Investing in an IPO is a clever way to increase your likelihood of becoming a part-owner in a company. Many private companies choose to go public by listing themselves on stock exchanges through an Initial Public Offering.
If you decide to invest in the IPO of a company with great potential, it can yield impressive returns and profits. Now, purchasing IPO shares online is convenient. However, you might be curious about how to go about buying IPOs online in India.
What is an IPO?
An Initial Public Offering (IPO) is the process through which a privately-owned company becomes public by listing itself on stock exchanges like BSE or NSE. During an IPO, a portion of the company’s shares becomes available for public subscription, allowing investors to participate in the offering.
Also Read : What is ASBA? – Benefits and Application Process
What You Need to Apply for an IPO
To apply for an IPO, you need the following:
- Demat Account: Essential for storing allotted shares.
- Trading Account: Mandatory for online IPO applications, can be opened with a SEBI-certified Depository Participant.
- UPI ID: Use an existing or create a new UPI ID for transactions.
- Bank Account: Linked to your Demat account for seamless payments through ASBA (Application Supported by Blocked Amounts).
Eligibility Criteria for IPO Application
Before applying for an IPO, ensure you meet the following criteria:
- SEBI-Approved Investor: Investors approved as per SEBI guidelines, including QIBs, NIIs, Retail Individual Investors, and Employees.
- Demat and Trading Account: Maintain accounts with a recognized Depository Participant in India.
- PAN Number: Have a valid Permanent Account Number.
- Sufficient Balance: Ensure your bank account has sufficient funds for the application, as the amount will be locked until the allotment date.
How to Apply for IPO Online
There are two online methods: through a broker or via internet banking.
Through Broker:
- Log in to your online broker account or register if needed.
- Navigate to the IPO tab and select the desired IPO.
- Enter bid details, including lot size, bid price, and UPI ID.
- Submit the bid and approve the transaction on your UPI app.
- Wait for the mandate notification; the application money remains blocked until allotment.
Through Internet Banking:
- Log in to your Internet Banking account.
- Access the ASBA tab and click ‘Apply IPO.’
- Select the IPO, enter details, and submit the bid.
- Bids submitted before 2 PM are accepted the same day; after 2 PM, they’re scheduled for the next day.
How to Apply Offline for IPO
Applying for an IPO through offline required a visit to a local broking firm or bank branch.
To initiate the process, investors must get an IPO application form at the designated branch. This form serves as the primary document, requiring completion of details such as the applicant’s name, PAN (Permanent Account Number), bid quantity, and bid price.
Simultaneously, investors need to fill out the Application Supported by Blocked Amount (ASBA) form, a mandatory step in the IPO application process, ensuring the availability of funds for the applied shares.
Submission of the filled forms, accompanied by necessary Know Your Customer (KYC) documents, follows, with careful attention to accuracy. After submission, the bid amount is blocked in the investor’s bank account, safeguarding the funds for the applied shares.
Monitoring the IPO allotment status post-submission is crucial, and once allotted, the corresponding amount is debited from the bank account, and the shares are credited to the Demat account upon completion of the listing process. While offline applications may involve more paperwork and time, some investors find comfort in this traditional method.
Benefits of Online IPO Application
- Time-Saving: Avoid physical visits, saving time.
- Convenience: Seamless and transparent application process.
- Interest Earning: Amount stays in your account, earning interest until allotment.
- Transparency: Complete control and visibility over the entire process.
Also Read : Who are Syndicate members in IPO – What role do they play?
Conclusion
Whether you choose online or offline application, the decision ultimately rests on your preference. Select a SEBI-authorized broker for a seamless and transparent experience.
Thoroughly research the company before investing to make informed decisions. Applying for IPOs is a straightforward process, as outlined in this guide. The next time you come across a promising IPO, follow these steps and embark on your investment journey.
Frequently Asked Questions: How to Buy IPO Online
Q1. What is an IPO and why should I consider investing in one?
Answer: An Initial Public Offering (IPO) is the process through which a privately-held company becomes publicly traded. Investing in an IPO offers an opportunity to be part of a company’s growth from its early stages and potentially gain substantial returns as the company goes public.
Q2. How do I open a Demat and Trading account for IPO investments?
Answer: To invest in IPOs online, you need to open a Demat (Dematerialized) account to hold securities and a Trading account to execute buy and sell orders. You can do this through a registered stockbroker or financial institution offering online trading services.
Q3. What documents are required for KYC verification?
Answer: For KYC (Know Your Customer) verification, you typically need proof of identity, proof of address, and your PAN (Permanent Account Number). Ensure you have these documents ready when opening your Demat and Trading accounts.
Q4. How do I fund my online trading account?
Answer: Once your trading account is set up, you can fund it by depositing the necessary funds through online banking or other supported payment methods. This will cover the cost of the IPO shares you intend to apply for.
Q5. Can I apply for an IPO without a UPI (Unified Payments Interface) ID?
Answer: While some platforms allow for alternative payment methods, having a UPI ID is recommended for a seamless online IPO application process. It is often used for transaction authentication during the application.
Q6. How do I choose the right IPO to invest in?
Answer: Research is key. Before investing, thoroughly review the prospectus, financials, and performance history of the company issuing the IPO. Understand their business model, future prospects, and industry trends to make an informed decision.
Q7. What is the Application Supported by Blocked Amount (ASBA) process?
Answer: ASBA is a mandatory process for IPO applications. It involves blocking the bid amount in your bank account during the application period, ensuring you have the necessary funds. The amount is debited only after the shares are allotted.
Q8. How can I track the status of my IPO application?
Answer: Most online trading platforms provide a dashboard where you can monitor the status of your IPO application. Additionally, you can check official stock exchange websites or registrar websites for updates on IPO allotment.
Q9. What happens after the IPO allotment?
Answer: If your application is successful, the allotted shares will be credited to your Demat account after the IPO listing. The corresponding amount will be debited from your trading account.
Q10. Is online IPO application safe and secure?
Answer: Yes, reputable online trading platforms use secure payment gateways and authentication measures to ensure the safety and security of your transactions.
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