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Whether you are a stock investor or not, you might have heard the phrase ‘a company went public’ either online or in a newspaper advertisement. What does going public mean? In the simplest terms, ‘going public’ is the process of a private company raising capital by issuing shares for the first time.

In a private company, the number of shareholders is limited by law. However, it has the option of raising capital from people by making them shareholders in the company and converting into a public limited company. When a private company approaches people to invest in exchange for a shareholding in the company, it launches the first offer called an IPO or Initial Public Offering. Today, we are going to discuss IPOs and also look at how to invest in an IPO.

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P.S: You can invest in upcoming IPOs on Groww now with your UPI ID. Login via desktop, and go to https://groww.in/ipo to apply for the latest IPOs.

Read more: Steps to Invest in an IPO on Groww

How to apply for an IPO online?

You can apply for an IPO online via ASBA facility available with most banks or UPI. Here’s how you can apply for an IPO online through both the facilities:

How to apply for an IPO online through ASBA

You can apply on your bank’s website throughout the online ASBA facility. ASBA stands for Application Supported by Blocked Amounts (ASBA). It holds funds in your account without actually debiting it. You can generally find the ASBA facility in e-services or net banking services option. ASBA facility allows you to invest in FPOs and IPOs as it will show all the live issues currently.

Here we will be using screenshots and examples from HDFC Net Banking ASBA facility. The steps are more or less the same across banking platforms

Step 1: Log in to your net banking account using your customer ID and password.

Step 2: Go to the request tab on the left side of the screen.

Step 3: Scroll down and find the IPO/Rights Issue option. 

Step 4: On the next screen you will see a list of IPOs and rights issue live. Click on ‘Apply’ for the IPO you want to apply for.

Step 5: The next screen will request some information from you. The number of shares you want to bid for, your bid price, date of birth. 

Some details like your name, PAN number, bank account number and name, branch, nationality and residential status will be pre-filled. These details cannot be altered here if need be.

The information asked for under Depository details can be found in your Consolidated Account Statement (CAS) as well.

Step 6: Once you proceed, you will be asked to confirm the amount to be blocked from your account, agree to necessary terms and conditions and submit the IPO application

How to apply for an IPO via UPI

The process of applying online for shares in an IPO is very simple:

Step 1: Login to your trading account and select the IPO that you want to invest in.

Step 2: Enter the price at which you want to apply for shares and the number of lots (explained below in the blog)

Step 3: Fill the application form completely and provide your UPI ID

Step 4: Approve the block funds request on the UPI app.

Step 5: Done.

Accounts Required to Apply for an IPO Online

You need the following three accounts to invest in an IPO and trade them in the secondary market eventually:

  1. Demat Account – where the shares are stored in an electronic form. It is mandatory to have a Demat account to invest in an IPO.
  2. Bank Account – to make payment for the applied shares. This is done via the Application Supported by Blocked Amount (ASBA) facility (explained below).
  3. Trading Account – this is needed to invest in an IPO online. You can open this account with a brokerage firm or a company that offers stock trading facility.

Funding Your IPO Application

The process of buying shares in an IPO is different from that in the secondary market. Regardless of a fixed price or book building issue, usually, the number of shares allotted is lower than that applied for.

Once you apply for the IPO online, regardless of the method (ASBA or UPI), the amount will get blocked for use from your bank account. It will show up in your account balance but will not be available for use/withdrawal. If your IPO application is accepted, the money will get debited after the allotment is finalised.

Otherwise, the amount will be released and you will be able to use the same.

Summing Up

There are many things that you need to know before investing in an IPO. We hope that this article helped answer all your questions about how to purchase an IPO. Remember, while companies try to create a buzz in the markets just before launching an IPO, you need to ensure that you research the company thoroughly before investing. Also, understand the entire process well and fill the application form correctly to avoid rejection.

Happy Investing!

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Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.