your PAN card, Aadhar card, Address & Identity proofs. You can easly get many options for trading platform to trader with your shares.
- Application Process
You can apply for an IPO through your trading account and Bank account. You need to understand ASBA (Application Supported by Blocked Amount) facility, which is compulsory for IPO Application. The ASBA is an application allowing the Banks to block money in your bank account at the time of placing for IPOs. The ASBA is available in both form physical & demat. The facility eliminates the use of demand draft & cheques. You need to specify your PAN, Demat account number, bank account number and bidding details in the application.
- BIDDING
Bidding is the next step to be followed. You need to bid while applying for shares, as per the lot size is mentioned in the prospectus. Lot size is the minimum number of shares you have to apply for during an IPO. There is a bid price too. The company usually sets a price band. The upper limit is known as the Cap price while the lowest is called floor price. You have to bid for shares in this price range. Although you can revise your bid during an IPO, it is important to note that you will need to block the money required while bidding. The blocked amount stays in the bank account and earns interest till allotment.
- Allotment
Once the bidding is completed, depending on the investor’s reaction to the IPO, you will be allotted the shares. One thing to keep in mind is, there are possibilities that you might get less than the number of shares you asked for or in some cases none at all. Such instances arise due to the massive demand in the market. When such incidents occur, the bank unblocks your bid money. However, if you get the full allotment of shares you’ll be issued with a Confirmatory Allotment Note (CAN) within 6 working days after closure of the IPO and the next process is to wait for the listing of stocks on the stock exchange.
Process to apply for IPO Online
- Login to your online net-banking account
- In the investment section,click on the IPO/e-IPO option.
- Fill out your depository details and bank account details to complete the verification process.
- After this, you are led to a screen titled “Invest in IPO”.
- Select the IPO for which you would like to apply.
- Enter the number of shares and the “bid price.”
- Read the “Terms and conditions” on the documents before you place your bid.
- Confirm and place your order by clicking on “Apply Now”.
