How To Buy IPO - Application Process for Investing in an IPO

You can apply for an IPO through your bank account or your demat and trading account.

How To Buy IPO - Application Process for Investing in an IPO

In this day and age, one of the headlines prevalent in the finance section of newspapers is about Initial Public Offerings or IPOs of various companies. An IPO is an essential step towards a company going public and widening its equity base. New IPOs by companies that have a strong market presence tend to draw a lot of media and public attention. You can apply for an IPO through your bank account or your demat and trading account. In this article, we shall discuss

  • What is an IPO
  • Prerequisites for an IPO application
  • Process of IPO application 

What is an IPO?

An Initial Public Offering is, as its name suggests, the first offer of public subscription to shares by any company. Through an IPO, a company that is privately held starts the process of getting listed on a stock exchange and having its shares traded there. There are two main types of IPO, namely a Fixed Price Issue and a Book-building issue. While the former type of IPO has a fixed offer price for shares, the latter has a price band instead. Both types of IPOs remain open for 3 to 7 working days (extendable to 10 working days if the price band is revised).

Documents and accounts required to apply for an IPO

In order to apply to a new IPO, you must have the following documents:

  • Permanent Account Number
  • Proof of Identity
  • Proof of Address

Furthermore, you must have a demat account and a functional bank account.

Major steps to apply for an IPO in India

There are two ways to apply for a new IPO: online and offline. Let us discuss both the approaches to IPO application:

Online application for an IPO

1. Through your broker's trading account platform: You can apply for an Initial Public Offering directly through the trading account platform of your stock broker. In order to do so, you must follow the steps mentioned below.

  • Login to your trading account application using your authorised login credentials.
  • Look for an option titled IPO in the main menu or side menu.
  • Select the IPO you wish to apply for.
  • Enter details such as the number of lots (of shares) you wish to apply for in the selected IPO. Then enter the bid price. It is advisable to place your IPO bid at the cut-off price or the highest price in the price band (in case of book-building issues).
  • Check all the particulars of the IPO application and proceed to payment.
  • Enter your Unified Payment Interface (UPI) ID and complete the payment for your IPO application.

2. Through your bank's Internet Banking facility: It is also possible to apply for a new IPO through your Bank's Internet Banking facility. The steps required to do so are as follows:

  • Login to your Bank's official Internet banking platform (app or website) with your User ID and password.
  • Locate the section called Application Supported by Blocked Amount (ASBA) or the section titled IPOs.
  • Select the IPO you wish to apply to.
  • Enter the name of the applicant.
  • Enter your Permanent Account Number.
  • Submit the bid price and number of lots you wish to apply for.
  • Click on pay via Application Supported by Blocked Amount, and the requisite application amount shall get blocked in your bank account until allotment of shares is done.

Offline application for an IPO

You can also submit your application for a new IPO offline. The steps for an offline IPO application are as follows:

  1. Visit the nearest branch of your bank that offers ASBA facility. Alternatively, visit the nearest office of your stock broking firm.
  2. Request an ASBA IPO application form, and submit the duly filled and signed form accompanied with the required Know Your Customer documents.
  3. Once your bank submits your new IPO application form, the application amount shall get blocked in your bank account.

To sum it up

Although you can apply for both types of IPOs online as well as offline, opting for an online application can help you save time and effort. You can check the status of your IPO application on the website of the registrar to the IPO as well as on the official websites of the Bombay Stock Exchange or the National Stock Exchange.

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