What are the prerequisites to apply in IPOs?

A SEBI-mandated process through which companies raise money from the public is known as an Initial Public Offering or commonly referred to as an IPO. As a potential investor, you need to gather appropriate information and understand how to apply for one. Currently, IPO issues are available through online avenues, and it is important to further understand how you can purchase shares of an IPO through these available avenues.

This article addresses questions that you may have as an investor aspiring to apply for an IPO issue.

Prerequisites to apply for an IPO?

As an individual investor, you are required to fulfill the basic eligibility to apply for an IPO which is as follows:

  • You are required to be an adult (18+ years of age).
  • You should be capable of entering into a legal contract according to the laws of the Country.
  • You are required to have a valid Demat account. In the case that an investor sells their stocks on listings, they would additionally need a trading account. It is advisable to open a trading account along with the Demat account if you are looking forward to investing in an IPO for the first time.

Additionally, any investor who is interested in buying IPO shares has to mandatorily hold and provide a PAN card issued by the Income Tax department of the country. It is a necessary proof of document to surpass the IPO eligibility criteria.

Types of Investors

This may not be relevant to the eligibility process, but it will help you understand how this impacts allotment. IPO investors can be divided into three classes– Retail, HNI (High Net Worth Individuals), and Institutional Investors.

Investments made up to Rs. 2 lakhs in an IPO are classified as retail investors. It is prudent to invest in the retail quota. SEBI makes sure that the allotment methodology is designed in such a way to ensure that as many retail investors as possible get an allotment of shares. The chances of allotment are much higher in this case.

The allotment is proportionate for HNIs. In the case of institutions, the allotment is discretionary.

How to buy shares in an IPO: Offline

Before you can apply for an IPO, you need to have a Demat account. If shares are allotted to you under the IPO issue, the shares will get credited to your Demat account.

The offline method to apply for an IPO requires you to fill out a physical application form and submit the same to the IPO banker or your broker. However, this process has now become automated and digital.

How to buy shares in an IPO: Online

The financial world has moved online and that includes the world of trading! For an online application for an IPO, you can register and log into the application directly through the trading interface provided by your broker. The benefit of an online IPO is that all your data is automatically populated from your trading or Demat account. This infers minimal clerical effort from your end.

The online IPO application process is extremely simplified and easy to maneuver. Online applications are more preferred when it comes to trading activities. It saves time, effort, and money.

The basis of allotment is finalized within 10-12 days of the issue. Subsequently, in a day or two, shares are credited into the Demat account of investors who are in their right to receive an allotment. Once the shares are in your Demat account and the stock is listed on the stock exchanges, you are permitted to sell the shares.


SEBI offers a facility called the ASBA– ‘Applications Supported by Blocked Amounts.

This means that you do not have to make a payment for the IPO until the allotment is made. The amount to the extent of your application is blocked from your bank account and on the allotment day, the amount will be debited only to the extent of the shares allotted.

Eg: You applied for shares worth Rs. 2 lakhs. Subsequently, you get an allotment for shares worth Rs. 80,000. In this case, only Rs. 80,000 will be debited from your bank account and the remaining amount is unblocked and made available to you again.

Final word

Initial Public Offerings are a boon for both companies that issue them as well as investors. However, one must be prudent and have a clear understanding of the financial parameters that impact market performance. Now that the IPO eligibility criteria are simplified, go ahead and research your next investment.

Frequently Asked Questions Expand All

Yes. For applications by retail individual investors through intermediaries, The Securities & Exchange Board of India (SEBI) has made the UPI mechanism mandatory.

Yes. However, pre-IPO companies are essentially private companies and these transactions are off-market, i.e., they do not take place on the exchange, but directly between buyer and seller.