Applying for an IPO
(Initial Public Offering) means buying shares of a company that is offering its
stock to the public for the first time. Here’s a step-by-step guide on how to
apply for an IPO:
1.Understand
What an IPO Is
IPO: A company decides to sell shares to the
public to raise funds. Buying these shares means you own a part of the company.
Shares: A share is a unit of ownership in the
company.
2.Choose a
Company’s IPO to Invest In
Companies that want to go public announce
their IPO dates. You can find this information on financial news websites, stock exchanges,
or brokerage platforms.
Research the company,
its business model, financials, and growth potential to decide if it’s a good
investment for you.
3.Have a
Trading and Demat Account
Demat Account: This account holds your
shares electronically. You cannot apply for an IPO without a Demat account.
Trading Account: This account allows you to
buy and sell shares. Most brokers offer both Demat and trading accounts
together.
If you don’t have these accounts, you need
to open one with a registered stockbroker.
4.Know the IPO Application Process
There are generally three ways to apply for
an IPO:
a) Through Online
Banking (ASBA – Application Supported by Blocked Amount)
- Log in to your net banking account and
look for the “IPO Application” option.
- Select the company’s IPO you want to apply
for.
- Enter the number of shares you wish to buy
and the price (usually within a given price range).
- The required amount will be blocked in
your bank account but not deducted unless you are allotted the shares.
b) Through Your
Broker’s Online Platform
- Most brokers have an IPO section in their
online trading platforms or apps.
- You can apply by selecting the IPO,
entering the details, and confirming your application. The funds will be
blocked through your linked bank account (ASBA).
c) Through Paper Application (Offline
Method)
Visit
your broker’s office or a designated bank branch, fill out an IPO application
form, and submit it.
5.Bid for
Shares
Lot Size: IPOs require you to bid for shares
in lots. A lot is the minimum number of shares you can apply for. For example,
if a company’s lot size is 15 shares, you have to apply for at least 15 shares.
Price Range: The company may announce a
price range. You can either bid at the lowest price (called the “floor price”)
or the highest price (called the “cap price”). If you bid at the highest price,
you are more likely to get shares if there is demand.
6. Wait for the Allotment
-
After the IPO closes (usually in a few days), the company will review all the
bids and decide who gets the shares. If the IPO is oversubscribed (more people
apply than the number of shares available), you may only get a partial
allotment or no shares at all.
- You’ll get a notification via email or SMS
if shares are allotted to you.
7. Refund or Share Allotment
- If you are allotted shares, they will be
credited to your Demat account.
- If you don’t get any shares, the blocked
amount will be released in your bank account.
8.Listing Day
- The company’s shares will get listed on
the stock exchange (like NSE or BSE). On this day, the shares will start
trading, and you can choose to sell your shares or hold them for the long term.
- The share price may fluctuate based on
demand and market conditions.
Key Points
to Remember
ASBA: Ensures that
your money is only blocked, not deducted, until shares are allotted.
Oversubscription**:
If more people apply than shares available, not everyone gets shares.
Risk: Investing in
IPOs can be risky as the share price can go up or down once listed on the stock
market.
By following these
steps, you can apply for an IPO and participate in the company’s public
offering.
