How to invest in an IPO

An Initial Public Offering (IPO) gives investors the opportunity to buy shares of a company before they are listed on a stock exchange. When a company launches an IPO, it invites investors to subscribe to its shares at a specified price or within a price band mentioned in the offer document.

For an investor, applying for an IPO is a fairly simple online process. You generally need a PAN, a demat account, a bank account, and a valid UPI ID linked to your bank account. Applications are processed through the ASBA (Application Supported by Blocked Amount) mechanism, under which the application amount is blocked in your bank account rather than being paid upfront.

What is an IPO?

An IPO means that a private company sells its shares to the public for the first time. Once the IPO is completed, the company's shares can be listed and traded on a stock exchange such as the NSE or BSE. Investors may apply for shares during the IPO subscription period. Applying for an IPO does not guarantee that shares will be alloted to you. If an IPO is oversubscribed, shares may be allotted according to the applicable allotment process.

How to invest in an IPO?

Find an IPO you want to apply for

Start by checking the IPOs that are currently open or are scheduled to open. Look at important details such as:

• IPO opening and closing dates
• Price band
• Lot size
• Minimum investment amount
• Fresh issue and offer for sale
• Financial performance
• Objects of the issue
• Risk factors

You can find these details in the company's offer documents. Reading the Red Herring Prospectus (RHP) can help you understand the company and the proposed issue before applying.

Also Read: How are IPO Valued: A Quick Guide for Retail Investors

Check the IPO details

Once you have shortlisted an IPO, understand how much you need to invest. For example, suppose an IPO has a price band of ₹95 to ₹100 per share and a lot size of 150 shares. The minimum application amount at the upper end of the price band would be: ₹100 × 150 = ₹15,000 The actual lot size, price band, and application amount vary from one IPO to another, so check the details of the specific issue before applying.

Open the IPO section on your investment platform

Log in to your broker's website or mobile app and look for the IPO section. Select the IPO you want to apply for and enter the required details, such as the number of lots you want to bid for and your bid price, where applicable. For a book-built IPO, investors can generally place their bids within the specified price band. Some platforms may also offer a cut-off option for eligible retail investors.

Enter your UPI ID

If you are applying through UPI, enter your UPI ID linked to your bank account. After submitting the IPO application, you should receive a UPI mandate request. You need to approve the mandate using your UPI app and UPI PIN. The amount required for your application is then blocked in your bank account. Make sure you approve the mandate within the applicable deadline. NSE's current IPO issue information also advises investors to submit UPI applications well before the deadline to avoid last-minute technical issues.

Check your application status

After submitting the application and approving the UPI mandate, you can check the status of your IPO application through the relevant platform or the registrar, depending on the facility available for that issue. The blocked amount remains in your bank account during the allotment process. If shares are allotted, the required amount is debited. If shares are not allotted, the blocked amount is released as per the IPO process. ASBA is designed so that the application money remains in the investor's account until the allotment is finalised.

Check the allotment and listing

Once the allotment process is completed, you can check whether shares have been allotted to you. If you receive an allotment, the shares are credited to your demat account. The company then gets listed on the stock exchange on the scheduled listing date. After listing, investors can hold the shares or sell them through their trading account, depending on their investment objectives and market conditions.

FAQs

Can I invest in an IPO without a demat account?

No. A demat account is required to receive shares allotted to you in an IPO.

Can I apply for an IPO using UPI?

Yes. Retail investors can use UPI as a payment mechanism for IPO applications through supported intermediaries. The UPI ID should be linked to the applicant's bank account.

Does applying for an IPO guarantee allotment?

No. If an IPO receives more applications than the shares available in a category, allotment is carried out according to the applicable rules. Therefore, submitting an application does not guarantee that you will receive shares.

What happens to my money if I don't get an IPO allotment?

The application amount is generally blocked in your bank account during the IPO process. If shares are not allotted, the blocked amount is released as per the applicable ASBA process.

Can I apply for an IPO after the closing date?

No. IPO applications must be submitted within the issue's specified bidding period. Investors should also check the applicable deadline for UPI mandate confirmation.