How to Apply IPO Online?

Investing in an IPO (Initial Public Offering) can be highly lucrative, offering significant growth potential and substantial returns in a relatively short period. However, before diving into IPO investments, it's crucial to understand the buying process. This article comprehensively answers all your questions about purchasing IPOs, equipping you with the knowledge and expertise needed to make informed decisions.

An Initial Public Offering (IPO) is the first time a company's shares are made available for public purchase. This process transforms a privately held company into a publicly traded one.

There are two main types of IPOs: fixed-price offerings and book-built offerings. In a fixed-price offering, the company sets the share price in advance. Conversely, in a book-built offering, the share price is determined through investor bids, allowing for potential price fluctuations.

Step 1: Choosing the right IPO 

Choosing the right IPO is the first and most critical step in the investment process. It's important to understand that not every IPO is a worthy opportunity, so careful consideration is essential before deciding. Two key factors should guide your choice: personal and company-related factors.

• Personal factors: Clearly define your investment criteria by assessing your capacity and risk tolerance. Reflect on your long-term financial goals to ensure they align with the potential investment.
• Company factors: Investigate the company offering the IPO thoroughly. Examine their prospectus, evaluate their past performance, and review their future expansion plans to make an informed decision.

Step 2: Arranging for funds 

Having your finances in order is a must before making any investment. You can use your savings or borrowed capital to fund your IPO investment. However, be sure about the money you invest. As IPOs involve high risk. If the company goes into loss, you are likely to lose your money. 

Step 3: Opening a Demat and Trading account 

A Demat Account records all purchases electronically, while a trading account allows you to trade shares freely. With a Demat account, you can only buy shares. At the same time, you will need a trading account to sell shares. Opening a Demat and Trading account is advisable for easy processing. 

Step 4: How to purchase IPO shares – the application process 

• Account Setup: You can purchase IPO shares using your Demat or bank account. Some banks offer the convenience of opening a trading, Demat, and bank account together. Once your accounts are active, investing in IPOs becomes easy.
  
  
• ASBA Facility: With the ASBA (Application Supported by Blocked Amount) facility, you no longer need to write cheques or Demand Drafts. ASBA, introduced by SEBI, simplifies the process by allowing banks to block the necessary funds in your account.
  
  
• Funds Blocking: ASBA ensures that the funds are secured from the day of your application until the shares are allotted. If you are allocated fewer shares than you applied for, only the amount corresponding to the allocated shares will be debited from your account.

For example, if you apply for shares worth ₹1,00,000 and receive shares worth ₹40,000, only ₹40,000 will be debited from your account.

Step 5: Bidding and Allotment of shares 

To buy shares, you first need to place a bid. Remember that you can only bid in multiples of the lot size specified in the prospectus. This lot size indicates the minimum number of shares you can bid for when applying for an IPO. The company sets a price band for the bid, so you must place your bids within this range. You can revise your bid at any time before the bidding closes.

If you successfully secure the full allotment of shares, you will receive a Confirmatory Allotment Note (CAN) within six working days. Once the shares are allocated, they will be credited to your Demat account. You now wait for the company to be listed on the stock exchange before you can start trading.

Invest smartly by opening a Demat Account with HDFC Bank today!

Looking to open a Demat Account? Click here to get started.

*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in the securities market are subject to market risks; read all the related documents carefully before investing.