How to Apply for an IPO?

What is an IPO?

An Initial Public Offering or IPO refers to the process of making a privately owned company public. When a company is private, 100% of the company's shares are owned by the company's owner(s) or stakeholder(s). When the company owner(s) decides to take the company public, they approach stock exchanges like BSE or NSE for listing their company.

They also make a part of their shares available for investors to subscribe to. Investors invest in the IPO during the subscription period and wait for the IPO listing. If the listing is at a premium, they make profits, and vice versa.

How to apply for an IPO | How to get IPO Allotment | IPO kaise kharide | What is IPO

What do you need to apply for an IPO?

Demat Account- It is essential to have a demat account to invest in IPOs. This is where your shares will be stored after allotment. 

Trading Account- It is mandatory to have a trading account before applying for an IPO online. You can open a trading account with any SEBI certified Depository Participant, like 5paisa. 

UPI Id- You can either use an existing UPI Id linked to your bank account or create a UPI Id at the BHIM app. 

Bank Account- you need a bank account to pay the shares applied. Earlier, the amount bid for the shares was debited from the bank account. Later, depending on the number of shares allotted, the remaining amount would be credited; this was time-consuming. So, SEBI formulated ASBA or Application Supported by Blocked Amounts to simplify the payment procedure. Via ASBA, a certain amount of money is blocked depending on the number of shares you bid for. After the allotment, cash is debited from your bank, and if you get fewer shares than you bid for, then the rest of the amount is unblocked.

Is there any eligibility criteria for IPO application?

Investing in an IPO is as easy as A-B-C. But, you need to fulfil specific eligibility criteria to apply for an IPO. Here is what you need to consider before investing:

1. You must be an approved investor as per SEBI (Securities & Exchange Board of India) guidelines. As of now, four types of investors can invest in an IPO - Qualified Institutional Buyer (QIB), Non-Institutional Buyer (NII), Retail Individual Investor, and Employees.

2. You must have a Demat and a trading account with any recognized Depository Participant in India, such as 5paisa.

3. You must have a Permanent Account Number, commonly called PAN. 

4. Your bank savings or current account must be linked to the Demat account. 

5. Your bank account must have a sufficient credit balance to fund the application. While the application amount will not be debited instantly, it will remain locked until the allotment date. If you are allotted the shares, the amount will be transferred from your bank account to the company's account.

And, if you do not get the IPO allotment, the blocked amount will be released, and you can use the money for other purposes. 

How to Apply For IPO Online

You can apply for an IPO online in two ways - through brokers like 5paisa or internet banking. Let's understand each in detail. 

How to Apply For IPO Online - Through Broker

Follow the steps mentioned below to apply for an IPO conveniently through a broker:

1. Login to your online account with the broker. If you do not have an online account, you need to register with your email and phone number and create an account.

2. Locate the IPO tab and go to the current IPO section. Select the IPO name from the current IPO list. 

3. Enter the lot size or the number of stocks you want to bid for. Also, select the bid price. If you want to increase the chances of IPO allotment, prefer bidding at the cut-off price or the maximum price at the upper end of the price band. 

4. Type your UPI ID in the next step and hit the submit button. You will need to approve the transaction on your UPI app, and your bid will be approved by the exchange.

5. Wait for the mandate notification in the UPI app. The application money will remain blocked until the IPO allotment date.    
 

How to Apply For IPO Online - Through Internet Banking

Follow the steps mentioned below to apply for an IPO easily through internet banking:

1.  Log in to the Internet Banking account with your login ID and password. 

2.  Locate the ASBA (Application Supported by Blocked Amount) tab and click on it. 

3.  Click on the 'Apply IPO' tab and select the IPO from the IPO list.

How to apply offline? 

If you do not feel comfortable applying for an IPO application online, you can visit the nearest branch of the broking firm or bank and submit an IPO application. First, you will have to fill out an ASBA application and provide essential KYC details. After that, your funds will get blocked, and the amount invested will be debited after shares are allotted. For example, if you invested your money worth ₹3 lakh and got shares worth ₹1 lakh, only ₹1 lakh would be debited from your bank account. 

What are the benefits of online IPO application?

Online IPO applications offer several benefits. They are:

1. You can save precious time by not running to the broker's office or bank.

2. The online IPO application process is seamless and convenient. 

3. The application amount stays in your account and continues earning interest (only if in a savings bank account) until the allotment date.

4. The entire process is transparent, and you have complete authority. 

The EndNote

Online IPO application saves you time and is more convenient. However, it is your discretion to choose an online or offline mode of application. Choose a SEBI-authorised broker like 5paisa to start your IPO journey. These brokers will help you with a seamless and transparent application process. Research is the key to getting the most out of your investment, so research thoroughly about the company before investing your capital. 

It is effortless to apply for IPOs, as you can readily see from this guide. So, next time, if you find a promising IPO and wish to invest, follow the steps mentioned earlier and start investing!

Click on this link to check the current IPOs and upcoming IPOs and invest as much as you want.