What is an IPO?
An initial public offering (IPO) is the process of selling shares of a private firm to the general public in the form of a new stock issuance. An IPO allows a company to raise funds from the general public. Since the transition from a private to a public firm often includes a share premium for current private investors, it might be a crucial time for private investors to completely realise rewards from their investment. Meanwhile, public investors are permitted to participate in the offering.
Who can apply?
Anyone above the age of 18 can apply for an IPO. A PAN and a bank account are required to apply for an IPO.
There are two methods for submitting an IPO application:
- Using a trading account
A trading account is required. It allows you to buy and sell stocks on the stock exchange.
Step 1: Log in and make a decision
Begin by signing in to your trading account. You must now select the IPO in which you wish to invest. However, make sure you conduct preliminary research first. Determine whether the IPO is worthwhile to invest in.
Step 2: Put in your order
Using the trading account, choose the amount of shares you want. The price of each share issued in a fixed-price IPO is predetermined. In the event of a book-building IPO, you must choose a price from the supplied price range.
(While the preceding procedure is completed entirely online, some brokers accept orders over the phone as well)
Step 3: Verification
The stock exchange will now check the specifics of your order. This comprises the share price, the availability of a sufficient number of shares, and other pertinent information. If everything verifies well, the exchange will confirm your order.
Step 4: Allotment
The IPO shares assigned to you will thereafter be placed in your demat account. You can even sell the allowed shares if you so desire. However, this is only achievable when the company has been listed on the stock exchange.
- Using a bank account
There are two ways to apply for an IPO using your bank account: offline and online. Here’s a basic rundown of how it works-
The offline process-
Step 1: Go to a branch of your bank that has an IPO investment facility. Since, only a few branches provide this service thus, it is essential to phone and check with your bank ahead of time.
Step 2: Complete the Application Supported by Blocked Account (ASBA) form. You must enter your bank account number, PAN number, and demat account information. Submit the completed form to the branch and pick up the acknowledgement slip. Follow up on your ASBA status using the reference number on the slip.
Step 3: Submit an application to invest in your preferred IPO. Mention the quantity of shares you desire and the amount you are willing to pay. Fill up the details correctly and make sure you have enough money in your associated bank account. If you are unable to do so, your application may be rejected.
Step 4: The bank will place a hold on the amount of the application in your account (as per the ASBA facility). It will then submit your IPO application to the stock exchanges you specify.
The online process:
Step 1: Apply online by logging into your internet banking account. It is recommended that you complete the one-time registration process in order to link your demat account, PAN, and other information
Step 2: Submit your proposal for an IPO. At this point, you must decide which IPO to invest in. Mention the number of shares you want to purchase as well as the price you are willing to pay. You may be allowed to submit numerous investment bids in the IPO at the same time. Before you begin, double-check the quantity of bids allowed.
Step 3: Remember that ASBA is required for online IPO applications. Check that your account has a sufficient balance. Fill in your bank account, demat account, and other information. Before confirming your order, it is a good idea to check for any irregularities.
Step 4: Save the generated unique transaction number. Use that for questions about your IPO investment.