What Are The Best Practices To Invest In An IPO?

4 mins read
Looking for investing in an IPO? But confused about how to do it in the best way? Check out this article to know the best practices while investing in an IPO!

Investing in an IPO is becoming a big thing in the financial marketplace. There are lots of upcoming IPOs that investors are eagerly waiting for. Gaining a profit margin while investing in an IPO can be a tricky process. However, with the right kind of practices and strategies, you can expect some amazing returns. 

Before jumping into the topics, let’s have a quick look at what is IPO:

The process when a private company or a government-owned company raises funds for various corporate uses by offering shares to the public is called an Initial Public Offering (IPO). Before going public, a company has a few shareholders like founders, investors & venture capitalists. As a company goes public, one can easily buy the shares and become an investor. 

Once an investor buys a number of shares, he will be provided with IPO allotment status. An IPO allotment status gives you details about the number of shares applied and allocated to the investors. For any new IPO, the allotment status is available online within a week of the IPO issue closing date. 

Now if you have been investing for quite some time, then you must be knowing about the primary market & secondary market. For all the newbies, let us give you a small detail:

Primary market:

This is a marketplace where the company shares its security via IPO. the securities can be in the form of shares, bonds, etc to the public for the first time.

Secondary market:

In this marketplace, the securities of the companies are traded after it has been offered to the public. In the secondary market, the prices of the securities keep on fluctuating.

Then there is something called the IPO grey market. In this grey market, the trading takes place in an “unofficial” manner before the scrip gets listed in the secondary market. In simple terms, unofficial bidding of a company’s shares happens before the shares get listed.

So if you are interested in investing in any latest IPO, let’s see the best practices that you can follow:

  1. To apply for IPOs with the UPI ID,  link it to your bank account. a. Bank account HDFC 12323353534535 (linked to my PAN) can have multiple UPI IDs linked to it like GPAY, Phonepe, Paytm etc. All these UPIs can be used to apply for an IPO. However, applying from someone else’s UPI may result in the rejection of the application by the exchange.
  2. Do not apply your IPO application via different broking apps with the same demat account
  3. To increase the chances of your allotment,  you can apply via multiple Demat accounts for any current IPO.
  4. Approve the mandate request sent to your UPI application for successfully applying for the IPO
  5. The bidding should be done as early as possible to avoid any last moment delays. There can be chances where users don’t receive a mandate for the IPO application. If the mandate is not received within 6 hours then the user should cancel the existing application and apply for a new one again.
  6. Always bid at a cut-off price. In case of oversubscription, the users with a higher bidding price will have higher chances for IPO allotment
  7. If there are multiple categories opened by the company like SHA, POL, IND, EMP then you should apply once in each of all the categories.
  8. Stay tuned to Angel One’s applications to stay updated with the current status of your application.  Angel one ➡️ IPO ➡️  IPO orders ➡️  Select the application
  9. Always purchase parent company shares. If you have at least 1 share of the parent company in your holdings then you can apply in the SHA category thereby increasing the chances of allotment

To Summaries:

  • Applying for IPOs with the same Pan card via different brokers would result in application rejection by the exchange
  • To increase the chances of allotment apply for the same IPO, you can use multiple Demat accounts like your friends and family
  • Approve the mandate request and send your UPI application mapped with your application number.
  • Cancel and reapply for the IPO if you haven’t received the mandate within 6 hours of placing an order.
  • The bidding should be done at a cut-off price to increase the chances of allotment.

For upcoming IPOs, check Angel One’s list. 

Disclaimer – Angel One Ltd. is just acting as the distributor of the IPO.