How to Apply for an IPO Online & Offline

Running a business is no child's play. Even if you have been managing your inflow of money and execution of plans somehow, there comes a time when you will need external funding, be it for expansion or diversification of the business. While there are options of bringing in an angel investor or taking a professional loan from a bank, such routes don't always have the best interest for the borrower.

Many companies choose to go with Initial Public Offering (IPO) in such a situation. IPO has become quite prevalent as many companies have launched their IPOs in the last few years.

However, being an investor, there could be a possibility that you would not be aware of how to apply for an IPO. If you are sailing in the same boat, let's find the answers in this post.

What is an IPO?

IPO stands for Initial Public Offering. It is a process that transforms a privately owned company into a public entity. When a firm is private, 100% of shares are owned by the stakeholders and the owners of the company.

However, the moment it becomes public, it gets listed on a stock exchange. Once this happens, a part of the company's shares become available for investors, who get to put their money in the IPO during the subscription period.

Eligibility Criteria for IPO Application

Before you consider investing in an IPO, there are some eligibility criteria that you must fulfil, such as:

• You should be an approved and eligible investor as per the Securities and Exchange Board of India (SEBI) guidelines. Currently, four types of investors can put their money in an IPO: Employees, Retail Individual Investors, Non-Institutional Buyers (NII), and Qualified Institutional Buyers (QIB).
• You must own a trading and a Demat account with a recognised depository participant.
• You must have a Permanent Account Number (PAN).
• You should link your Demat account to your current or savings account.
• Your bank account should have enough balance to fund the IPO investment.

Requirements to Apply for an IPO

To apply for an IPO, you would need the following things:

• A Demat Account: It is vital to have a Demat account for an IPO investment. This is the place where your shares will get stored once they have been allotted.
• Trading Account: A trading account is mandatory before applying for IPO online. You can get this one opened with any depository participant that is certified by SEBI.
• Bank Account: You must have a bank account to pay for the applied shares. The deduction takes place through the Application Supported by Blocked Amounts (ASBA) method, wherein a specific amount of money gets blocked based on the number of shares you bid. Once you receive the allotment, the money gets debited from your account. And, if you are allotted fewer shares than you had bid for, the rest of the amount will get unblocked.
• UPI ID: You can link your UPI ID to your bank account. You can either create a new one or use an existing ID.

How to apply for an IPO online?

There are two different ways to apply for an IPO online: through internet banking or the broker's website.

Apply for IPO Online: Through Internet Banking

If your internet banking is active, you can apply for an IPO through these methods:

• Log into your internet banking account by using the login username and password.
• Look for the ASBA tab and click it.
• Choose the 'Apply IPO' option and select the company you wish to bid
• Enter the asked details, such as the PAN and your name
• Put in the bid quantity and price, and then click Submit.

If you submit your bid before 2 PM on a working day, it will be accepted on the same day. If not, it will get scheduled for the succeeding day.

Apply for IPO Online: Through Broker

You can even apply for an IPO through a broker conveniently. Here are the steps to do the same:

• Visit the broker's website or app and log into your account (if you are not registered with any broker, you will have to complete the signup process first)
• Look for the IPO tab and visit the current IPO section.
• There, choose the company for which you would like to bid for
• Enter the number of stocks or the lot size you wish to bid for and choose the bid price (to increase the probability of allotment, bid at the maximum price or the cut-off price)
• Enter your UPI ID and click the Submit option
• Open the UPI app and approve the transaction.

Wait until you receive a mandate notification in your UPI app.

How to apply for an IPO offline?

If you don't want to apply for the IPO application online, you can get this done offline as well. For this, you will have to:

• Visit the nearest branch of your bank or the broking firm
• Fill out the ASBA application form and provide KYC details
• Your funds will get blocked, and once shares have been allotted, the amount will get debited from your account.

Frequently Asked Questions (FAQs):

Q. Can a beginner apply for IPO?

Yes, a beginner can apply for an IPO. It has become effortless to invest in an initial public offering. Whether you want to invest online or offline, follow the steps mentioned above and have everything required. Once done, you will be good to go with the IPO investment.

Q. How can I buy IPO before it goes public?

To buy the IPO before it goes public, ensure you have a Demat account and a trading account. Other than that, you must meet all the requirements of eligibility. And then request shares of a company that is about to launch its IPO and place an order. If you are lucky enough, you will get the allotment. Or else you will get your money back.

Q. How much should I invest in IPO?

Generally, your investment amount can be at most Rs. 2 lakhs. Retail individual investors have got the allocation of 35% of shares of the total issue size.

Q. Is buying IPO a good idea?

Despite being a well-acknowledged investment instrument, it is true that IPO is only for some. You must not invest in a company's IPO just because it has positive attention. If it has an extreme valuation, it could mean that the investment's reward and risk are not favourable enough at the current price.

Q. Are IPOs high-risk?

If you wish to invest in a new company, you must have a high-risk tolerance for it, as shares could be volatile in the initial few months once the IPO is launched.

Q. Can you sell IPO shares immediately?

Basically, yes, you can sell IPO shares. If you have bought shares in an open market on the day of its IPO, you can buy and sell whenever you want. But, if you had taken part in the IPO and got shares at the cut-off price before the first day of trading, you will have to adhere to a lock-up period.

Q. Is there any loss in IPO?

Before original holders and buyers of the IPO stock can liquidate their positions, the company can bring a no-sell period, preventing instant selloffs. During this phase, the stock's price can decrease; thus, it can result in a loss.

Q. Is IPO money refundable?

No, IPO money is not refundable. It will get deducted or unlocked after the allotment of the shares. Once you have applied for the public offering, your amount will get blocked in the account. You will not be able to withdraw this money.

Q. How do you know if an IPO is overpriced?

You can find out whether an IPO is overpriced by dividing a company's stock price by its sales per share and net income per share. If the ratios are on the higher end than the company's competitors, the stock could be overpriced.

Q. Why does IPO get rejected?

Your IPO can only be accepted if you provide the correct details about your PAN number or Demat account. Your application can get rejected if there is a mismatch of numbers and names on the bank account and the PAN card. Another reason behind the rejection could be you applying multiple times with the same name for the same IPO.

Q. Can I sell IPO on listing day?

No, you cannot sell an initial public offering on a listing day. The trading begins when the market opens. Thus, you can sell your shares after the trading session has begun, not before it.

Q. How many lots should I apply for IPO?

As per the SEBI mandate, you can apply for one lot of shares with one account and documents.