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How to Invest in an IPO?

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IPO Full Form: Initial Public Offering or IPO is a process through which a privately held company transforms into a public company. IPO is also referred to as a “company going public” as it is the first time when a private organization raises capital by issuing shares to the public.

 A company may require capital for multiple reasons. For example, they may need funds to expand their capacity, to expand their business domestically and internationally, they could be looking at diversifying into new businesses or they may even be wanting to repay loans. All such funding needs can only be met through an IPO.

To list its shares on a stock exchange for the first time, a company needs to meet the requirements of the Securities & Exchange Board of India (SEBI). With the increasing popularity of IPOs over the last few years, investing in IPOs elicits significant interest among the investors. As investment in IPOs could be a good opportunity to grow wealth through listing gains or capital appreciation, let’s read on to learn how to invest in IPO online.

  • Firstly, decide on an IPO you want to apply for. You may go through the company’s Draft Red Herring Prospectus (DRHP), which is a mandatory document that a company going public has to submit to SEBI. It’s a great resource to gather an idea of the company’s business model and future plans.
  • After that, you need to arrange for funds to buy shares of the company whose IPO is opening. You may use your savings to invest in an IPO.
  • A Demat and Trading Account is mandatory for investing in an IPO. Once you open a Demat and Trading account, the shares get credited in your Demat and Trading account in case you receive the allotment.
  • Next, you would be requiring a UPI ID linked to your bank account. Most platforms offering IPO applications, support UPI payments.

How is the price of a share in an IPO determined?

The price of shares to be sold are predetermined, before the launch of the IPO which can be done via two methods:

a) Fixed cost method

b) Book building method

The price of the shares plays a vital role in the market. It cannot be overpriced or underpriced as either can be unfavourable to the company issuing IPO.

Choosing the Right IPO

When considering how to invest in IPO, it is crucial to conduct thorough research. Start by evaluating the company's financial health, including revenue and profitability. Reviewing the prospectus is vital, as it provides insights into the risks and potential of the investment. Understanding the competitive landscape will also help you gauge whether to invest in IPO shares.

Valuation is another critical factor in the decision-making process. Assess whether the initial pricing is reasonable based on the company's earnings potential. This evaluation will guide you in determining whether to proceed with an online IPO application. Be cautious of inflated valuations that may lead to losses.

Finally, establish your strategy for how to apply IPO shares effectively. Determine the amount to invest and whether to apply at the cutoff price or within the specified range. A clear plan will help you navigate the IPO process successfully and maximize your investment opportunities.

How to apply IPO online and offline?

The applicant must-haves:

  • Demat Account Shares are stored in electronic form in a Demat Account. It is compulsory to have a Demat account to invest in an IPO.
  • Trading Account – This is required to sell the shares once the allotment is received. Such an account can be opened with a brokerage firm.
  • UPI ID linked to the bank account – UPI id is required to pay for the applied shares. This is carried out via the ASBA (Application Supported by Blocked Amount) facility.

How to Apply for IPO?

  • Login either on the website or the mobile application of the selected broker and go to the ongoing IPO section.
  • Select the IPO you want to apply for.
  • Select the number of lots you want to bid for
  • Enter the UPI Id
  • Submit the application
  • Visit your UPI app & confirm the payment mandate sent by your broker
  • After successful authentication, amount will be blocked in your bank account
  • If you receive the allotment, blocked amount will be debited and shares will be credited to your Demat account
  • If you do not receive the allotment, blocked amount will be released in your bank account

How to Apply for an IPO Using ASBA?

Applying for an IPO using the Application Supported by Blocked Amount (ASBA) is straightforward. Here’s a quick step-by-step guide:

  1. Ensure You Have a Demat Account: Before applying, make sure you have a Demat account linked to your bank account.

  2. Log into Net Banking: Access your bank’s net banking portal. Look for the IPO section, which allows you to apply directly.

  3. Select the IPO: Choose the IPO you want to apply for from the available options. It’s important to research the company beforehand.

  4. Complete the Application Form: Fill out the form with your details, including the number of shares and your Demat account information. Verify that everything is correct.

  5. Submit Your Application: After confirming your details, submit the application. The funds will be blocked in your bank account until the allotment.

  6. Wait for Allotment Results: Finally, check the allotment results. If allotted, the application amount will be debited; if not, it will be unblocked.

Following these steps simplifies how to apply IPO using ASBA, making it easier to participate in new stock offerings.

How to Apply for an IPO Using UPI?

Applying for an IPO using UPI is a simple process that allows you to invest quickly. Here’s a step-by-step guide to help you understand how to apply IPO using UPI:

  1. Ensure Your Demat Account is Ready: You need a Demat account linked to your bank account.

  2. Log into Your Trading Account: Access your brokerage account where you want to apply for the IPO.

  3. Select the Desired IPO: Browse the available IPOs and select the one you wish to invest in IPO.

  4. Fill Out the Application Form: Complete the form with your details, including the number of shares you want to apply for.

  5. Enter Your UPI ID: Provide your UPI ID when prompted. Ensure it is correctly entered.

  6. Approve the Mandate Request: A mandate will be sent to your UPI app for approval. Accept this request to block the funds for the IPO application.

  7. Check the Allotment Status: After submitting, you can track the allotment status online to know if shares are allotted.

This method streamlines the online IPO application process and ensures secure payment through UPI.

Essential Requirements for IPO Investment    

It’s advisable you do thorough research before bidding on a certain IPO. ‘Bidding’ is the term used for applying in IPO.

You can bid in an IPO online on the platform of your stockbroker. It is necessary to have a Demat account to bid in the IPO.

Let’s check how the bidding takes place online.

  • You should open a Demat account with a stockbroker and maintain sufficient funds in your bank account to bid in IPO.
  • You can visit the IPO section in the trading application of your stockbroker and select the number of lots you want to bid for. Enter UPI ID & accept the request in the UPI application.
  • You could discontinue, modify or withdraw the IPO bidding by contacting your broker.
  • Fill in the other necessary details and submit the application.
  • Once your application is submitted, you get the details such as the IPO application number & other transaction details.
  • If the shares are allotted to you on allotment day, by default they get deposited in your Demat account.
  • In case they aren’t, you’ll receive a refund in your bank account.

Where can I find information about the upcoming IPO?

Now that you’re aware of how to invest in IPOs, you must be wondering where to find out about the upcoming IPOs.

You can login into the BFSL website and gain further knowledge on the same.

Conclusion

To sum up, even though companies create ample buzz in the markets before the launch of an IPO, you should do adequate research on the company you want to invest in.

Companies tend to put in a lot of details in their Draft Red herring Prospectus (DRHP), so go through these documents before you arrive at a decision. Go for companies that have a sustainable business model and reflects profit potential in the future. It’s always wise to invest in such companies. Scrutinize the entire process properly before investing to avoid any kind of rejection. Happy investing!

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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Frequently Asked Questions

What steps do I need to follow to invest in an IPO online?

Answer Field

To invest in an IPO online, you need to open a Demat account, complete the online IPO application, select the desired IPO, and submit your application through your bank's net banking portal or brokerage account.

What is ASBA, and how does it facilitate online IPO investments?

Answer Field

ASBA stands for Application Supported by Blocked Amount. It allows investors to apply for IPOs while blocking funds in their bank accounts. This method facilitates online IPO investments securely until shares are allotted.

Can I track my IPO application status online?

Answer Field

Yes, you can track your IPO application status online through your bank’s website or brokerage platform. Simply enter your application details to view the current status of your online IPO application.

What payment methods can I use for online IPO applications?

Answer Field

For online IPO applications, you can use methods like ASBA through your bank account or UPI for payments. Ensure that your chosen method is supported by your bank or brokerage.

Are there any fees associated with investing in an IPO online?

Answer Field

Typically, there are no direct fees for applying for an IPO online, but brokerage fees may apply. Always check with your broker for any charges related to investing in an IPO online.

What is an IPO, and how does it work?

Answer Field

An IPO, or Initial Public Offering, allows a company to raise capital by offering shares to the public for the first time. This process turns a private company into a publicly listed entity on stock exchanges.

How to Apply for an IPO?

Answer Field

To understand how to apply for an IPO, open a Demat account, select the IPO, enter your UPI ID, confirm the mandate in your UPI app, and submit. Check the IPO allotment status after submitting your application.

How can I find upcoming IPOs to invest in?

Answer Field

To find upcoming IPOs, check your brokerage platform’s IPO section or reliable financial news sites. These sources provide information on IPO announcements, aiding decisions on how to invest in an IPO.

What are the eligibility criteria for participating in an IPO?

Answer Field

Eligibility criteria for how to invest in an IPO include having a Demat account, adequate funds, and meeting any regulatory requirements. Ensure all criteria are met before submitting your application.

What payment methods can I use to invest in an IPO online?

Answer Field

For how to apply for an IPO, use UPI or ASBA for payment. These methods block funds until allotment. Verify your UPI ID to ensure the payment process completes successfully when applying for an IPO.

How can I track the performance of my IPO investment after purchase?

Answer Field

To track how to invest in an IPO performance, monitor stock price changes on your brokerage platform. Your trading account reflects price movements once the IPO lists on the exchange.

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