How to Buy IPO Online in India

Last Updated: 27 Dec 2024

An investor’s introduction to the world of stock market is quite simple – all you have to do is open a demat account and trading account. However, from there, the investor can go in any direction as the opportunities presented by the stock market are endless. One such opportunity that various investors in the market are interested in is IPOs.

What is an IPO?

An initial public offering IPO refers to ‘going public’ for a company. It is a process by which a private company raises capital by selling its shares to the general public. For the company itself, an IPO is an opportunity to become better regulated and more transparent. Moreover, it also helps the company expand and grow faster. The process of IPOs involves the company selecting an underwriter and selecting the stock exchanges on which the shares of the company can be distributed publicly.

Why Should You Invest in IPOs?

An investor should invest in IPOs for the following reasons:

• By making the right IPO investment at an early stage, you get an early chance to own stakes in a promising company that might reap high dividends for years to come.
• IPO investments are a good option for investors looking for long-term investments in the market.
• IPOs are also a more transparent form of investment since their price per security has to be explicitly stated for all public investors.

Before Investing

There are certain factors that you should consider before you start investing in IPO:

• First, determine your essential investment criteria which include your investment capital, risk appetite and long-term financial goals.
• Exercise caution before making your selection of IPO listings which includes conducting a thorough round of research about the company’s fundamentals, valuation and historical performance
• Leverage all sources of information available about the IPO listing, such as the details in their released prospectus, company’s plans of action, expansion ideas, forays into other sectors and other important details about their long-term goals.

How Do You Invest in IPO Shares?

To invest in IPO shares, you must first open a Demat account as well as a trading account. Only Demat accounts are typically required to purchase shares in an IPO. However, if you wish to sell those IPO shares to a secondary market in the future, you will need to both open a Demat account and a trading account.

Are There Any Eligibility Criteria for IPO Application?

Yes, there are eligibility criteria for applying to an IPO, mainly aimed at ascertaining whether the investors meet the specific requirements. These criteria include:

• Demat Account: A valid Demat account is necessary for all IPO applications. It is used to hold shares allotted to you. If you do not have a Demat account, you cannot receive the shares electronically.
• PAN Card: A valid Permanent Account Number (PAN) is required for every IPO application. It is a government-issued document used to track financial transactions and for tax purposes.
• Minimum Investment Requirement: Retail investors can apply for a minimum lot size specified by the IPO, which can be between 1 and 10 shares. The amount of investment depends on the issue price of the IPO.
• Eligibility for Certain Categories: Some IPOs have specific provisions for Qualified Institutional Buyers, Non-Institutional Investors, and Retail Individual Investors. Retail investors normally get a priority allotment, but the amount they can invest in will be capped.

Key Points to Remember While Applying for an IPO

When applying for an IPO, here are a few essential points to keep in mind for smooth and informed investing:

• Research the Company: Before applying, research the company’s financial health, business model, growth prospects, and risks. Read their prospectus to know more about the company.
• Check Eligibility Criteria: You must satisfy the eligibility criteria, such as having a valid Demat account and PAN card. You also need to understand the minimum lot size and investment requirements for retail investors.
• Application Type: You can apply online through your broker or bank’s trading platform or offline via physical forms. UPI-based payment is mandatory for retail investors applying online.
• Understand the Risks: IPOs can be very volatile, and the initial price of the issue may vary after listing. Be prepared to not receive an allotment if demand exceeds supply.
• Application Timing: Apply well in advance, as the IPO may close quickly due to high demand. Ensure timely payment to avoid application rejection.

Conclusion:

An IPO or an Initial Public Offering is lucrative investment opportunity for a variety of investors. However, like all investments, any potential IPOs should first be researched and thoroughly vetted by the investor. You too can start investing in various IPOs available in the stock market by opening a demat account and trading account using IIFL Markets App.

Frequently Asked Questions

1. Is buying an IPO a good idea?

Buying an IPO is a good investment if the company has good growth potential, but there are risks like market volatility and overvaluation. Before investing, research, due diligence, and understanding the company’s fundamentals are crucial. Post-launch, IPOs usually experience price fluctuations.

2. Can you buy an IPO before it goes public?

Yes, buying an IPO before it goes public is possible, but this is generally allocated to institutional investors, major clients, or through a pre-IPO allocation. Retail investors gain access only after the stock becomes listed on the exchange after the public offering process has been completed.

3. Can I apply for IPO twice?

Yes, you can make an IPO application twice, but only if you have applied through different demat accounts or with different individuals, such as family members. Applying multiple times with the same demat account might be considered a manipulation of allotment, and hence, there might be a disqualification.

4. Is UPI mandatory for IPO?

Yes, UPI is compulsory for retail investors making an IPO application in India. This saves time, as funds are confirmed instantly against the application. UPI-based payment gateways are used for the application amount, which ensures smooth and hassle-free transactions during the application process.

5. How can I buy an IPO offline?

To purchase an IPO offline, you can approach the stockbroker or the designated bank offering IPO services. Your broker will help you submit the IPO application and pay and process the allotment. Offline applications involve filling out forms and submitting a cheque or demand draft for payment.