Planning to invest in an IPO of a company: Know details before investing

Initial Public Offering (IPO) usually creates a buzz on Dalal Street. Companies going public attract attention due to the potential for high returns and the opportunity to be part of a company’s growth story.

But it is important to note that investing in an IPO requires careful consideration, as it’s not a ticket for great return.

What is an IPO?

An IPO is the process by which a private company sells shares of stock to the public for the first time, transitioning from private to public ownership. 

Why do companies launch an IPO? 

Companies launch IPOs to raise capital, fund growth initiatives, repay debt, and reward early investors and employees who hold stock in the company.

There are two main types of IPOs: fixed price offering and book building offering.

Going public through an IPO increases a company's credibility, and provides access to the public capital markets for growth and expansion. 

You can purchase IPO shares with your Demat or bank account. Some banks offer to open trading, Demat and bank accounts under the same umbrella. Once you have activated your trading and Demat account, you can make investments in IPOs with ease.  

What do you need to invest in an IPO? 

If you are planning to invest in an IPO, make sure you meet the eligibility criteria outlined below:

Must hold a PAN card

Have a valid Demat account

Though a trading account isn’t required to invest in an IPO, it can be essential if you want to sell the share after it gets listed

You can buy IPO shares with Application Supported by Blocked Account (ASBA) or using UPI, ASBA is a facility introduced by the SEBI to facilitate easy trading for IPO applicants. 

How to apply for IPO through Application Supported by Blocked Amounts: 

Log in to net banking: Access your bank’s net banking portal using your customer ID and password.

Find IPO/Rights Issue Section: Look for the IPO or Rights Issue section, usually found under the 'Request' tab or similar.

Select IPO: Choose the IPO you want to apply for from the list of available options.

Fill in details: Provide necessary information like the number of shares you want to bid for, bid price, and date of birth. Some details like your name, PAN, and bank account details might be pre-filled.

Confirm application: Review your application details, confirm the amount to be blocked from your account, agree to terms and conditions, and submit the application.

Wait for allotment: After submitting the application, wait for the IPO allotment process to be completed. If your bid is successful, shares will be allocated to you, and the blocked amount will be debited from your account. If unsuccessful, the blocked amount will be released back to your account.

How to apply for IPO through UPI

Log in to trading account: Access your trading account provided by your broker or trading platform.

Select IPO: Choose the IPO you want to invest in from the available options. This is typically done through the IPO section or by searching for the specific IPO.

Enter application details: Fill out the application form with details such as the price at which you want to apply for shares and the number of lots you wish to bid for.

Provide UPI ID: Enter your UPI ID, which is linked to your bank account. This is essential for processing payments through UPI.

Approve payment request: Once you have submitted your application, your broker will send a payment request to your UPI app. Open your UPI app, approve the request, and authenticate the transaction.

Confirmation: After you approve the payment request, your application will be processed. You'll receive a confirmation of your bid.

Wait for allotment: After submitting the application, wait for the IPO allotment process to be completed. If your bid is successful, shares will be allocated to you. If unsuccessful, any blocked funds will be released back to your account.

Always ensure that you have sufficient funds available in your bank account linked to your UPI ID to cover the application amount. Additionally, double-check all details entered in the application form to avoid any errors.