Time and again, the media buzzes with news of an IPO – an initial public offering, and the investing public goes crazy! The craze for IPOs happens because an IPO can potentially bring high returns; it represents a chance to be a part of a potential business success story. Today, it is easy to subscribe to an IPO in a few simple steps, and online and offline application options are available from leading broking houses.
Start with the Basics
- Have your documents in place. Any adult interested in applying to an IPO must have a PAN card and a valid Demat cum trading account. Subscribing to an IPO does not require you, the investor, to have a trading account. A Demat account alone suffices. However, if you want to sell the shares on a listing, a trading account is required. This is the reason why brokers recommend opening a trading account along with a Demat account.
- Do your research. To identify an IPO,you might be interested in, begin by researching company information soundly, to determine its plans and prospects. Or, you might be drawn to a particular industry where there are strong investment flows, a sunrise sector which has seen many startups in recent times,and identify prospects for particular IPOs in that industry. Either way, thorough research is critical. Do not be swayed by rumours or tips! Study the company and decide for yourself. If you struggle, you can take the help of your broking firm. Leading service brokers such as Angel One offer research and advisory services in these areas in addition to handling your IPO application.
Two Ways to Apply
Most leading broking services offer two options for applying for an IPO.
- Online IPO Application: Customers of broking services can apply for IPO shares online through its trading website or a mobile trading app. An online IPO application is an easy and convenient way of applying for a stock exchange-listed IPO. Online IPO applications are preferred because client data is uploaded from the trading/demat account, thereby thus reducing application time and simplifying the form fill-up process.
- Offline IPO Application: Clients can also subscribe to an IPO in person by visiting the nearest branch of their broking firm.
In both cases, you have to fill an Application Supported by Blocked Amount (ASBA) application form, and provide necessary KYC details. The ASBA facility is mandatory, as it authorizes banks to block money in your bank account for this purpose. While it sounds complicated, it actually simplifies the process.
Depending on your funds and share price, you decide to apply for a certain number or “lot”‘ of shares. With ASBA, the amount of money, to the extent of your application is blocked from your bank account. On the allotment day, the amount is debited, but only to the extent of the shares allotted. So if you applied for shares worth Rs. 2 Lakhs, and got allotted shares worth only Rs. 1 Lakh, then only Rs. 1 Lakh gets debited from your account, while the remaining amount unblocked from the designated bank account.
The ASBA form is available both in hard copy or Demat Format. It requires your PAN, Demat account number, bank account number and bidding details for the IPO in the application.
After successfully applying in an IPO, you get an acknowledgement slip with a reference number. The next step is to get ready to bid for an IPO!