The first public offering (IPO), as the name suggests, is the procedure through which firms raise cash from the market. For a variety of reasons, companies require funding. They could need capital to increase their capacity, diversify to other business lines, want to broaden their presence throughout India and beyond, or even seek to reimburse their high-cost credits. An IPO can meet all of these fundraising requirements. As investors, you have to know how to apply for the IPO and, above all, how to buy the IPO online.
Offer new versus offer for sale Follow-on
In fact, the phrase IPO is a genre that includes a number of sub-items. This is a new offer when, for example, the firm first raises cash from the IPO market and lists its stocks. The new offer results in the listing and expansion of the company’s capital base.
Follow-on offers also exist where the firm has been included but is attempting to raise additional cash on the market of the IPO. The IPO is only one way to raise additional funding for their goals. They’re already listed on the exchanges. Finally, an offer for sale is called where existing developers and investors take away part of their stocks.
The majority of the government’s disinvestments come in the form of a selling offer. In an OFS, the corporation’s share capital does not rise, but only changes its ownership arrangement. Companies commonly use an OFS to list companies in the stock exchange. How can I invest in IPOs in India and how can IPOs be subscribed online?
Who is eligible to invest in an IPO?
Every adult able to conclude a legal contract is technically eligible for a corporation’s IPO application. It is, of course, important to have an Income Tax department PAN card and a valid Demat account. You have a Demat account. Note that for IPOs, a Demat account alone is not mandatory for trading accounts. If you wish to sell the shares on the listing, you will have to enter a trading account.
Therefore, brokers will suggest you, when you apply for an IPO, that you open a trading account and Demat account. Here’s a crucial point to remember! It is not an offer, but an invitation to offer when you apply for an IPO. It amounts to a bid only when the issuer of the IPO offers you shares.
How to apply for an IPO
Two significant issues need to be addressed: how to apply for the IPO online and the processing of the IPO application. You must know here when you are applying for a company’s IPO
Two kinds of IPOs are available: Fixed Price IPOs and Book Built IPOs. The firm determines the price of IPO as a sum of the par value and premium in advance on a fixed price IPO. At that price, you can request the IPO alone. In a Built book problem, the business simply offers an approximate price range for the IPO, and via the book-building process, the last price of the IPO will be found. Most of the IPOs today are mostly via the book construction approach.
IPOs are divided into three categories: Retail, HNI, and institutional. Retail investors are categorized as investments up to 2 lakhs in the IPO. Investment into the retail quota is favorable because SEBI has developed the allocation mechanism to guarantee that as many retail investors as feasible are allocated. Therefore, in this scenario, your allocation possibilities are significantly better. In this, the allocation is proportional whereas the allocation is discretionary in the case of institutions.
You can submit an Offline Method or Online Application for IPOs. The form is filled out in the tangible form in an offline manner and sent to the banker or broker of the IPO. In an online application, you may log in immediately using your broker’s trading interface. The advantage of the online IPO is that most of your information is automatedly complemented by your business account, therefore decreasing your clerical work. This streamlines the procedure of filling up the IPO online application form. Actually, the preferable way is the IPO Online application.
The allocation basis will be concluded within 10-12 days according to the book-constructed technique and the Demat loan will also occur within a few days. You will be free to sell the shares once the shares have been listed in your Demat account and stock on the exchange. As mentioned above, to sell these shares, you need a trade account.
You have to grasp a very crucial component of applying for IPOs. SEBI now has an installation named ASBA accessible (Applications Supported by Blocked Amounts). An ASBA IPO’s advantage is that until the allocation is made, you don’t have to write a check or pay any money for the IPO. You block the amount of your application from your bank account and only pay it to the extent of the shares allocated on the day of the assignment.
Only to the extent of the shares assigned may the amount be charged. If you applied for shares worth Rs.1.50 lakh, and you only have an allocation of Rs.60,000, then your account will be debited with just Rs.60,000, and the block of the remaining amount would be lifted.