Submission of an Initial Public Offering (IPO) application helps eligible investors participate in shares offered by companies looking to list themselves on stock exchanges. The process of submitting an IPO application usually involves use of mechanisms such as Application Supported by Blocked Amount (ASBA) and Unified Payments Interface (UPI) mandates for funds blocking and bidding prior to listing. Applications may be placed using internet banking platforms, broker applications or participating intermediaries. Awareness of the IPO application process helps in submitting applications in an accurate manner.
Eligibility Criteria for Applying for an IPO
In order to apply for an IPO in India, one needs to be 18 years old, hold a valid PAN card, have a Demat account and hold a bank account that facilitates ASBA or is linked to a UPI enabled application. As per regulatory norms of the Securities and Exchange Board of India (SEBI), investors are usually expected to meet certain eligibility criteria before participating in IPO issue. Satisfying the eligibility criteria helps in submitting the application successfully. However, applications might still get rejected due to inconsistencies in the submitted information or any technical issue or even validation related problems.
In order to apply, make sure that you meet the following criteria:
- Valid PAN Card: This is a requirement for capital market transactions
- Active Demat Account: Needed to receive allotted shares
- Trading Account: Helps to make bids through broker platforms
- Bank Account: Should facilitate ASBA or be linked to a UPI application
- Age Criterion: The Retail Individual Investor (RII) has to be 18 years or older
List of Mandatory Documents to Apply for an IPO
Preparing the necessary documents helps in successfully applying for an IPO within the allotted bidding time period. Below are the documents which are required for participation in an IPO application process.
IPO Document Checklist
| Document Name | Purpose of Document in IPO Application | Requirement Status |
|---|---|---|
| PAN Card | Identification for tax compliance | Mandatory |
| Aadhaar Card | Identification for opening Demat account | Mandatory |
| Demat Account | Beneficiary Owner ID (BOID) of shares | Mandatory |
| Bank Account | Source for ASBA funds blocking or release | Mandatory |
| UPI ID | Mandate approval for applications using UPI | Mandatory (UPI route) |
Make sure that PAN details are linked to Demat account, bank account and UPI application, wherever applicable. Inconsistency in the submitted information leads to rejection of the application.
IPO Application Process: Step-by-Step Guide
Step-by-step Guide
Step 1: Selection of an IPO Issue
Review the IPOs available for application and read Red Herring Prospectus (RHP) to understand the business, financial information and risks involved.
Step 2: Determination of Lot Size and Price
Determine the lot size for applying in the IPO. Investors may go for the cut-off price option in case it is permissible under the regulations.
Step 3: Submission of Application
Enter the Demat account details and bid information through broker application or internet banking platform or any other intermediary.
Step 4: Approving the Mandate
If the application is submitted through the UPI route, the investor has to approve the mandate request within the stipulated time period. The funds remain blocked in the account till the completion of allotment process.
Step 5: Waiting for Allotment Status
The registrar approves allotment on the basis of approved basis of allotment. For oversubscribed issues, allotment is usually done as per the rules laid down by SEBI.
Step 6: Release of Funds
If the shares are allotted, the corresponding funds are debited and shares are transferred to the Demat account. Otherwise, the blocked funds are released.
How to Apply for an IPO via ASBA
Application Supported by Blocked Amount (ASBA) is a method used by Self Certified Syndicate Banks (SCSBs) through which the investor blocks his/her funds in the bank account till the time the allotment is done. Applications may be submitted through the internet banking facilities of eligible banks.
Step-by-step Guide
Step 1: Login to Internet Banking
Visit the internet banking portal and enter the IPO or investment page.
Step 2: Opt for ASBA Services
Choose the ASBA facility and view the IPO issues currently available.
Step 3: Entering Applicant Information
Enter the following details: PAN number, Demat account number, Investor category, Bid quantity
Step 4: Entering Bid Information
Enter the lot size and bid information. If allowed, you may enter the cut-off price option.
Step 5: Confirming Fund Blocking
Submit the application. The specified amount gets blocked in the bank account till the completion of allotment.
How to Apply for an IPO via UPI
Unified Payments Interface (UPI) is an eligible method for submitting applications for retail investors through participating intermediaries. UPI mandates allow investors to approve fund blocking electronically while submitting an IPO application.
Step-by-step Guide
Step 1: Placing the Bid
Login to broker application and choose the IPO issue. Enter: Lot size, Bid information, UPI ID
Step 2: Exchanging Application
The intermediary sends the application to the exchange. The mandate request is sent to the UPI application linked to the bank account.
Step 3: Approving the Mandate
Open the UPI application and check the mandate request pending for approval. Approve the mandate using UPI PIN.
Step 4: Checking Application Status
The application status may be checked through the broker application.
How to Apply for an IPO via Broker Applications
Broker applications may come with an integrated IPO application interface which allows investors to submit bids and mandates digitally. The process may vary across the intermediaries.
Step-by-step Guide
Step 1: Accessing IPO Section
Login to the broker application and go to the IPO section.
Step 2: Reviewing the IPO
Check the following information: Price band, Issue size, Subscription dates, Minimum lot size
Step 3: Entering Bid Information
Enter the following details: Bid quantity, Bid price, UPI details
Step 4: Submitting the Application
Complete the application.
How to Apply for an IPO Off-line
Although online submission is the most common method of applying for IPOs, some investors still prefer the physical method of application submission.
Step-by-step Guide
Step 1: Getting the Form
Collect the ASBA application form from the eligible bank branch.
Step 2: Filling in the Details
Enter the following information: PAN number, Demat account number, Bid quantity, Bid price
Step 3: Bank Authorisation
Complete the ASBA authorization section.
Step 4: Submission of the Form
Submit the form to the authorized bank official.
Why Should Investors Consider IPOs?
Depending on their financial goals, investment horizon and risk tolerance, investors should look at IPOs for the following reasons.
- Access to New Companies: The main reason behind investors applying for IPOs is getting shares in the company which transitions from being privately owned to public listing
- Diversification of Portfolio: In order to get exposure to different types of companies, participation in IPO helps in this regard
- Regulatory Disclosure: The company which issues its shares through an IPO has to submit various information in regulatory-compliant offer documents like Red Herring Prospectus (RHP)
What Happens After Applying for an IPO?
After the approval of ASBA request or UPI mandate, the application moves to the post-submission stage. Awareness about this process helps in keeping track of application status and timings.
IPO Allotment Timeline
| Timeline | Activity |
|---|---|
| T-Day | Funds are blocked in the bank account |
| T+1 | Basis of allotment is finalized |
| T+2 | If shares are not allotted, funds are released |
| T+2 | If shares are allotted, they are credited to Demat account |
| T+3 | Shares are available for trading after listing |
If the applications exceed the number of shares, allotment takes place on the approved basis of allotment.
Potential Considerations and Risks Involved in IPOs
Considerations vs Risks
| Potential Considerations | Risks |
|---|---|
| Opportunity to invest in new companies | Volatility |
| Portfolio diversification options | Price fluctuations |
| Investment in primary issuance | Oversubscription |
| Availability of regulatory disclosures | Operating history might not be enough in some cases |
Common Mistakes in IPO Applications
The applications may get rejected due to any inconsistency in the entered information or due to procedural mistakes. Some of these are listed below:
- Inconsistencies in PAN Details: PAN details should be consistent in the bank, Demat account and broker application
- Payment Through Third-Party: If the applications are made through the UPI route, the UPI ID must belong to the applicant only
- Delay in Approving the Mandate: The mandate should be approved within the stipulated time
- Incorrect Category of Investor: Applications by Retail Individual Investors (RII) should be submitted in the relevant category as per the applicable limits
Conclusion
In India, the application process in IPO is mainly done through ASBA or UPI route. Maintaining consistency in PAN details, Demat details and banking details helps in submitting the application properly. Understanding of timelines, allotment procedure and post-application process helps in making an IPO application.
FAQs on IPO Applications
How to buy IPO stocks online?
Investors can submit their applications online through participating brokers, internet banking applications that facilitate ASBA service or UPI enabled applications.
Can we buy an IPO before it is publicly traded?
Access to unlisted securities is based on the regulatory guidelines, availability and eligibility conditions.
Is the money invested in an IPO refundable?
If the shares are not allotted, the blocked funds are released by the bank once the allotment is completed.
When can we buy IPO stocks?
Investors can apply during the subscription period indicated in the offer documents or purchase IPO stocks after listing on the stock exchange.
How to invest in an IPO for Beginners?
Individuals need to have a PAN card, Demat account, bank account and access to ASBA or UPI enabled application platforms.
Is buying an IPO a Good Idea?
Whether buying IPO is a good investment decision or not depends on an investor’s financial goal, investment horizon, risk tolerance and the evaluation of the company issuing the stock.
What Happens if an IPO Gets Oversubscribed?
If applications are greater than the number of shares issued, allotment takes place as per the basis of allotment.
How to Apply for an IPO Online in the Name of a Minor?
Guardian may create a Demat account in the name of a minor and proceed with the IPO application process.
Disclaimer
This article is solely for educational purpose and should not be considered as investment advice or any recommendation to invest in any financial product or security.
