Step-by-Step Process of Investing in an IPO

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Shares aren’t only available on stock exchanges in India. Investors can also look towards IPOs to get company shares. There is a predefined process for applying for an IPO. Every investor must follow the IPO process to stand a chance for allotment. If you are a beginner, you must know the IPO application process. You can buy IPO online via a brokerage account and get some shares. Let us discuss the IPO online process in detail.

Comprehending IPOs in India

Before understanding the process of applying for an IPO, let us discuss its meaning. An IPO is launched by a company that makes a transition from private to public. After launching its IPO, a company becomes public in the true sense. Any company offers shares to the public for the first time in an IPO. Companies that wish to become public must submit IPO requests to Securities and Exchange Board of India (SEBI). After submitting a few details and documents, SEBI allows the company to launch its IPO. Retail, institutional, and other investors are informed about upcoming IPO via trading platforms and news sources. They submit their IPO applications and wait for allotment. Here is the step-by-step process of applying for an IPO online:

Step 1: Open a 2-IN-1 Trading and Demat Account

A trading and demat account is mandatory for investing in an IPO. You cannot buy shares or any other security without a brokerage account. Similarly, you need a Demat or dematerialisation account to hold the shares purchased in an IPO. The best option is to apply for a trading cum Demat (2-in-1) account with a stockbroker. The same broker will provide you with an investment or trading platform. You can access your Demat and trading account via the platform. The trading platforms will also allow investors to search for upcoming IPOs.

Step 2: Choose an IPO

The next step is to choose an IPO to invest. You are allowed to submit multiple IPO applications and wait for allotment. Choosing an IPO is not as easy as it seems. You must choose a company with chances of growth in the future. Investors indulge in research and analysis to participate in the right IPO. They collect information regarding the financial performance of the company. They also identify future trends based on the current and historical performance of the company. A trading platform can help you compare different IPOs and choose the right one.

Step 3: Meet the Eligibility Criteria

When you get allotted, or the IPO application is approved, you must buy the shares. Many brokers tend to confirm whether you have the money for buying the shares or not. For instance, some brokers allow investors with 35 or 40 trades to participate in IPOs.

Step 4: Fill Out the IPO Application

Once you select an upcoming IPO, apply for it. You must provide your name, UPI ID, number of shares, bidding price, and other details in the IPO application. It is crucial to ensure that all details in the IPO application are accurate. When done, submit the IPO application on the trading platform. The IPO application will be received by the issuer. Also, try to submit your IPO application before the IPO closing date.

Step 5: Wait for Allotment

Once you have submitted the IPO application, you must wait for the issuer’s response. Share allotment is done by the issuer after analysing all applications. You might get the exact number of shares you applied for in an IPO. In some cases, shares are allotted on a proportional basis by the issuer.

In a Nutshell

Investing in IPOs can help buy shares of public companies. You can hold shares purchased in an IPO and stand a chance for capital appreciation. A trading platform can help find upcoming IPOs and submit applications. Search for an IPO and apply now!

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Divya Dixit