Imagine you're at the front door of a grand party. Luckily, instead of waiting for everyone else to arrive, you get in early and see all the excitement first. That's what investing in an Initial Public Offering (IPO) feels like. It's your chance to be part of a firm's journey right from the start, before it hits the big stock market. The best part is that you can do it from the comfort of your home. It's like getting a VIP ticket to the future of a company, and online investing makes it easy to join this IPO party.
What is an IPO?
An IPO is the process through which a private company raises capital by offering shares to the public for the first time. The number of shareholders is limited by law in such companies, so they plan to raise capital by making people their shareholders. They then approach stock exchanges like the BSE and NSE for their listing and convert to a public limited company.
It's a significant milestone for any company transitioning from being privately held to publicly traded. IPOs provide investors with an opportunity to own a stake in the company's growth and success.
What do you need to apply for an IPO?
Before you dive into applying for an IPO online, you need to consider the following essentials:
- Demat Account: A Demat (Dematerialised) Account is a digital repository where your shares are held in electronic form. You need a Demat Account to apply for and receive shares allotted through an IPO.
- Trading Account: A Trading Account is essential for buying and selling shares in the stock market. It acts as an interface between your bank and Demat Accounts for executing trades.
- UPI ID: A Unified Payments Interface (UPI) ID is required for making payments for IPO applications online. You will have to authenticate it with your VPA (Virtual Payment Address), a unique identifier linked to your bank account, to enable seamless transactions.
- Bank account: You'll need a bank account linked to your UPI ID to transfer funds during the IPO application process. Earlier, the bank account used to first get debited with the full amount of the IPO shares you would have applied for. Some amount would be refunded later, considering the number of shares allocated to you. This process was time-consuming. The SEBI then introduced the ASBA (Application Supported by Blocked Amount) method to simplify the application process. Now, only a certain amount of money is blocked in your bank account based on the number of shares you bid for. The funds are only debited after the IPO allotment, and any leftover amount is unblocked.
Eligibility criteria for IPO application
Before applying for an IPO online, ensure you meet the following eligibility criteria -
- You must be a resident of India and be an approved investor as per SEBI guidelines.
- You must have a PAN Card.
- You should have valid Demat and Trading Accounts with a recognised depository participant.
- Your UPI ID should be active and linked to your bank account.
- Ensure a sufficient credit balance in your bank account to cover the application amount, even though it's not debited immediately.
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How to apply for an IPO online?
You can apply for an IPO online through a broker or IPO services provided by banks.
AxisDirect provides seamless investment/trading platform by linking your Savings bank account, Demat account and Trading account. With AxisDirect 3-in-1 account, you get an integrated accounts providing you investment/trading options under one roof. Here are the steps to apply for IPO online with Axis Direct:
- You need to first log in to your trading account. You need to select the desired company (issue) from the current IPO section.
- You need to select the category you wish to apply for, enter the number of lots and the bidding price for the stock, and click on submit.
- As soon as you click on submit, the required amount will be blocked in your bank account for IPO.
- Once the shares are allocated, the required amount is deducted from your bank account. Additionally, the shares will be credited to your Demat account, and the bank will unblock the remaining amount to the extent of shares.
Axis Bank also offers the IPOSmart service, which enables you to apply for an IPO without releasing your funds, allowing you to continue earning interest on them. You can seamlessly apply for an IPO through net banking. Here are the steps to apply for IPO online on Axis Bank’s IPOSmart -
- The first step is to go through a one-time registration so that common details like Demat and PAN particulars need not be filled for every application through IPOSmart.
- Click on the registration link and submit it after filling in the accurate details.
- Once the registration is complete, the next step is to make the application through the payment section.
- Select the IPO to apply for and specify the number of shares along with the corresponding price quotes. Maximum three quotes/bids are permitted per application. The highest bid amount will be calculated, and lien will be marked accordingly on the operating account selected.
- The bid will then be accepted if there is a sufficient balance in the account, and a unique transaction number will be generated for any further status inquiries.
Conclusion
An online IPO application process can save you time and effort while giving you a chance to achieve potential growth. If you don't have a Demat Account, most online brokers offer a Demat Account and trading platform under one roof with several benefits.
The Axis Direct Trading and Demat Account can be opened online. It will help you transform physical shares to their digital form, simplifying settlement and management.
You can start your IPO journey with thorough research and a well-informed investment strategy.
Also Read: How can SMEs qualify for an IPO?
FAQs
What is the 3-day rule for IPO?
The 3-day rule refers to the mandatory cooling-off period between the closing of an IPO and the commencement of trading of the newly issued shares on the stock exchange. During this period, the underwriters and regulatory authorities finalise the allocation of shares and ensure all necessary processes are completed.
Can I sell an IPO anytime?
Yes, you can sell IPO shares anytime after they are listed on the stock exchange. However, it is advisable to conduct thorough research and consult financial advisors to make informed investment decisions.
Does an IPO give profit?
Investing in an IPO can potentially yield profits if the company performs well post-listing, driving up the share price. However, it's important to note that investing in IPOs also carries risks, and not all IPOs guarantee profits. Conduct thorough research and consult financial advisors to make informed investment decisions.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
