How to Invest in an IPO Online

Initial Public Offering or IPO is a process through which a privately held company transforms to a public company. IPO is also referred as a “company going public” as it is the first time when a private organization raises capital by issuing shares to the public. A company may require capital for multiple reasons. For example, they may need funds to expand their capacity, to expand their business domestically and internationally, they could be looking at diversifying into new businesses or they may even be wanting to repay loans. All such funding needs can only be met through an IPO.

To list its shares on a stock exchange for the first time, a company needs to meet the requirements of the Securities & Exchange Board of India (SEBI). With the increasing popularity of IPOs over the last few years, investing in IPOs elicits significant interest among the investors. As investment in IPOs could be a good opportunity to grow wealth through listing gains or capital appreciation, let’s read on to learn how to invest in IPO online.

  • Firstly, decide on an IPO you want to apply for. You may go through the company’s Draft Red Herring Prospectus (DRHP), which is a mandatory document that a company going public has to submit to SEBI. It’s a great resource to gather an idea of the company’s business model and future plans.
  • After that, you need to arrange for funds to buy shares of the company whose IPO is opening. You may use your savings to invest in an IPO.
  • A Demat and Trading Account is mandatory for investing in an IPO. Once you open a Demat and Trading account, the shares get credited in your Demat and Trading account in case you receive the allotment.
  • Next, you would be requiring a UPI ID linked to your bank account. Most platforms offering IPO applications, support UPI payments.

How is the price of a share in an IPO determined?

The price of shares to be sold are predetermined, before the launch of the IPO which can be done via two methods:

a) Fixed cost method

b) Book building method

The price of the shares plays a vital role in the market. It cannot be overpriced or underpriced as either can be unfavourable to the company issuing IPO.

What is the process of investing in an IPO Online?

The applicant must-haves:

  • Demat Account Shares are stored in electronic form in a Demat Account. It is compulsory to have a Demat account to invest in an IPO.
  • Trading Account – This is required to sell the shares once the allotment is received. Such an account can be opened with a brokerage firm.
  • UPI ID linked to the bank account – UPI id is required to pay for the applied shares. This is carried out via the ASBA (Application Supported by Blocked Amount) facility.

Process to apply

  • Login either on the website or the mobile application of the selected broker and go to the ongoing IPO section.
  • Select the IPO you want to apply for.
  • Select the number of lots you want to bid for
  • Enter the UPI Id
  • Submit the application
  • Visit your UPI app & confirm the payment mandate sent by your broker
  • After successful authentication, amount will be blocked in your bank account
  • If you receive the allotment, blocked amount will be debited and shares will be credited to your Demat account
  • If you do not receive the allotment, blocked amount will be released in your bank account

How to Bid in an IPO?

It’s advisable you do thorough research before bidding on a certain IPO. ‘Bidding’ is the term used for applying in IPO.

You can bid in an IPO online on the platform of your stockbroker. It is necessary to have a Demat account to bid in the IPO.

Let’s check how the bidding takes place online.

  • You should open a Demat account with a stockbroker and maintain sufficient funds in your bank account to bid in IPO.
  • You can visit the IPO section in the trading application of your stockbroker and select the number of lots you want to bid for. Enter UPI ID & accept the request in the UPI application.
  • You could discontinue, modify or withdraw the IPO bidding by contacting your broker.
  • Fill in the other necessary details and submit the application.
  • Once your application is submitted, you get the details such as the IPO application number & other transaction details.
  • If the shares are allotted to you on allotment day, by default they get deposited in your Demat account.
  • In case they aren’t, you’ll receive a refund in your bank account.

  • Where can I find information about the upcoming IPO?

    Now that you’re aware of how to invest in IPOs, you must be wondering where to find out about the upcoming IPOs.

    You can login into the BFSL website and gain further knowledge on the same.

    Conclusion

    To sum up, even though companies create ample buzz in the markets before the launch of an IPO, you should do adequate research on the company you want to invest in.

    Companies tend to put in a lot of details in their Draft Red herring Prospectus (DRHP), so go through these documents before you arrive at a decision. Go for companies that have a sustainable business model and reflects profit potential in the future. It’s always wise to invest in such companies. Scrutinize the entire process properly before investing to avoid any kind of rejection. Happy investing!

    Open Demat & Trading Account

    By continuing, I confirm that I have read and agree to the Terms & Conditions and Privacy Policy.